A few weeks ago, Mark Cuban caught dissension from all over the Internet for calling Facebook a “Time Waster”.  The purpose of this article is to point out the simple fact that for Businesses, he could not have been more correct.  If you run a business, and you are looking to make money through driving people from Facebook to your products or services, Facebook is very likely not in any way worth the amount of time or expense required.

IBM has released a couple of reports that are positively devastating to the notion of Social Media as a platform for driving commerce. The IBM Digital Analytics Benchmarks Social Summary metrics for “Black Friday” and “Cyber Monday” should be enough to put to bed the misguided idea that advertising on Social Media platforms is an effective strategy for driving sales.

The Numbers Nobody wants to talk about

On this recent 2012 Black Friday, Online Sales grew 20.7% from last year.  Online Sales on Cyber Monday grew by 30.3%.  Those numbers represents HUGE growth in the Online space.  Within those numbers however, Social Media overall was responsible for 0.34% of Online sales on Black Friday.  Allow me rephrase this in case your glasses fogged over? Social Media was responsible for one third of 1% of Online sales on Black Friday. Do not despair however, because on the following Cyber Monday, Social Media represented a whopping 0.41% of Online sales, or less than half of 1% of overall Online sales.

Okay, so you say Social Media has not been around for a while and it will take time for Social Media to grow into a viable selling platform. Well, guess what, Bunkie? Those numbers I quoted above? For Black Friday, they represent a more than 35% DECREASE from last year. For Cyber Monday, the news is not as bad, but those numbers represent a more than 26% DECREASE from last year as well.  It is an undeniable conclusion that sales via Social Media are in decline from already infinitesimal numbers, compared to other Online sales options.

Commercial Intent almost never exists on Social Media

In 2011, Google, through its AdWords advertising service represented 9% of all Online ads on the Internet. CTR (Click Through Rates) on ads on Google resulted in sales revenue to the tune of 36.4 Billion Dollars.  In 2011, Facebook represented 17.1% of Online Advertising.  Facebook Ad revenue in 2011 returned 3.7 Billion dollars.  Again, allow me to summarize. Facebook advertisements almost doubled those of Google in 2011. Facebook revenue from advertisements was barely one tenth that of Google.

So, why did Google make 10 times as much as Facebook last year on just over half as many advertisements? The answer is “Commercial Intent”.  When people are shopping, they have what is called Commercial Intent, which means they are looking for something they want to  purchase. It is no different from back in the days of searching through the Yellow Pages for a business that is selling what you are interested in buying. Your Commercial Intent is to find those who provide what you are looking for.

Commercial Intent does not exist on Social Media, because the overwhelming percentage of its users is not there for shopping. They are there for the purpose of conversation and interaction with others.   Bradley Horowitz, the Google VP in charge of Google+ recently likened an advertisement on Facebook to a man wearing a Sandwich sign walking up to a couple of people having a conversation on a sidewalk.  The advertisement is an unwelcome interruption.

Only on rare occasions will someone welcome something that interrupts him or her to the point of interest. It is usually an accidental reminder of Commercial Intent, not initiated by the potential buyer.  Facebook and its advertisements have the burden of convincing, or reminding a viewer to the point of interest. When someone performs a search for an item on Google, the commercial intent  already exists.  Hence, ads placed next to high ranking sites which offer what the searcher is looking for have a much  higher likelihood of influencing conversion of the searcher into a customer.

Facebook claims 500M active users per month out of a total user base of over 1 Billion people.  These numbers are the reason that so many businesses are attracted to place ads on Facebook.  The potential for reaching this size of an audience rarely exists.  By comparison, in 2011 Google averaged 4.7 Billion search queries…PER DAY. (math is hard) The largest potential audience for persons with Commercial Intent is obviously resident at Google. So, why are more ads purchased on Facebook, than on Google? One reason: the so-called “Social Media Expert”.

There are very few of these persons willing to discuss the efficacy of an ad placed on Facebook, and the likelihood of a customer conversion resulting from same. Make no mistake, there are many businesses making money from their Facebook presence, through a systematic approach of advertising to a curated audience of relevant Facebook friends.

The drawback to this approach, is that Facebook is now charging (some say penalizing) businesses to communicate with the very audiences they worked hard to build. Unless a business is willing to pay a fee based upon the number of followers, it is limited to communicating with between only 5 to 15% of their curated audience. Not only that, the members of that limited group are selected not by the business, but by Facebook. The algorithm for this determination is called “Edge Rank”.   That’s right, businesses cannot relay customized messages to targeted segments they define themselves.

In my opinion, this practice represents a total “Bait and Switch” approach to Social Media, in addition to a conflict of Interest.  A business on Facebook is no longer working only for their interests, but Facebook’s, in that the more users a business attracts, the more they must pay Facebook to communicate with that audience in full.

Social Media is for Branding, not Selling