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Get Ready… Organic Reach of Facebook Heading to 0%

Marketing on Facebook — for free — is getting harder... a lot harder, maybe even impossible. It's time to either pony up the dough and master the skills necessary to fully leverage Facebook's advertising opportunities, or throw in the towel and allocate your resources elsewhere.

Back in January, The Financial Brand told bank and credit union marketers that the free ride on Facebook had come to an end, as the social media giant was increasingly shifting to a pay-to-play model. Little did we know how bad it was going to get.

“Organic reach of the content brands publish in Facebook is destined to hit zero,” says Marshall Manson, Managing Director of Social at Olgivy, one of the world’s largest and most respected ad agencies. “It’s only a matter of time.”

“Facebook is saying that you should assume a day will come when the organic reach is zero,” Manson continues. “Facebook ‘zero’ is a reality now facing every brand and business with a presence on the platform.”

Most Facebook watchdogs tend to agree with Manson. Looking at the data, it would be difficult to come to any other conclusion.

organic_reach_of_facebook_page_posts

Average Organic Reach October
2013
February
2014
Change from
October 2013 to
February 2014
(5 Months)
All Pages 12.05% 6.15% -48.94%
Pages with more than 500,000 Likes 4.04% 2.11% -47.88%
Pages with 100,000 to 500,000 Likes 13.05% 6.38% -51.11%
Pages with less than 100,000 Likes 13.66% 7.02% -48.58%

Source: Social@Olgilvy

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“Facebook convinced countless brands that its service was the best way to reach people,” observes Sam Biddle with Gawker. “But now that companies have taken the bait, Facebook is holding the whole operation hostage.”

Manson at Olgivy says the impending end of organic reach raises some tough questions for marketers using Facebook to connect with their constituencies. “How can brands get the most from Facebook? Is Facebook still a driver of ‘earned’ media? Or is it just a straightforward paid channel now? How should brands approach content and engagement going forward?”

“Inevitable budget limitations and lack of audience attention will force brands to be more selective in what they publish and promote,” Mason adds.

ZDNet social media analyst Eileen Brown agrees. “Paid reach is the only way to achieve good reach on Facebook,” she says. “Perhaps Facebook is really a better option for large brands with huge marketing budgets. Is it going to squeeze businesses until only the big brands continue to invest in paid posts? Smaller brands might consider returning to e-mail newsletters for marketing.”

Now of course Facebook says it has been throttling posts from company pages in an effort to minimize clutter in people’s Timelines, which, as a user, you can probably appreciate. But as a Facebook page admin, it’s pretty frustrating.

Many smaller institutions have invested big blocks of both time and energy into building a respectable sized following on Facebook. The good news, at least for the time being, is that Facebook seems to be going a little easier on company pages with fewer Likes. Organic reach for modest Facebook pages can be as high as 10-20%. But it becomes significantly more difficult to achieve organic reach the bigger your following gets. For brands with 100,000 Likes or more, organic reach starts to dip below 5%, and for the biggest brands on Facebook — those with 1 million fans or more — they might see organic reach no greater than 1.5%. It seems obvious that Facebook is trying to put the tightest squeeze on the brands most likely and most capable of running big ad campaigns.

Bottom Line: Marketing on Facebook — for free — is getting harder… a lot harder, maybe even impossible. No matter who you are, whether you’re a big bank with a gazillion fans or a small credit union with only a handful, maintaining organic reach at a level that justifies the effort is becoming so difficult, nearly every institution on Facebook will be forced to make a decision: Either pony up the dough and master the skills necessary to fully leverage Facebook’s advertising opportunities, or throw in the towel and allocate your resources elsewhere.

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Cost to Reach 100% of Fan Base With One Promoted Post Every Day

Using a cost estimating calculator developed by SHIFT Communications, you can see below what some of the larger financial institutions would have to shell out if they wanted to reach 100% of their current fan base with one promoted post per day.

