Facebook Price Increases Crowding Out Small Businesses

facebook summer editIncreases in Facebooks ad prices are beginning to crowd out small businesses unable to keep up with the growing costs, with only 28 per cent planning to increase add spending on social media in the next 12 months.

Facebooks earnings call last month revealed that the average price per ad had risen 123 per cent in the last quarter compared to a year ago, while ad impressions had actually declined 25 per cent. Ad revenues, meanwhile, rose 67 per cent to $2.68bn (£1.59bn) for the company.

On the call, Dave Wehner, Facebooks chief financial officer said: “The price of ads correlates to the value that they create. We continue to focus on making those ad units better and better, more relevant and targeted for the people who use Facebook, as well as for marketers.”

However, a report in the Wall Street Journal claims that the changing nature of Facebook marketing puts small businesses at a disadvantage, as they lack the financial or human resources to manage the work involved with a successful social-media ad campaign, in particular the testing required to target the optimum audience.

Competition for ad space has intensified on Facebook, with 1.5m companies of various sizes paying to advertise on Facebook, up from 1m a year ago, and with a redesigned advertising space offering fewer, larger ads. This has driven the price per ad up, while the number of impressions shrinks.

A survey of 728 small-business owners showed that 83 per cent dont expect to advertise on Facebook this year, and of those who had previously done so, only 19 per cent said theyd seen a quantifiable increase in sales, revenue or brand awareness. Another survey found that small businesses rated Facebook and other social media only slightly ahead of print directories like Yellow Pages in their effectiveness as a marketing medium.