Facebook Doomed? Forrester Says Ads Tell a Sad Story

By Jim Edwards

Forrester, the respected market research group, has just published a brutal report on Facebook (FB) based on a survey of 395 marketing executives. The conclusion: "Facebook creates less business value than any other digital marketing opportunity ... [so] ... Don’t dedicate a paid ad budget for Facebook."

Facebook responded that the report was "illogical and ... irresponsible."

The research company published a blog post discussing the report here. But we've seen the full report, and it's grim reading for Facebook. The social network ranked last among a range of online tactics that 395 executives were asked to choose from:

CHART 1: FACEBOOK CREATES LESS BUSINESS VALUE

Forrester Analyst Nate Elliott concludes:

Facebook creates less business value than any other digital marketing opportunity. We asked 395 executives from the US, the UK, and Canada how satisfied they were with the business value they get from 13 different online marketing sites and tactics. You’d expect a site boasting the largest audience and the biggest collection of data to fare well. But we found that Facebook offered less value than anything else on our list .... The least valuable tactic within Facebook? Those paid ads onto which Facebook has shifted focus.

To be fair, Facebook still scored a 3.54 out of a possible five marks in total. But note that Google, Yahoo and LinkedIn all scored higher among ad clients:

CHART 2: FACEBOOK LAGS

Forrester then pours salt on the wound, and recommends advertisers not create a dedicated budget for Facebook:

If you want to buy ads on Facebook, rely on facts rather than faith. We’ve no doubt that for some marketers targeting some audiences, Facebook advertising can work. If the site really performs well compared with your other media buys, go ahead and spend money there. But marketers tell us Facebook ads generate less business value than display ads on other sites. It’s time to make decisions based on facts, not on faith or fascination. You’re just buying display ads! Don’t dedicate a paid ad budget for Facebook. Make it compete with other media buys based on performance, just as you would any other site.

... We don’t believe that Facebook will make the changes needed to win back marketers’ hearts. In fact, we don’t believe the company even sees the need to change: Its enormous revenues have blinded it to marketers’ growing dissatisfaction. But if it doesn’t change, the results will be dire:

Facebook responded in an email to Business Insider:

While we agree that the promise of social media is still in process, the conclusions in this report are at times illogical and at others irresponsible. The reality is that Facebook advertising works. That's why we have more than a million active advertisers including all of the Ad Age 100. And, countless studies have demonstrated the significant return on investment marketers see from Facebook. Our promise is to continue to deliver positive results for marketers.

The report has its flaws, of course. For instance, it claims, "The smart money will leave Facebook. A handful of notable brands have drawn first blood, announcing they’re leaving Facebook entirely." But it cites only two clients — General Motors (GM) and Mark Cuban — and GM already started advertising on Facebook again.

Disclosure: The author owns Facebook stock.
Read more: http://www.businessinsider.com/forrester-report-says-dont-dedicate-a-paid-ad-budget-for-facebook-2013-10#ixzz2j7XgKZvF