You can see it in the numbers and read it in the quotes: Facebook's advertising business is a mess.
The numbers: Facebook's advertising revenues shrank from Q4 to Q1, but that's normal; industry-wide, advertisers spend a lot leading up to the holidays and don't spend much after them.
What's actually a warning signal is that while Facebook's business is still growing year-over-year, overall, it's growing at a slower rate every quarter. It's decelerating. That's not what you want from a company that is about to IPO at a $100 billion valuation.
The quotes: Part of the problem with Facebook's advertising business is that its customers – advertisers – don't know what they are getting for their money. In separate articles posted today, the WSJ and CNET have all kinds of quotes from these people about their dissatisfaction:
- WSJ: "The question with Facebook and many of the social media sites is, 'What are we getting for our dollars?'" said Michael Sprague, vice president of marketing at Kia Motors Corp.'s North American division.
- CNET: David Smith, the CEO of digital agency Mediasmith : "Facebook just doesn't seem to care. They're still trying to grow this thing. The question is, do they want the big bucks?"
- CNET: Mike Parker, the co-president of U.S. operations of Tribal DDB , talking about his frustration with Facebook: "For the longest time, we've been trying to call Facebook to do business with them and there's nobody to pick up the call," said Parker. "...They're very focused on the consumer experience, and less focused on revenue and working with advertisers."
- WSJ: "There's a pretty high degree of animosity right now with Facebook because they have become so powerful," said Rob Griffin, global director of product development at Havas Digital, a unit of Havas
The ultimate problem: Facebook doesn't really have a great ad product to offer marketers.
We've covered that problem in detail, here: One Thing Is Clear: Facebook Hasn't Figured It Out Yet
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