Lack of trust in Facebook may be holding back ad sales

Associated Press

NEW YORK

Facebook’s reach is wide but not deep. Few users surveyed in an Associated Press-CNBC poll say they click on the site’s ads or buy the virtual goods that make money for it.

More than 40 percent of American adults log in to the site — to share news, personal observations, photos and more — at least once a week. In all, some 900 million people around the world are users. But many of them don’t have a very high opinion of Facebook or trust it to keep their information private.

If Facebook the company were a Facebook user, it would have a lot of virtual friends but not many real ones, the poll suggested.

Users’ distrust limits the value of the site’s ads. Advertisers want to target their messages to the people most likely to respond to them. And the more Facebook knows about us, the better it will be at tailoring those ads to our interests.

Yet in the poll of U.S. adults published Tuesday, only 13 percent said they trust Facebook “completely” or “a lot” when it comes to keeping their personal information private. A majority, or 59 percent, said they trust Facebook “only a little,” or “not at all.”

Users’ desire for privacy and Facebook’s need to target advertising aren’t necessarily opposing interests. Facebook doesn’t expose information about its users directly to advertisers. Instead, it effectively accepts missions to deliver ads to groups of people, such as “movie goers” or “people planning trips to Europe.” It’s up to Facebook to figure out how to find those people.

But the company doesn’t seem to be connecting very well. In the poll, 83 percent of respondents said they “hardly ever” or “never” click on the ads Facebook serves up.

The ones who did click through were enough to yield the company $4.34 per user in advertising last year. That’s up from $3.07 in 2009. So the company is getting better at making money from its user base, but it has a long way to go to fill out the market capitalization of nearly $100 billion implied in its IPO pricing.

The Wall Street Journal reported Tuesday that General Motors Co. plans to stop advertising on Facebook because the company has concluded that the ads are ineffective. The paper cited anonymous sources.

GM spokesman Tom Henderson said the company is “reassessing” advertising on Facebook, but would not say if the company has made any changes.