Financial Institution Assets Total # of
Facebook Likes
Daily
Cost
Annual
Cost
Approximate % of
Overall Ad Budget
Chase Bank $2.0 trillion 3,754,905 $18,681 $6,818,558 0.4%
Bank of America $1.4 trillion 1,481,401 $8,560 $3,124,418 0.3%
Navy FCU $55 billion 1,016,869 $5,452 $1,989,962 4.2%
TD Bank $218 billion 430,424 $2,494 $910,288 0.5%
PNC $310 billion 157,770 $806 $294,252 0.1%
America First Credit Union $6.2 billion 103,815 $586 $213,726 4.0%
Mountain America Credit Union $3.9 billion 103,378 $605 $220,807 6.7%
Regions Bank $117 billion 57,802 $308 $112,555 0.1%
Fifth Third $128 billion 42,038 $303 $110,767 0.1%
Golden 1 Credit Union $8.2 billion 41,695 $215 $78,314 1.1%
Huntington Bank $59 billion 36,643 $188 $68,740 0.1%
Suncoast Credit Union $5.8 billion 33,848 $203 $74,095 1.5%
OnPoint Credit Union $3.4 billion 30,208 $154 $56,301 2.0%
Umpqua Bank $11.6 billion 27,514 $173 $63,251 0.6%
San Diego County Credit Union $6.4 billion 23,843 $144 $52,575 1.0%

Don’t expect things to ever go back to the way they were either. Far from alienating brands and driving them away from Facebook, the squeeze play seems to be paying big dividends for the social media behemoth. Indeed, Facebook ad prices have steadily increased following the decision to throttle the organic reach of posts.

“We’re seeing pricing from Q4 2013 to Q1 up 10% across the board,” says Dan Slagen, SVP of Marketing at Nanigans, a Facebook partner that helps companies execute social ad strategies.

The strategy must be paying off, because Facebook is raking in profits. In mid April, the company announced quarterly profits of $885 million on revenues of $2.5 billion. Shares quickly shot up 5%.

Analysts say ad prices at Facebook have been trending up in part because the company has not increased the frequency of ads. Facebook said in Q3 2013 that it intended to keep ad inventory level at about 5% of all posts in the News Feed, the most coveted space for advertisers.

Bottom Line: Not only do you have to pay to play, you’re going to have to pay even more than before. But don’t rush to dismiss the idea of paid advertising on Facebook. It just may be worth it, since studies have shown that Facebook fans are up to four times more likely to purchase after seeing an ad.


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Comments

  1. Brian Rich says:

    Great piece, though I think we’ve lost perspective over the past few years where Facebook marketing was a gravy train for organizations looking for a lot of bang for a little buck. Direct mail and print ads are virtually impossible to measure ROI (you can print 50k ads but how many are actually seen?), so it’s hard to ever declare them officially useless. But if you look at the price of either, you’d think they were still the most viable forms of marketing available, as they’d have to generate a pretty outstanding return to justify the thousands some small companies spend just to send a piece of mail to their existing customers.

    Facebook, on the other hand, actually tells you not only when a person sees one of your posts, but when they click it and where they wind up once they do (your page? a blog? your website?). Facebook marketing gives businesses a somewhat captive audience with demographic information and all sorts of digital feedback so marketers can not only speak to people, but hone their message to elicit the ideal response. What other advertising avenues can say the same?

  2. Brian, good, skilled direct marketers can (and do) track everything, regardless of medium. There are a number of tracking mechanisms that can be used — dedicated phone numbers, custom promotional URLs, PURLs, offers/discount codes unique to each piece/medium. In advertising, it’s a little trickier, but you can still use some of the same techniques that direct marketers use. The trouble is that very few marketers employ these principles. A bank/CU will put together an entire auto loan campaign with the same rate, the same contact info, the same message, the same call-to-action, etc., etc., in every piece they create — postcard, ad, billboard, etc., etc. And then when the results come in, they can’t attribute anything to any specific channel.

    You’re right that Facebook makes tracking, segmentation and conversion metrics easier. But what Facebook is really doing is making it easier for marketers to do what they should have been doing in *every* channel for decades.

  3. Brian Rich says:

    Excellent points. My comments were mainly speaking on behalf of the thousands of small businesses that may not have had the staff or resources to put together truly comprehensive marketing campaigns as you described. So many businesses have 1-2 person marketing departments, others absorb marketing duties into another position because they can’t afford a specialist on their staff. Facebook was a great option for these businesses because it was free, easy to learn and easy to harness with contests, sweepstakes, etc. It also provided easily digestible insights for an entry-level employee to understand.

    The kinds of advanced marketing techniques you describe are going to be more common in businesses with highly paid, experienced marketers and/or a significant marketing budget, which lessens the impact of Facebook’s recent changes (they’ve got the money to pay for engagement).

    I suppose that’s all why they are taking it easy on smaller businesses with lower fan counts – they know the page will just get shut down if it totally loses its organic reach.

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