More bad news for Facebook as poll shows 80% of users ignore website's advertising
- Social network desperate to capitalise on its 900million customers
- 34pc of users are spending less time on site through 'Facebook fatigue'
- Site generated $3.7billion in revenue last year, but sales growth is slowing
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Four out of five Facebook users have never bought a product or service as a result of advertising or comments on the social network site, a poll has revealed.
The poll, conducted online by Reuters and Ipsos Public Affairs, is the latest sign that much more needs to be done to turn 900 million Facebook customers into advertising dollars.
The poll also found that 34 per cent of Facebook users surveyed were spending less time on the website than six months ago, whereas only 20 per cent were spending more.
Potential revenue: A survey of more than 1,000 Americans found that 80 per cent have never bought a product as a result of Facebook advertising
The findings underscore investors' worries about Facebook's money-making abilities, which have pushed the stock down 29 per cent since its initial public offering last month - reducing its market value by $30 billion to roughly $74 billion.
Of those polled, 46 per cent said the market debut, seen by investors as troubled, has made them less favorable toward Facebook.
The poll was conducted between May 31 and June 4, involving 1,032 Americans. Of them, 21 per cent said they had no Facebook account at all.
THE FIGURES AT A GLANCE
The Reuters/ Ipsos Public Affairs poll of 1,032 Americans, conducted online between May 31 and June 4, found:
80% have not bought a product, regardless of Facebook advertising and/or the recommendation of Facebook friends or users.
60% of daily users are between the ages of 18 and 34.
50% used Facebook now as much as they did six months ago.
46% says the IPO has made them less favourable towards Facebook.
40% say they use Facebook every day.
34% spent less time on the site than six months ago, citing their reasons as that it is 'boring', 'not relevant' or 'not useful'.
29% of daily users are over the age of 55.
21% have no Facebook account at all.
Facebook's 900 million users make it among the most popular online destinations, challenging entrenched Internet players such as Google and Yahoo.
Not everyone is convinced the company has figured out how to translate that popularity into a business that can justify its lofty valuation.
Shares of Facebook closed on Monday's regular trading session down three per cent at $26.90 (£17.54).
While the survey did not ask how other forms of advertising affected purchasing behavior, a February study by research firm eMarketer suggested Facebook fared worse than email or direct-mail marketing in terms of influencing consumers' decisions.
Debra Williamson, an eMarketer analyst, said: ' It shows that Facebook has work to do in terms of making its advertising more effective and more relevant to people.'
Last month General Motors , the third largest advertiser in the U.S., said it would stop paid advertising on Facebook.
Facebook declined to comment in detail on the survey, but referred to case studies of companies such as Nutella, which found that a 15 per cent increase in sales was attributable to Facebook.
The internet company also pointed to restaurant chain Applebee's, whose Facebook ads delivered a threefold return on investment.
Measuring the effectiveness of advertising can be tricky, particularly for brand marketing in which the goal is to influence future purchases rather than generate immediate sales.
Disappointing news: Facebook CEO Mark Zuckerberg is yet to figure out a way to tap into the social network's increasing number of mobile phone users. Facebook only offers limited advertising on its mobile platform
The success of an ad campaign must be considered in relation to the product, said Steve Hasker, president of Global Media Products and Advertiser Solutions at Nielsen.
He said: 'If you are advertising Porsche motor cars, and you can get 20 per cent of people to make a purchase, that's an astonishingly high conversion rate.
'If you are selling instant noodles, maybe it's not.'
'Facebook continuously has the challenge of Facebook fatigue, of the novelty factor wearing off, and therefore they have to introduce new kinds of interaction'
About two out of five people polled by Reuters and Ipsos Public Affairs said they used Facebook every day.
Nearly half of the Facebook users polled spent about the same amount of time on the social network as six months ago.
Keeping users coming back is crucial for all social media services, said Gartner analyst Ray Valdes.
He added: 'Facebook continuously has the challenge of Facebook fatigue, of the novelty factor wearing off, and therefore they have to introduce new kinds of interaction.'
He cited features such as the 'Timeline' interface and the planned $1 billion acquisition of mobile photo-sharing app Instagram.
The survey provides a look at the trends considered vital to Facebook's future at a time when the company has faced a harsh reception on Wall Street.
Facebook's $16 billion IPO, one the world's largest, made the U.S. company founded by Mark Zuckerberg the first to debut on markets with a capitalisation of more than $100 billion.
More work needed: The poll not only showed that Facebook users were not swayed by advertising, they were also not inclined to accept the recommendations of Facebook friends
Its coming out-party, which culminated years of breakneck growth for the social and business phenomenon, was marred by trading glitches on the Nasdaq exchange.
A decision to call some financial analysts ahead of the IPO and caution them about weakness in its business during the second quarter has triggered several lawsuits against Facebook and its underwriters.
While Facebook generated $3.7 billion in revenue last year, mostly from ads on its website, sales growth is slowing.
Consumers' increasing use of smartphones to access Facebook has been a drag on the company's revenue.
'If you are advertising Porsche motor cars, and you can get 20 per cent of people to make a purchase, that's an astonishingly high conversion rate. If you are selling instant noodles, maybe it's not'
It offers only limited advertising on the mobile version of its site and analysts say the company has yet to figure out the ideal way to make money from mobile users.
Facebook competes for online ads with Google, the world's No.1 web search engine, which generated roughly $38 billion in revenue last year.
Google's search ads, which appear alongside the company's search results, are considered among the most effective means of marketing.
Facebook is still perfecting the effectiveness of its ads, said Mr Valdes, but he said he was surprised that the comments posted on the website from Facebook users' friends were also only responsible for 20 per cent of users making a purchase.
He said: 'Comments and recommendations from friends on Facebook do carry a lot of weight, so I'm surprised by the number.'
The most frequent Facebook users are aged 18 to 34, according to the survey, with 60 per cent of that group being daily users.
Among people aged 55 years and above, 29 per cent said they were daily users. Of the 34 per cent spending less time on the social network, their chief reason was that the site was 'boring', 'not relevant' or 'not useful'.
Privacy concerns were also mentioned.
