Facebook Advertising and Sloppy Pricing

As I mentioned in an earlier post, I had a poor experience attempting to pay Facebook for services I agreed to purchase. It wasn’t the acquiring process that was messed up… it was the actual payment. This is the absolute worst place to make things fall apart – when you want a customer’s money.

I did, however, discover one other serious mistake on Facebook’s part: sloppy pricing.

Let’s go back to my sample advertising campaign. I selected the article to “Boost” and the target audience, and then it gave me the prices. Since I was physically in Israel using an Israeli ISP (and hence IP address) at the time, the price offered was 180 Israeli shekels (NIS). On the other hand, since my business is US-based, I clicked on the “select currency” pull-down, switched to US dollars…. and got 180 USD! The current NIS:USD exchange rate is ~3.60:1 (it was worse, but the Bank of Israel lowered its rate by 25 basis points early last week), I could pay $180 USD or 180 NIS = $50 USD! Essentially, the price was 180, whatever currency you were in. Maybe, I should have tried Chinese Yuan, as the RMB:USD rate is around 6.14:1!

I could easily understand the same demographic in 2 different regions – US and Israel or UK and Hong Kong – with differential prices, but for the exact same demographic to cost the 3.6x less just because of a different currency? This is a classic arbitrage opportunity, and a big one at that. Even better, the 2 markets are run by the exact same company, in the very same window in front of the same customer! Facebook needs to be careful to manage its pricing much more carefully. Maybe I wouldn’t have paid $180 to advertise, but maybe I would have paid more than $50. Either way, to sell the exact same product, to the exact same audience, in the exact same packaging, for 2 different prices? Foolish.

It looks like Facebook has its internal technology figured out pretty well – they do some impressive stuff architecturally in order to scale to the 1BN+ users they have; the published documents and presentations are recommended reading for anyone designing technology systems – but they appear to be much weaker in terms of integration with external systems like PayPal, and especially in their own marketing and especially pricing. It appears they need some adult supervision at the helm. Sure, they did $2.02BN in revenue in Q3 of last year, but how much more are they leaving on the table?

 

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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