Is an Ad on Facebook Worth the Money?

A new study reveals that only about a quarter of small businesses have placed ads on the social network.
Business Writers
January 27, 2012

If you can have a Facebook page for free, why pay money for an ad?

That appears to be the feeling among small-business owners. While 70 percent use Facebook for marketing, just 23 percent have forked over any cash for an ad on the world's largest social network, according to a new survey.

That 23 percent is up five percent from just six months prior, says MerchantCircle, the online marketing firm for local businesses who conducted the study. But business owners are not overwhelmingly convinced the ads are worth the money: Over half (62 percent) said they'd advertise again, while 28 percent weren't up for a repeat. Of the latter, 66 percent complained the ads didn't attract new customers, 41 percent said the ads were too expensive and 37 percent said they didn't receive clicks.

The survey—the seventh one MerchantCircle has conducted—found that use of daily deals is up among local merchants: 12 percent have offered one, up 33 percent since June 2011. About two-thirds (61 percent) of respondents say they would offer another deal in the future, saying it was effective for winning new customers.

Think a Groupon or its equivalent will ruin you with a stampede for low-priced merchandise? It's still an issue, with just over a third (37 percent) of merchants reporting solid profitability. But that figure is up significantly from the 24 percent who reported making money off a daily deal in June. Over a third (42 percent) of merchants said they would not offer another daily deal, with the top reason being it didn't net them new customers, followed by that the deal was too expensive (36 percent) and that they lost money on the deal (34 percent).

The top choice for small businesses was not Groupon or LivingSocial but various specialized deal providers; nearly half (43 percent) of the local merchants who offered a deal did so through one of the smaller providers. Twenty-six percent used Groupon and 21 percent used LivingSocial.

But watch out, Groupon: 32 percent of merchants are planning to try out Google Offers for their next deal. That's compared to 26 percent eyeing Groupon and 16 percent for LivingSocial. The deciding factor for choosing a deals provider: 64 percent said cost, while 57 percent said local targeting. The ability to reach a large audience registered as the third biggest concern, with 52 percent.

If repeat business is an indication, Google Offers also had the highest satisfaction rate of the major deal providers: 66 percent said they'd use the search engine's deals arm again. That's compared to 41 percent apiece for Groupon and LivingSocial.

Have you used a daily deal? What's been your experience?  

Photo credit: iStock