Small Businesses and Facebook Advertising

August 11, 2014

Starting a new business can be difficult. Deciding exactly what you want your business to do, where you want it to be located, and how you want it to be organized all take a lot of planning. But even once you purchase or lease a location and open up your doors, the hard work is not done. You still need to figure out a way to get the word out about your new business, and convince potential customers that they should give your company a shot. While it used to be as easy as taking out an advertisement in the phone book, things have changed in the internet age.

One way of getting the word out is social media. Whether your business is a food truck that posts its daily location on Twitter, or a retail establishment that offers special deals to your dedicated customers on Facebook, many small businesses are already pretty savvy when it comes to using free social media. But social media has another side to it that small businesses have to consider: the advertising side.

The Wall Street Journal recently reported that Facebook ads are becoming a costly choice for small businesses. According to the report, the average price per ad for a Facebook ad increased 123% in the most recent quarter compared with the price during the same quarter last year. Meanwhile, the number of ads displayed declined 25%.

This can be very problematic for small businesses, particularly startups with limited budgets. Facebook claims that the ads are more expensive because they are more effective, but if small business owners cannot afford them, effectiveness does not matter. There is also an issue with whether Facebook ads for small businesses can really be as effective as Facebook ads for larger companies, because many small businesses lack staff with the skills and resources to manage a successful campaign.

Of course, Facebook is not the only option for online advertising. Google and email marketing campaigns are just two other options. Those options may see more traffic, as Facebook ads do not appear to be particularly popular with small businesses. An April survey of 728 small business owners by the Wall Street Journal found that over 80% of small business owners expected to spend nothing on Facebook ads this year.

This is not to say that Facebook ads do not work for any small businesses. Some are quite happy with the results these ads have had for them. The Wall Street Journal reported on one such business owner, Amy Norman of Little Passports Inc. Ms. Norman's company spends $250,000 on Facebook ads each month. The company started using Facebook ads a little over a year ago, and started with an expenditure of $30,000 a month. As a result of the ads, her San Francisco company's subscriber list has tripled and her company's revenue run rate increased 263%.

So, while ads on social media may be cost prohibitive for the majority of small businesses, for those who can afford them they may pay off nicely. It is very important to have the staff and know-how to take full advantage of the potential benefits of these ads if your company is going to make such a hefty investment.