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FB fires backThe post-IPO quiet period expires, and Facebook responds to its critics, as reported in the WSJ:
Facebook Inc. launched a public-relations blitz Tuesday to hit back at criticism from the
past few weeks that advertising on the social network isn't effective. Since filing for an initial public offering in February, the company had
been prohibited from making public comments under securities rules. That
"quiet period" lifted on Tuesday, permitting executives to go on the
offensive to justify the social network's business model after the stock debut
backfired last month. Facebook started the day with research firm comScore Inc. releasing a study
commissioned by the social network that attempts to show the value of marketing
on Facebook's site. The report concluded that being a fan of a brand on
Facebook causes people to purchase that brand more frequently. In tandem with the study, Facebook's executives talked up comScore's
results. "It's a myth that Facebook advertising doesn't work," said
Brad Smallwood, head of measurement and insight at Facebook, in an interview. Facebook's coordinated efforts to defend its ad business comes after some
big brands and advertising agencies have come out and said there is no evidence
that advertising on Facebook leads to consumers spending more money. A few days
before Facebook's IPO, General Motors Co. said it would pull $10
million of ads from the social network because they don't work. Facebook's Mr. Smallwood acknowledged the company has been told by some of
its biggest clients that it wasn't doing a good enough job of showing the value
of advertising on the site. "We heard we have to do a better job of demonstrating" returns on
investment, he said. Mr. Smallwood said the biggest question now from advertisers is how to take
the fan base that brands have accumulated and get the most for their money.
"We're in the early days of helping advertisers on this journey," he
said. Critics of Facebook have also blasted the company for its lagging efforts
to make money off its mobile site, where it has only recently begun to offer
opportunities to advertise. More than half of Facebook's 900 million users
access the site via mobile. The company last week offered marketers the ability to pay for ads on the
its mobile site separately from a premium package, a move that was meant to
increase ad revenue from mobile. Carolyn Everson, vice president of global marketing solutions at Facebook,
said in an emailthat there is a challenge to sell ads on mobile phones, where
there is a smaller screen and a bigger chance of disrupting a users'
experience. But with "sponsored stories"—which lets advertisers pay to repost
positive user messages to those users' friends—Ms. Everson said the company
doesn't face that challenge because those ads appear in "the natural place
where people get information on Facebook whether they are on desktop or
mobile." Facebook also released its own internal research of more than 60 ad campaigns
on its site, though the company wouldn't release the names of the companies or
the full results. Facebook said 70% of campaigns showed a return on ad spend of
three times or more, while 49% of campaigns showed a return on ad spend of five
times or more. There were still topics that were off limits for Facebook, however—a
spokesman declined to answer questions about the company's IPO. In the wake of criticism, Facebook's stock—which debuted at $38 a share—has
fallen about 27%, undercutting expectations that the company could keep up its
valuation at the more than $100 billion at which it went public. Facebook,
which generated $3.1 billion in ad revenue last year, will need to
substantially grow that revenue to fill out its market capitalization, which
now stands at about $74 billion. On Tuesday, Facebook's efforts didn't much impress investors. The company's
stock rose 1.5% to end 4 p.m. trading at $27.40, on a day when the broader
market was up. In comScore's study, the research firm tracked people who were fans of Starbucks Corp. on Facebook against a control
group of people who weren't exposed to those messages. ComScore found that over
a four-week period, fans and their friends bought 38% more frequently at
Starbucks than people who weren't exposed to the Facebook messaging. Similarly, comScore tracked Target Corp. fans and their friends on
Facebook and found that those people bought at Target 21% more frequently than
those who weren't Facebook fans of the retailer. Comscore analyst Andrew Lipsman said the firm targeted users' purchase
habits prior to being exposed to the ads so that brand affinity—or the fact
that they were already fans of the company—was removed as a variable that
swayed them toward buying more of that product. Not all brands had similar results. Amazon.com Inc., for example, saw that fans of
its Facebook page spent twice as much as the average Internet user on the
e-commerce site, but their friends only spent about 8% more, according to
comScore. That study was conducted over the holiday season and Amazon didn't have
in-store sales, which lowered the results, said comScore. Amazon and Starbucks declined to comment. Target didn't have immediate
comment. <<
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