GM offers one answer to that question in  “GM Says Facebook Ads Don’t Pay Off” (Wall Street Journal, May 16, 2012, non-subscribers click here).  A case study reported by NPR found equally dubious results – “Pizza Delicious Bought An Ad On Facebook.  How’d It Do?” (Planet Money Blog, May 16, 2012).

Any in-class discussion should distinguish between the various ways brands can use Facebook.  Marketers can create a Facebook fan page and invite customers to “like” the page.  After liking the page, posts to that page appear in that person’s news feed.  The cost to the marketer is to create the page and keep it up — but there is no media cost.  There is also no revenue to Facebook, so the firm has developed other types of advertising. In theory and probably some time in the future, Facebook knows so much about users (through elaborate analysis of likes, posts, photos, the user’s network, etc.) that it can target customers.

Ask students if they ever click on Facebook ads?  Ask if they have “Liked” any brands — and if they read the brands’ posts in their news feed?   What messages appeal to them?  Why?  What can Facebook offer advertisers?  The articles I posted above tend to discount the role of advertising in brand building.  These questions are also posted at Learn the 4 Ps.

Getting back to the question in the headline:  well, the jury is still out.  Certainly a lot of investors buying Facebook stock are hoping that the company finds a formula to make it work.

For example, did you know that Facebook apps are gathering data about users and user’s friends?  You can read more about this in “Selling You on Facebook” (Wall Street Journal, April 10, 2012).  Looking ahead, you can be sure that Facebook and Google are developing techniques for mining many types of data — everything from your “likes,” gender, and political leanings — to your status posts and photo stream. Facebook wants to be able to anticipate your needs — so that it can help marketers address those needs.  Yes, that is the reason the company is worth $100 billion.

The video below is kind of long (7:54) provides an overview you could show to stimulate class discussion.  Students may be interested in this topic.  I have found that my students are much less concerned about the invasion of privacy than I would have suspected.  Also posted at Learn the 4 Ps.

The article and video might be used when you discuss social media, advertising, targeting, and privacy.

On the other hand, focus of the article, “Big Brands Like Facebook, But They Don’t Like Paying,” (November 2, 2011, non-subscribers may need to click here) describes a business model challenge for Facebook.  The company’s $70 billion market value is based on the idea that the social network giant will produce revenues and profits — largely from selling targeted ads on the site.  Big brands love the eyeballs their Facebook fan pages attract, but those pages cost little to produce and generate no revenue for Facebook.  And many firms, like Ford, are spending for other media — in part to drive customers to Facebook.  While Americans spend 15% of their online time on Facebook, the social network giant only attracts 6.4% of all online advertising.  The video below interviews with the author of the WSJ article.

The article has insights for teaching about advertising, media selection, and social media.

No one is quite sure where this is going, but many consumers are already clicking the Facebook “Like” button on their favorite brands — or maybe mentioning in a post a recent  purchase of the brand.  Now it seems that Facebook will mention this ads targeting that customer’s friends.  So for example, if I “Like” a brand like Ikea on my Facebook page, an ad could appear on my friends pages that mentions “Joe (and perhaps more of their friends) Likes Ikea.”  In theory, knowing that Joe likes Ikea may make the store more appealing to my friends. This short article at Fast Company suggest that Facebook’s sponsored stories work – see “Facebook Sponsored Stories Performing 2 Times Better Than Standard Ads” (July 15, 2011).

Why could it work?  Because Facebook users are trusting people.  There is evidence that social networks foster trust.  You can read more about it in another Fast Company article, “Digital Oxytocin:  How Trust Keeps Facebook, Twitter Humming” (July 18, 2011).

These short articles epitomize one of the original motivations for Teach the 4 Ps – how can we keep our customers up-to-date when books only publish every few years.  So many new things are happening in marketing — so the blog is designed, in part, to help you stay current.  Also posted at Learn the 4 Ps.

Yikes, lots of stuff here.  The Sheryl Sandberg story in BusinessWeek provides a neat profile of the COO and gets you up to date on some Facebook initiatives — like advertising and whether the firm should enter China.  The more interesting issue is the ethical lapse by Facebook.  It also makes you wonder about a PR firm that would take on (or maybe even suggest) such a tactic.  Neither looks very good here.  Also posted at Learn the 4 Ps.

Great scenario to use to discuss ethics in class.  How does a PR firm – even a big, well-known firm like Burson-Marsteller say no to Facebook?