John Whitman Blog Post #2
Link: http://online.wsj.com/articles/facebook-ads-become-costlier-choice-for-small-businesses-1407341983
The article I chose to analyze is titled “Facebook Ads Become Costlier Choice for Small Businesses.” This piece was written by Sarah Needleman, a journalist for the Wall Street Journal, a respected source for world and financial news both in the United States in abroad. The primary theme of the article describes Facebook as a premier publisher for many advertisers. Despite this success, smaller businesses are finding it increasingly difficult to use Facebook as an outlet for their online advertisements. This is due to the increasing costs of keeping their advertisements on Facebook’s platform. The content of this article touches upon many elements we have studied in class. First it deals with Lars Backstroms lecture about Facebook, its engagement figures, and its financial success. Additionally the article deals with many concepts found in Chapter 15 of the textbook. These including revenue per click, click through rates, and advertiser valuations.
One of the many things Lars stressed in his guest lecture was Facebook’s ability to engage its audience. Two statistics he mentioned were 800M daily average users and over 1B “likes” per day on the platform. This content has translated into incredible success for Facebook. The article mentions that the average per ad price increased 123% YoY, the number of ads it displayed was down 25%, and revenue was up 67% YoY. The reason for this success relates to many topics we have discussed in class. The first has to do with revenue per click. The primary justification for the increases in the prices of ad slots on Facebook’s platform has to due with the increased revenue per click that Facebook creates relative to traditional advertising outlets. This increased revenue per click affects the advertisers value for the slots, increasing their willingness to pay. However, this incremental revenue comes at a cost, as CPC’s have increased tremendously for the advertisers. An example in this trend talked about electric bike manufacturer Pedego inc. While the CEO mentioned that its revenue was increasing due to Facebook’s premium publishing platform, he also described how is CPC’s have increased close to 80%, from $.24 per click to $.40, in only 8 months.
The content of the article relates very closely to what we have studied in class. Ideas of engagement, RPC, and CPC’s were present in this article and align very closely to Lars’ presentation and Chapter 15 of the textbook.