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Facebook Inc (FB) Probably Shouldn’t Be Bragging About This

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Stop the presses!

Facebook Inc (NASDAQ:FB) has officially reached the milestone of 1 million active monthly advertisers on its ecosystem.

Before you bust out your favorite bottle of bubbly to celebrate, this headline could benefit from a little perspective.

It turns out that the vast majority of advertisers that do business with Facebook Inc (NASDAQ:FB) are of the small-business variety. Take a wild guess how many small businesses have a presence on Facebook: 16 million.

Facebook Inc (NASDAQ:FB)

The less than 6.25%
When you break it down, 1 million active advertisers represents 6.25% of the 16 million small businesses on Facebook Inc (NASDAQ:FB), assuming that all 1 million advertisers are, in fact, small businesses. Of course, this isn’t the case when big brands like McDonald’s Corporation (NYSE:MCD), The Coca-Cola Company (NYSE:KO), General Motors Company (NYSE:GM), and then some, are advertising on the site. The exact percentage of active advertisers is difficult to pinpoint, because Facebook doesn’t release total business Fan Page statistics, but it’s safe to say that it’s lower than 6.25%.

Why so low?
When I read between the lines, Facebook doesn’t appear to be rapidly winning over marketing budgets, and there are two factors likely at play here. The first is how infantile Facebook Inc (NASDAQ:FB)’s ad measurement technology is — it only recently improved when the company purchased Atlas from Microsoft Corporation (NASDAQ:MSFT) last March. It’s worth noting that Atlas did help persuade General Motors Company (NYSE:GM) to re-establish its campaign after an 11-month hiatus, but, as a whole, it’s still too early to call Atlas a smashing success.

The second factor is how Facebook has essentially become a freeloader’s paradise for businesses. According to BIA Kelsey, a research firm that specializes in local advertising, more than 50% of small business owners utilize Facebook Inc (NASDAQ:FB) to promote their businesses, but only 16% spend money on ads. The fact that businesses get a free Facebook Page to grow their presence could be undermining the company’s advertising ambitions. For the businesses that have the ability to grow their fan base organically, there could be little incentive to spend money on advertising.

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