Facebook: ads don't sway most users

Four out of five Facebook Inc users have never bought a product or service as a result of advertising or comments on the social network site, a Reuters/Ipsos poll shows, the latest sign that much more needs to be done to turn its 900 million customer base into advertising dollars. The online poll also found that 34 percent of Facebook users surveyed were spending less time on the website than six months ago, whereas only 20 percent were spending more. The findings underscore investors' worries about Facebook's money-making abilities that have pushed the stock down 29 percent since its initial public offering last month, reducing its market value by $30 billion to roughly $74 billion. About 44 percent of respondents said the market debut, seen by investors as troubled, has made them less favorable toward Facebook, according to the survey. In the May 31-June 4 poll of 1,032 Americans, 21 percent said they had no Facebook account. Facebook's 900 million users make it among the most popular online destinations, challenging entrenched Internet players such as Google Inc and Yahoo Inc. Not everyone is convinced the company has figured out how to translate that popularity into a business that can justify its lofty valuation. Shares of Facebook closed Monday's regular trading session down 3 percent at $26.90. While the survey did not ask how other forms of advertising affected purchasing behavior, a February study by research firm eMarketer suggested Facebook fared worse than email or direct-mail marketing in terms of influencing consumers' decisions. "It shows that Facebook has work to do in terms of making its advertising more effective and more relevant to people," eMarketer analyst Debra Williamson said. Those concerns were exacerbated last month when General Motors Co, the third largest advertiser in the United States, said it would stop paid advertising on Facebook. Facebook declined to comment in detail on the survey, but referred to case studies of companies such as Nutella, which found that a 15 percent increase in sales was attributable to Facebook, and restaurant chain Applebee's, whose Facebook ads delivered a threefold return on investment. Measuring the effectiveness of advertising can be tricky, particularly for brand marketing in which the goal is to influence future purchases rather than generate immediate sales. The success of an ad campaign must be considered in relation to the product, said Steve Hasker, president of Global Media Products and Advertiser Solutions at Nielsen. "If you are advertising Porsche motor cars and you can get 20 percent of people to make a purchase that's an astonishingly high conversion rate," said Hasker. "If you are selling instant noodles, maybe it's not," he said. from economic times.