Why Facebook’s self-evaluation doesn’t jive with how businesses use Facebook

With the Facebook IPO this week, everyone’s buzzing about the social network. Some who bought Facebook stock have confidence that the business will find a stable way to monetize itself in the future.  Others have less confidence, even to the extent of filing a class action lawsuit, claiming that Facebook provided false information regarding their self-evaluation. As of now, there are definitely problems with how Facebook measures its own value (regardless of whether they did it on purpose or not). Facebook makes money through its ads, and though Facebook ads may be useful for businesses when utilized properly, the way businesses can best utilize Facebook is through a professional and eye-catching Facebook page that encourages likes and fans.

There’s a reason why many Facebook ads don’t see results. When businesses use Facebook ads, there’s a right and wrong way to do it. OrangeSoda has found that ads linking to a business’s Facebook page bring in four times more results than a link pointing to a page outside of Facebook.  In fact, we found that Facebook ads that link to a Facebook page can be about 12 times more cost-effective than comparable advertising on Google AdWords. This means to play the Facebook game, businesses need to have a strong presence within Facebook in order to achieve results. Many businesses buy Facebook ads but skip building a concrete Facebook page, resulting in less successful ads.

So, businesses should have a Facebook page, but measuring the success of a Facebook page can be difficult. You can measure the people talking about your business and you can measure the amount of likes you get, but sometimes it’s difficult to see how that translates into actual customers. Even if you ask all your customers how they heard of you, will they say they heard of you from Facebook or will they say they heard of you from a friend (who mentioned you on Facebook)?  And when will you see the results? Right away? Down the road?

These are questions that many businesses and online marketing companies are striving to answer, but we do have some data on the matter. In a 2011 study, Syncapse found some interesting metrics. According to their survey, 40% of consumers say they factor in Facebook recommendations when making purchasing decisions. And on average, Facebook fans are 28% more likely than non-fans to continue using a brand, and fans are 41% more likely to recommend a fanned product to their friends.

So for now, the best way a business can utilize Facebook is through a professional Facebook page. If a business does use Facebook ads, these ads should point to a well-developed Facebook page, not an outside site. For the time being, this means the way businesses can best utilize Facebook and the way in which Facebook tries to garner money does not exactly match up. Until it does, Facebook stock will continue to be unstable.