Facebook paid ads: Concerns continue around IPO time

Analysts still find Facebook doesn't match up with Google's Ad Network, could spell revenue trouble

As the countdown clock zeros-in on the largest venture-backed IPO ever, the conversation has turned to just how effective Facebook's central money-making crux is. With GM pulling its $10 million paid ad budget out just days before the IPO, many are looking at just what the paid ads have to offer when companies can tailor contests, pages and games without handing over any money to the social network. 

And this morning, Greenlight, an independent digital marketing agency, released the results of a global survey it took that revealed 30% of people 'strongly distrust' Facebook with their personal data whilst 44% say they would ‘never’ click on Facebook sponsored ads. Not the best numbers coming out just hours before the company prices its stock.

Granted, Greenlight’s global “Search & Social Survey (2011-2012)” only reached out to 500 people – from students, law enforcement professionals, medical staff, accountants, lawyers to the unemployed, but the results seem to be reflecting a common sentiment that people have about ads that litter their Facebook walls.

About 50% of respondents to Greenlight’s survey said they use Facebook for social engagement, sharing photos, and catching up with friends and family -- ranking it as the  third most popular website (after Google and YouTube) in the survey.

But when asked, 'Do you click on advertisements or sponsored listings in Facebook', a mere 3% of respondents answered 'regularly' and 10% 'often' -- while a staggering 44% said 'never.' 

According to this study, the most popular and effective ad format is the Sponsored Story. This option delivers, on average, a 32% decrease in cost per acquisitions (sales) and an increase in CTR (engagement).

“When running both the traditional ad format alongside a sponsored story format, we tend to see at least a 30% increase in conversion rates, again with retail leading across the sectors,” Hannah Kimuyu, director of paid media at Greenlight Kimuyu, explained in the report.

How Facebook ads match up to Google

It hasn't been a secret that the average click-through rate for Facebook ads leaves a lot to be desired -- since, on average the rate is .05%, roughly 10 times less effective than Google’s display ad network, according to Wordstream, and Internet marketing software and tools company. 

Many are looking at the ad formats themselves as a reason why Facebook is less effective in converting browsers to traffic paid ads. The ads are very straightforward, like cutting and pasting an ad into a newspaper or magazine. Google ads often have more flexibility in what can displayed.

One of Wordstream's analysts, Larry Kim posted a blog recently, outlining why Facebook is not competitive enough with it Google ad counterpart.

Some of the biggest elements that jump out, giving advertisers a disadvantage if they choose to put their ad dollars in Facebook ad rather than Google adds include the lack of mobile advertising, the lack of of retargeting options, the absence of partner sites and the fact that there is currently no keyword-based contactual targeting options on Facebook. 

Wordstream even wrapped up this whole evaluation of Facebook vs. Google into an infographic report card.

Its unclear whether these points of concern will effect Facebook's IPO price or activity, but more importantly, it could really put a lot of questions into the heads of marketers that were, at one time, approaching Facebook marketing budgets as a necessary element, but are now questioning the expense altogether. 

Here is a look at the full infographic provided by Wordstream.