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Facebook targeting small businesses – are we getting proper bang for our buck?

We got a warm and rosy glow inside this week when we read that executives from Facebook had set up an initiative to help small businesses.

That glow got warmer and rosier when we heard that Sheryl Sandberg, chief operating officer of Facebook, had been in Dublin speaking to small business owners and had told them that their mission and Facebook’s mission were “inextricably tied”. Facebook, Sandberg told them, had 25 million small to medium sized businesses and wanted to help them to reach their customers.

Being big fans of a collaborative approach to improving the lot of small businesses and, truth be told, being a big fan of Facebook, we were impressed by the seemingly altruistic nature of Ms Sandberg’s mission to Dublin. We thought we’d explore it further.

By any measure, Facebook is doing well. It has just reported an increase in revenue of more than 70% compared to the same quarter last year, a profit of £383 million, as well as a 21% year on year increase in the number of daily active users to more than 800 million. Revenue from advertising also increased, breaking through the $2 billion mark, an increase of more than 80% year on year.

Everything sounds great. But there have been signs in recent years that Facebook’s hegemony maybe under threat from others. To stay ahead of the game, it needs to constantly refresh its offering and find new ways of monetising that impressive user base.

Dan Levy, Facebook’s director of small businesses, announced recently that the platform now has one million advertisers, double the number from a year before. One million advertisers is an impressive figure. But if you take the 25 million small businesses with active company pages, only 4% are using Facebook as an advertising medium. It has been speculated on in the media that as many as half of the small businesses on Facebook could eventually start advertising. This would generate significant additional advertising revenue.

But before you rush and get seduced by what Facebook has to offer, ask yourself whether the products or services you offer are ready to be advertised; do you have the time and resources to manage that campaign or to handle any additional demand that may be stimulated as a result? Facebook is providing a simpler advertising interface to enable you to dip your company’s toe into the corporate water.

Facebook has one big thing going in its favour. We all use it; we are all used to it and most of us like it. So when Sheryl Sandberg tells us she wants to work with us, we’re flattered and we want to sit up and take notice.

There’s nothing wrong at all with Facebook boosting its revenues on the back of small businesses, provided the small businesses are getting a proper bang for their buck. That’s why we say wait until Facebook introduces a proper performance-based advertising model, where small businesses are only charged if their advertising delivers sales, thereby eliminating a bit more of the gamble. It would make Facebook seem more like the partner it claims it wants to be and would give further encouragement to all of us to give them a try.

Howard Robinson is Head of Communications at collaborative small business network, Ingenious Britain.

This was posted in Bdaily's Members' News section by Ingenious Britain .