Sterne Agee: 'Facebook Promoted Posts' A Flop, But Stock Still A ‘Buy’ With Hope For Gifts Program
In its continued effort to establish more persuasive revenue streams than its user-base-fueled ad revenue alone can offer, Facebook (Nasdaq: FB) recently introduced two new features to its newly-minted one billion users that attempted to position users more purely as consumers than they have traditionally been viewed. On Friday, the analyst firm Sterne Agee released some of the first data on the potential of Facebook’s new “gifts” and “promoted posts” features.
Launched late last month, the Facebook “gifts” platform allows users to purchase and send real-world items to friends on the social network. In a survey conducted for the report, almost 45 percent of respondents said that they would consider using the new feature.
“We believe [Gifts] is an area of tremendous opportunity for Facebook,” Sterne Agee analyst Arvind Bhatia concluded in the report. “This will allow Facebook to diversify its revenues away from advertising and should lessen the impact of the shift towards mobile.”
While the majority of people surveyed said they were only “slightly likely” to use the new feature, Bhatia maintained that the fact that the product is still so new means it retains its core potential.
As for Facebook’s other new feature, the controversial “Promoted Posts” offering that allows users to send their own messages to the top of their friends’ news feeds, the outlook was not nearly as promising. Only 16 percent of surveyed Facebook users said they would pay to promote their own status updates. Only 1.2 percent of those surveyed said that they would be willing to pay more than $5 for the feature. At present, the pay-to-promote option costs about $7 per status update.
Like the recently announced “Collections” feature, Promoted Posts is still in testing and is not available to most Facebook users. The main difference with Promoted Posts is that it would give normal Facebook users the ability to sponsor their own material, similar to how brands already do so on popular social media channels such as Facebook and Twitter. But while an aggressive social media campaign may take up most of a popular brand’s marketing budget at this point, $7 for a promoted post probably seems too steep for the average user less interested in selling their own product.
“While we see a significant opportunity for Facebook Pages to promote posts, we view the move into promoted posts for personal profiles as small,” the report concluded. “While the margins will be high, we think it’s unlikely for the promoted personal posts to move the needle in the near term.”
Despite some fits and starts in the new proposed offerings, Sterne Agee’s report noted promisingly that Facebook users by-and-large are still engage with the social network at equal levels to their engagement six months ago.
Seventy-seven percent of respondents, who identified themselves as "mobile" Facebook users, said they were moderately to extremely satisfied with their experience on the site—an area that CEO Mark Zuckerberg himself said he was eager to invest more time and energy into for the company’s future. The same percentage of people said that they hadn’t noticed ads on the mobile version of the site, a number the report took to indicate that sponsored material has proven to be effective without disrupting user experience on their smartphones.
Bhatia did express doubts about one figure: the percentage of people who found ads relevant to their Facebook experience, 61 percent, had not changed over the past six months.
“This is a concern for advertisers,” he told VentureBeat. “They’re advertising on Facebook because they’re hoping to get more targeted ads.”
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