Are Ford Motor and Coca-Cola Friending Facebook for the Long-Term?
Many lost faith in Facebook’s (NASDAQ:FB) business model when one of the country’s biggest advertisers, General Motors (NYSE:GM), ended its $10 million campaign last month, declaring that Facebook’s paid ads didn’t impact consumer car purchases. But on Tuesday, both Ford Motor Co. (NYSE:F) and Coca-Cola Co. (NYSE:KO) separately said they found value in Facebook advertising, giving the social networking site a big vote of confidence as it struggles to recover from a disastrous IPO.
Ford’s (NYSE:F) global sales and marketing vice president, Jim Farley, said the automaker is actually increasing its social media presence, particularly on Facebook, to improve its image among potential buyers. “Someone who ‘likes’ you on Facebook is substantially more willing to advocate the brand,” he said at an event in Dearborn, Michigan, on Tuesday.
Meanwhile, Coca-Cola marketing chief Joe Tripodi said at an advertising conference in Cannes, France, that Facebook ads probably help drive its beverage sales. “If we can get 40-million plus fans, or even some subset of them, talking positively about the things we’re doing, ultimately that’s a good thing for us,” he said.
When General Motors (NYSE:GM) pulled out last month, Facebook was under an IPO-imposed quiet period and was prohibited from publicly discussing its business, and therefore from defending its advertising model. But since the quiet period lifted a week ago, Facebook has been vigorously defending its ads. Last week, research firm comScore Inc. released a study commissioned by Facebook (NASDAQ:FB) that concluded that being a fan of a brand on the social network causes people to purchase that brand more frequently.
Facebook (NASDAQ:FB) counts heavily on online ads to fuel its revenue growth. About 85 percent of 2011 revenue — $3.1 billion — came from advertising. Facebook currently provides both paid and free marketing opportunities to advertisers. Through Facebook Pages, brands can build a fan following and then post updates that will appear in fans’ news feeds. While that service is free, Facebook has started offering advertisers the ability to pay sot hat more fans see the post. And Facebook has also encouraged them to supplement free marketing efforts with paid display advertising along the side of a user’s screen.
Ford (NYSE:F) will spend more than 25 percent of its advertising budget on digital advertising this year, according to Farley, and the vast majority will be spent on interactive or social Web pages rather than on banner ads. Farley said it’s a mistake to equate interactions on Facebook with direct sales, but that the social site improves Ford’s image among buyers and builds advocates for the brand — a harder to measure but invaluable service.
“This interaction and engagement [on Facebook] is something that you don’t necessarily see in traditional media. That’s why we continue to accelerate our digital advertising investment to more than 25% of our media dollars,” Mr. Farley said.
He pointed to the success of the Mustang Customizer app, which allows users to virtually alter a Mustang to their own specifications. The customized Mustangs then compete for “coolest design” votes. Since the app launched in September, Ford says 4.3 million Mustangs have been designed, and that Mustang sales are up 18 percent this year. Ford believes at least some of the sales increase is connected to its Facebook app, but Farley said the customizer “isn’t about the Mustang, it’s about building the Ford brand.”
Coca-Cola (NYSE:KO), too, is spending between 20 percent and 25 percent of its advertising budgets on digital and mobile platforms in some markets. “Our mix is evolving and will continue to evolve,” said Tripodi, who believes “there needs to be some value” attributed to people who click “like” on Facebook, or share advertisers’ content on the site, even though it may take “a year or two” to come up with a more standard way to measure that value. For now, though, Tripodi says he’ll just have to take “a little leap of faith.”