Outside the Box

Last week, Facebook announced an incentive plan for small businesses by offering a $50 credit to 200,000 small business for use on their advertising plan.

COO Sheryl Sandberg, former vice president of global online sales and operations for Google, is hoping to pump up revenue from ads offered on Facebook by targeting small businesses.

Sandberg estimates of the 30 million small businesses, 9 million are using Facebook to promote their business through page creations. She is hoping the credit will spark businesses to spend money on Facebook in the form of ads.

The credit is used for the cost businesses must pay each time a consumer clicks on their ad. The cost-per-click on the ad varies with the popularity of the keyword. For example, if someone is searching for designer jeans, the keyword cost may be much higher than someone who searches for a very specific brand.

Sandberg told USA Today, “It’s easier for small businesses to turn to Facebook, because they don’t have to pay for building a site, and most people can make a Facebook page, or could learn within minutes.”

With Google being portrayed in an unflattering light while being questioned by Congress for antitrust issues, Facebook couldn’t have picked a better time to rollout the plan.

But will it work?

Granted Facebook has risen to the number one destination on the web with 750 million users, but I am not completely sold on the program.

Small businesses, or any business for that matter, are able to put up a free Facebook page quickly, which allow for interaction with fans, marketing of promotions, and news updates. So, why spend the extra money on ads?

Businesses  need to keep in mind that $50 credit will be gone in a matter of days if not hours for certain businesses. The cost-per-click can be anywhere from ten cents to $3.00 to much higher with no guarantee of a sales conversion. Most businesses may not be able to afford that risk and are looking at free advertising avenues like Twitter or LinkedIn to market their products and services.

Also, most people who visit Facebook do so for the social aspect and not necessary to shop. Google’s click through rate supersedes FaceBook’s rate with approximately 2% compared to .05%. An uphill battle looks likely for the social network.

If businesses are looking to take the plunge, I believe Facebook’s main advantage lies in the demographic. A business can target an extremely specific demographic based on the extraction of profile data. For example, Gatorade can target people who have a job in sports, are interested in sports, or like certain teams.

Even if the idea of placing ads on Facebook appeals to small businesses, I am a little wary of the timing of Sandberg’s announcement. I believe she may have ulterior motives in the respect that Facebook is expected to make an IPO in 2012 and the online ad revenue will add to the appeal for investors. Also, her announcement coincides perfectly with the Google investigation, the troubled economy, and small businesses crying out for help from the government. It is a great publicity for Facebook but there needs to be more measurable data.

The idea sounds appealing. If you are one of the lucky 200,000 businesses give it a shot but make sure to review the analytics before making the full on jump into the world of online ads.

[Image via Wiki Commons]