As Businesses Build Marketing Programs Around the Social Network, Some Balk at Paying a Fee to Promote Their Posts

By SARAH E. NEEDLEMAN And EVELYN M. RUSLI

Figuring out the value of a Facebook fan has become more complex for many small-business owners, ever since the social-media giant began asking businesses to pay to “promote” their posts.

Under a program rolled out in May, businesses pay Facebook Inc. anywhere from $5 to hundreds of dollars to promote a post to the news feeds of users who have “liked” their page, plus Facebook friends of those users. The price depends on how many users a business wants to reach.

Figuring out the value of a Facebook fan has become more complex for many small-business owners, ever since the social media giant began asking businesses to pay to “promote” their posts. Sarah Needleman reports on Digits. (Photo: AP)

The giant social network, which has to balance users’ desire to broadcast messages against the need to keep the ecosystem tidy, has always limited the number of posts users receives via their news feeds. According to the company, the average business post reaches 16% of its fans. The Promoted Post program is supposed to make it possible to increase that reach.

Richard Bishop, of Mountain Home, Idaho, is among the many entrepreneurs who are irked about being asked to pay to reach a larger percentage of their Facebook fan base, which they have spent time and money building.

Todd Meier for The Wall Street JournalRichard Bishop, a caterer, estimates he would need to spend at least $9,100 a year in Facebook fees.

16

The average percentage of fans who will see any given (nonpromoted) business post.

Mr. Bishop says he puts out an average of 35 posts a week, and estimates that he would need to spend a minimum of $9,100 a year if he opted to pay fees to promote each one of them to his more than 1,500 followers.

Facebook “lured us in with free Facebook pages,” says the 35-year-old caterer, referring to small-business owners like himself who have built marketing programs around Facebook. “Now all of a sudden they’re saying a minimal percentage of your fans will see your posts unless you pay. They devalued the value of a fan.”

Using social media has long been a particular challenge for many small-business owners, who often don’t have a large staff or the free time to manage Facebook, as well as the other outlets.

A July survey of 400 U.S. businesses with between $5 million and $50 million in annual revenue found that 77% spend a quarter or more of their marketing efforts on social media. Slightly fewer, 73%, said they have added social-media management to the duties of at least one employee in recent years. The survey was conducted by Edge Research and commissioned by software company Vocus Inc.

Facebook’s expanding menu of fees has rankled some small-business owners who say they were initially drawn to the social-networking site because it is free to join and has a massive user base, now one billion monthly active users. Many have come to rely on Facebook as their main marketing vehicle to keep their operating costs low. And some even use its business pages in lieu of a company website.

Having to pay for social media puts small businesses at a disadvantage over larger rivals, says Eric Yaverbaum, co-founder of SocialMediaMags.com, a magazine publisher in New York. “They don’t have the same amount of money to compete with the big companies,” he says. “They’re going to have to reshape their online sales strategy or bow out if they can’t afford it.”

According to Facebook, Promoted Posts are gaining considerable traction. In an emailed statement Tuesday, it said the program “has significantly increased over the past three months.” The company declined to provide specific data.

Among those using the feature is Joe Sorge, co-owner of four casual restaurants in Milwaukee and one in Madison, Wis. Since the Promoted Posts launched, he has been spending about $1,000 a month on it, mainly to highlight new menu items and special events. He says he is seeing results in the form of higher sales. “Before I didn’t have as much control over whose feed (a post) showed up in,” he adds.

In its efforts to educate wary businesses, Facebook has compared Promoted Posts to search advertising, where organic search results are free but companies pay extra to show up in sponsored search results. The company is also providing businesses with data on how many people have seen their posts and what percentage of this group came through the Promoted Post program.

The initiative is just one example of recent moves by Facebook to prop up its sagging stock price with new money-making products. In late September, the social network debuted a gift service that lets users send real-world presents such as cupcakes or flowers to friends. And earlier this month, it rolled out a version of promoted posts for individuals, which charges users $7 to amplify a personal announcement, like an engagement or the birth of a newborn.

Other social-media outlets have also recently begun adding fees for businesses, including Foursquare Labs Inc., of New York. Since July the location-based social-networking service has been testing a pilot program called Promoted Updates in which businesses pay to be listed high in search results on its mobile app.

Foursquare hasn’t yet disclosed the price of Promoted Updates, which is the company’s first advertising product, says spokeswoman Laura Covington. It will be accessible by all users “in the not-too-distant future,” she adds.

Some small-business owners say they weren’t previously aware that their posts to Facebook only land in a small portion of the fan’s news feeds. But the discovery hasn’t prompted Lindsay Gonzales of Casper, Wyo., to pay a fee to amplify the number of users her two-year-old photography business reaches.

“It’s a waste of money because even if you pay they still regulate who sees your posts,” she says, adding that her business, Making Memories Photography, has about 1,400 Facebook fans.

Write to Sarah E. Needleman at sarah.needleman@wsj.com and Evelyn M. Rusli at evelyn.rusli@wsj.com

A version of this article appeared October 11, 2012, on page B9 in the U.S. edition of The Wall Street Journal, with the headline: What’s a Facebook Follower Really Worth?.