Advertisers 'Are Now Openly Talking About Their Discontent' With Facebook

Julie BortFacebook founder Mark Zuckerberg.

Nate Elliott, the Forrester analyst who wrote a controversial report recommending that advertisers "don't dedicate a paid ad budget for Facebook" last October, has struck again.

This time, he says in a new blog post, a recent change Facebook made to reduce the "organic reach" of advertisers' posts - the percentage of their fans who see them - makes advertising on the social network no longer worth it:

Is there any doubt now that Facebook has abandoned social marketing, and that its paid ad products aren't delivering results for most marketers?

Research by the ad agency Ogilvy shows that brand pages reach just 6% of their fans. Pages with more than 500,000 fans reach only 2% of them.

Social@OgilvyClick to enlarge: The decline in "reach" on Facebook over time.

The problem here is that the average Facebook user has about 1,500 items in their news feed every day. If those items were shown exactly in the order your friends posted them, your feed would be a meaningless jumble of garbage. (Look at the activity feed on the far right of Facebook on desktop if you want to get an idea of what you're "missing.") So Facebook has an algorithm that favors posts that have gotten comments and likes from your friends - you're seeing the most important stuff first, not the most recent stuff. That means most posts do not get seen by most people.

The only way to ensure your posts are seen by your followers is to pay to promote them - or to just buy ads.

And, Elliott says, advertisers hate it (emphasis ours):

Brands and agencies are now openly talking about their discontent. Every day I talk to brands that are disillusioned with Facebook and are now placing their bets on other social sites - but few of them want to go on the record. Lately, though, more brands and agencies have started speaking openly to the media about how Facebook is failing them. One former Facebook advertiser referred to Facebook as "one of the most lucrative grifts of all time."

The marketer who made the "grifts" comment was James Del, head of Gawker's content studio. He told Digiday:

Facebook may be pulling off one of the most lucrative grifts of all time; first, they convinced brands they needed to purchase all their fans and likes - even though everyone knows you can't buy love; then, Facebook continues to charge those same brands money to speak to the fans they just bought.

OK, so Gawker isn't exactly a major corporate client like American Express, BP, Ford or IBM. So that is why it should be especially worrying for Facebook when Social@Ogilvy, the digital ad agency that has represented all those companies, also slams Facebook. Social@Ogilvy EAME Managing Director Marshall Manson told Ad Age recently that, "Increasingly Facebook is saying that you should assume a day will come when the organic reach is zero."

MRY, another big New York ad agency, piled on, too:

"We've lowered our expectations from Facebook in regards to collaboration and partnership," said Jeffrey Melton, chief distribution officer at digital agency MRY. "At this point, we're so used to it. Facebook is kind of like your C student who is not failing, but they're definitely not your A student looking to be the class leader."

Michael Seto / BICarolyn Everson

When Facebook was a young company, ad agencies used to complain that its staff was overly arrogant - some of them wouldn't even return phone calls when their clients called.

The arrival of VP/global marketing solutions Carolyn Everson in 2011 changed all that, and Facebook built an ad sales team that now books $2.6 billion a quarter. Much of those sales are "direct response" based, meaning that as long as they create extra sales, advertisers keep buying them. So the opinions of various advertisers should be taken with a pinch of salt - the numbers tell the real story. "The conversations we have with advertisers tell us the ads they run are working. That's why they keep running them," a Facebook spokesperson tells Business Insider.

Nonetheless, it is unusual for advertisers to talk this way about a major media partner. These comments will hurt.