The typical U.S. small business is not spending much, if anything, on Facebook FB -0.30% ads this year, according to the WSJ’s story today on the rising cost of advertising on the social-media outlet.
Facebook ads cost more, and are reaching fewer users, because there’s less ad space available and competition for that space has intensified. The story cites the experiences of three small businesses — an earphone-maker, an electric-bike maker and a Web platform for enrolling children in classes — with mixed results.
Facebook says the cost of its ads rose because the ads deliver more value. It also says it has many happy customers, including Amy Norman, co-founder of Little Passports Inc., who in June began spending up to $250,000 monthly on Facebook ads.
Ms. Norman says she began using Facebook ads 14 months ago, initially spending about $30,000 monthly to advertise geography-themed activity kits for children in users’ news feeds. She says her San Francisco company’s subscriber base has since tripled to about 35,000 and its revenue run rate increased 263% to roughly $5 million.
- Amy Norman, co-founder of Little Passports Inc., which is spending up to $250,000 a month on Facebook ads.
- Corrin Dove
“The secret to our success has been testing our ads over and over again using the different tools that Facebook offers,” says Ms. Norman.
Her favorite: “Lookalike Audiences,” a feature introduced in March 2013 that lets a business target Facebook users who are similar in gender, age and other characteristics to their existing customer base.
Unlike Ms. Norman, however, most small-business owners aren’t increasing their social-media marketing budgets this year, at least according to one survey.
In January, 69% of 1,008 small businesses – defined as firms with fewer than 500 employees — said they plan to spend the same amount advertising on Facebook and/or other social media sites over the next 12 months. Just 28% said they planned to spend more and 3% said they planned to spend less, according to consulting firm Thrive Analytics LLC. The survey didn’t ask respondents how much they planned spend or the effectiveness of that spending.
Two experts we interviewed—a marketing professor and consultant—suggest that small businesses run experiments in their news feeds for free before spending a dime on Facebook ads, by targeting users in different geographic areas or demographics. “That way you don’t waste a lot of time and money before you find the right formula for you,” says Larry Chiagouris of Pace University.
Businesses should also gather email addresses from their Facebook fans and use them to run free email marketing campaigns, adds Nathan Latka, chief executive of Heyo.com, a Blacksburg, Va., firm that makes applications for marketing contests on Facebook. He says this takes less time and can be more effective than paying for Facebook ads.
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