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Small businesses and non-profits will ditch Facebook
by Tony Novak, CPA, MBA, MT 11/26/2014
Over the coming months I will work with a number of small business and non-profit groups to move their primary marketing and public outreach efforts away from Facebook and focus on other media. This article explains why.
Background
Beginning around 2008 I began persuading small businesses and non-profits to focus on Facebook promotions primarily because "that's where the people are". For the first few years the strategy worked well to build followers that could then possibly "get the word out" on items of interest to their Facebook contacts by liking, commenting or reacting to a post.
The focus of business discussion during this period was that most entities had trouble justifying the cost in terms of time invested in social media strategy. Social media promotion was largely faced on faith that it would eventually pay off for consistent participants who published relevant high quality content. Facebook now offers paid promotion with improved reporting capabilities that can be used to monitor results. Over the past year most firms, including my own, had been unable to justify either the time or the cost of a Facebook promotion strategy.
What we know
Sometime in 2013 Facebook users began noticing a drop-off in the effectiveness of their posts. Distribution and shares dropped dramatically. Facebook confirmed that it began curtailing distribution of free posts by commercial and community pages in order to boost its paid advertising. Many firms tried the paid advertising but had poor results. Paid promotion of advertising has been a failure for 100% of the companies I work with and virtually all of the small businesses that report such results in public media. Third party research reported in the Wall Street Journal says that a message now reaches only 2% of your followers and has, at best a 0.5% response rate ("like" or other action).
Facebook announced that beginning January 2015, it will further reduce distribution of posts with commercial content. That means that posts and shares by individuals will not be effective in getting out the message for a businesses or clubs. (So if you want the world to see your video of a talking duck posted on your personal page, you're good, but if you want more people to come to your club's bake sale, forget it).
What we don't know
Social media is complex. I am not an expert. My research is far from perfect; the number and sizes of samples was too small, collaborating information from others is scarce, and I'm not even confident that we've even identified all the key issues yet. Yet that's the nature of almost all cutting-edge information for small business and that's what we must work with right now. I expect that other publishers will produce confirming research in the future.
Small businesses have not yet fully identified and tested the range of alternate online media methods. From a strategist's perspective it is a bit dangerous to abandon one strategy before you've identified its replacement. But from an accountant's perspective I can say that if advertising is not paying off and you have no clear plans to change the poor results then cut off the advertising immediately.
My tests
Over the past few months I tested and compared Facebook paid promotion and distribution for small businesses and non-profit organizations. I conclude that Facebook can absolutely deliver specified results, but those results are insufficient to pay for the cost of the Facebook promotions. I found the cost per follower, cost per click, and cost per action to be about $1. The result was the same regardless of other factors. The value of each result was estimated to be less than $.20. This led me to conclude that Facebook paid promotion is overpriced by a factor of at least 500%. With free promotion no longer an option and paid promotion not priced effectively, we realized that another strategy is necessary.
I conducted these small tests across different industries, directed toward different target audiences and with different intended results. I found Facebook paid promotion to be financially ineffective for small business and non-profit organizations. The cost per impression, cost per click or cost per action were remarkably consistent and predictable across all tests at about $1 per action. Yet unfortunately the cost was at least five times more than their maximum value to the small business or non-profit advertiser.
The alternatives
The search for better and cost-effective online marketing strategies is on. We will undoubtedly read more about this in business publications soon. We should presume that Google is well aware of the situation and is planning accordingly. (I have no experience with Google paid promotion within the past eight years and therefore cannot comment further).
I see a few changes are already in the works for alternate distribution channels. Most of my own editorial content will be published mostly in HTML5 format on commercial web sites next year. The intent is to maximize the search engine access rather than a "push" strategy and make more content accessible through mobile devices. I will likely rely on free publishing features of LinkedIn for most of my push distribution of content focused on small businesses.
Our small business Money Island Marina will refocus the distribution of content on NJanglers.com, a privately owned community-based forum. I see paid promotion in the online sites of controlled-membership community groups as an attractive option for local businesses especially for reaching more mature audiences. My local Rotary Club improved its web site and returned to publishing a PDF version of its newsletter after a brief experiment with Facebook. The website and newsletter reach fewer people but those who read it have more interest in the activities of the club. The other small businesses and non-profits I work with are just beginning to discuss the subject and haven't reached any conclusions yet.
I'm looking forward to see how other small businesses and non-profit entities react to the Facebook marketing landscape. I'd love to hear about the results of any other tests on return on investment on Facebook advertising.
Opinions expressed are the solely those of the author and do not represent the position of any other person, company or entity mentioned in the article. Information is from sources believed to be reliable but cannot be guaranteed. Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues or a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Tony Novak operates as an independent adviser under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator" but is not a representative, agent, broker, producer or navigator for any securities broker dealer firm, federal or state health insurance marketplace or qualified health plan carrier. He has no financial position in any stocks mentioned. Novak does work as an accountant, agent, adviser, writer, consultant, marketer, reviewer, endorser, producer, lead generator or referrer to other companies including the companies listed in the articles on this web site.
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