Hollywood studios may be regretting the day they accepted a friend request from Facebook.
According to the Los Angeles Times, skepticism over the effectiveness of Facebook (Nasdaq:FB) ad campaigns is growing in the entertainment industry, as an increasing number of studio executives wonder if advertising on the world’s largest social network is worth the cost. Although no executives would speak ill of Facebook on the record, their biggest gripe, according to the Times, seems to be a relatively new algorithm for Facebook’s newsfeed that has led to a reduction in their pages’ reach.
Such dissent would not be surprising since the algorithm -- dubbed EdgeRank -- has been provoking serious gripes from Facebook users and brands that say they’ve seen their page reach drop since the algorithm was implemented in September. “Star Trek” actor turned Facebook phenom George Takei railed against it, as did media mogul Mark Cuban. Both complained that, since the change, fewer of their fans saw their posts.
At around the same time, meanwhile, Facebook implemented a new feature that allowed page administrators to pay money to promote their posts, thereby assuring that more people would see them. Many users went ballistic, with one blogger from Dangerous Minds calling it the “biggest bait and switch in history.” Facebook denied that the algorithm change was a ploy to sell more ads. Will Cathcart, Facebook’s product manager, told TechCrunch in November that EdgeRank was implemented to combat spam. He added that, in reality, posts never reached 100 percent of a page owner’s fan base. The only difference now is that page owners know about it. While Facebook users often say they would prefer to see their newsfeeds unfiltered, Facebook insists that the noise and chatter from constant updates would overwhelm users. As such, it is constantly tooling and retooling its algorithm, which chooses posts based on the people and pages users interact with most.
Regardless of why EdgeRank was implemented, it seems to have diminished page reach for Hollywood studios, at least according to BlitzMetrics. The Facebook marketing firm, which analyzed 9 billion page posts, told the Times that some 72 percent of movies and network TV shows “experienced a drop in the number of people who saw new Facebook posts after the new algorithm launched.”
Facebook doesn’t share official EdgeRank rankings, but if that number is correct, it could spell trouble for the company as it strives to retain its dominance in the increasingly crowded social media market, where studios now spend an estimated $1.5 billion each year promoting movies.
And it wouldn’t be the first time a power player deemed Facebook unworthy. In May, General Motors (NYSE:GM) pulled a $10 million advertising account from the social network after determining that advertising on the site didn’t help it sell cars. The automaker does, of course, still have a free Facebook page, where it has amassed more than 449,000 fans and continues to post regular updates about goings-on within the company. But then again, free works with any ad budget.