Facebook’s growing pains: upsetting users and developers

More intrusive advertising, real-money gambling apps, and tough tactics with developers: is this how Facebook plans to make the profits investors are demanding?

Facebook shares have plummeted to $20 from their launch price of $38 in May, and its first set of results published last month showed a second quarter loss of $157 million, compared to a $240 million profit in the same period last year. The loss was blamed on early payments to investors, but that didn’t stop shares falling 11% on the news.

“We’re disappointed about how the stock is traded but the important thing for us is to stay focused on the fact that we’re the same company now as we were before,” Facebook’s chief financial officer David Ebersman said at the time. But is Facebook the same company – and the same to users – as it was before it went public?

Facebook makes most of its money through advertising, but ad revenue growth is slowing and the success of that marketing has been called into question – notably by US carmaker GM days before the IPO.

Now, Facebook is testing extending the reach of advertisers’ sponsored messages. Previously, advertisers could insert messages in a news feed only if the user or a friend had indicated an interest by “Liking” the company.

Now, according to Inside Facebook, ads will begin appearing on all news feeds, labelled as Sponsored Messages. Early tests have shown higher click-through rates, but Facebook has insisted it’s a small test to see how users react.

That advertising shift follows an app change last week, when Facebook extended its platform with another commercial route: gambling. Facebook approved the first real-money gambling app on the site, a brightly coloured, cartoonish bingo game from London-based Gamesys.

Developer complaints

Behind the scenes, there’s more controversy, with a growing number of developers complaining about the way Facebook deals with them.

A startup called Limited Run posted criticism – now deleted – that Facebook ads were only delivering 20% of the clicks the firm paid for. Limited Run built its own analytics software to investigate.

“On about 80% of the clicks Facebook was charging us for, JavaScript wasn’t on,” explained the post. “And if the person clicking the ad doesn’t have JavaScript, it’s very difficult for an analytics service to verify the click. What’s important here is that in all of our years of experience, only about 1-2% of people coming to us have JavaScript disabled, not 80% like these clicks coming from Facebook.” After further investigation, it appeared the 80% of ghost clicks were from bots.