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It’s bad news for Facebook when...

July 30, 2012

By Luke Simcoe, Macleans

Everything is going wrong for Facebook lately, it seems. First, there was the very public spat with GM–which the car giant seemed to time just so it could poo-poo Facebook’s grand debut as a publicly traded company (although now it’s trying to make up)–, then the technical glitch that confused investors at the IPO, not to mention the controversy about Facebook’s underwriters, and finally, last week, some pretty disappointing earnings results. But the one thing that must be keeping Mark Zuckerberg up at night these days is the creeping suspicion among investors that online ads are not be quite the moneymaker they thought they would be–even on Facebook.

The bad news on that front, though, just keep coming. Only last week, in fact, research emerged hinting that, in the world of online advertising, the best ad may be no ad at all.

In a recent experiment conducted by the Advertising Research Foundation (ARF) a blank banner ad received more clicks than the average Facebook ad, twice as many as your average “branded” display ad (a static ad which promotes a brand rather than a specific offer or call to action), and only one click in ten thousand less than the average banner ad.

The experiment began when ARF executive Ted McConnell and his friends–including an astrophysicist–decided to test how much clicking on banner ads represented actual user engagement versus how much was just noise–people clicking on the ad by mistake. To do so, the team created and trafficked a blank ad, under the assumption that clicks on an empty ad would qualify as noise. They wired it to measure everything that happened to it, anywhere it ran, and programmed it to ask users who clicked through whether they had done so by mistake or out of curiosity. They even monitored things like mouseovers, and used a heat map to guard against click fraud. (Heat maps detect fraudulent clicks because bots–automated software applications that are sometimes used to inflate click-through rates — tend to click on the same spot every time).

The results are shocking. The click-through rate on the blank ads was 0.08 per cent, just 0.01 per cent short of the average ad. According to independent research from Web Trends, the average click rate on a Facebook ad is only 0.051 per cent, meaning that people click on about one of every 2,000 ads. If that’s the case, then the blank ad performed 60 per cent better.

It gets worse. According to McConnell, roughly half of the total clicks (nearly four clicks per every 10,000 impressions) were unintentional.

It’s only a single experiment, of course, but the findings are pretty damning for a company like Facebook, which reportedly relies on advertising for 85 per cent of its revenue. The social network, for its part, has been fighting tooth and nail to stem the tide, encouraging companies to think differently about social advertising and even partnering with ComScore to show that visibility on the site leads to more purchases (and this from a company that has always been loathe to publicize its metrics). Still, it won’t be an easy task to convince clients to keep shelling out for clicks when half of them may be meaningless. Even if companies do keep buying ad space, it’s entirely possible that they will want to pay less per click.

Online advertising is a $100 billion industry, replete with creative prodigies and sophisticated tracking programs, and armed with all the personal info about customers that social media sites can provide. Yet, in spite of all that money, talent and data, an empty ad still outperforms the average. It might too early to tell how this will shake out, but studies like McConnell’s show that we’re overdue for a rethink in terms of how to advertise on the Internet. The best way to start might be to find a better surrogate for attention than the lowly click.

As seen here: http://www2.macleans.ca/2012/07/30/when-a-blank-online-ad-gets-as-many-click-as-the-average-ad/

 

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