Facebook dominates the Web, but it’s never really cracked the direct response puzzle. That looks like it will change in 2013 with an avalanche of new measurement and targeting tools.
As a marketing platform, Facebook has traditionally thrived at top-of-the-funnel advertising. Unlike search, which hits people just as they express an interest in buying a certain product or service, social media marketing at its best builds relationships, and there’s compelling evidence for its value.
The heavy lifting for this type of advertising, however, happens on the advertisers’ own media—their brand pages. Although Facebook doesn’t charge for brand pages, it can still make money from them by selling ad units that encourage users to become fans, or that amplify the reach of content shared on the page. In a lot of ways, these are straight direct response ads, but with a call-to-action for a “like” or “share” and not a sale.
Showing marketers how many likes or conversations an ad produces is one thing, but proving ultimate sales is another, much more difficult job. Because Facebook advertising traditionally operated high in the funnel, the platform has long suffered from a “last-touch” bias. Click rates and conversions probably underestimate the actual impact of advertising on the Facebook platform, especially for the small display ads that appear to the right of the newsfeed. If people see an ad while they’re checking in on their friends, they may not click. Or they may click on it and do nothing. Later, however, they may decide to go to the website or a store and make a purchase. It’s often this last channel that gets outsized credit for this sale.
Overcoming this last-touch bias has become an imperative for Facebook. First of all, Facebook has developed “sponsored stories,” a native ad format that appears in the newsfeed and refers to how a friend interacted with a brand—becoming a friend, commenting on an article, redeeming an offer, etc. They still pivot off the relationships within Facebook’s social graph but have much higher CTRs and engagement. With these ads, Facebook has a more powerful format, where CTR becomes their ally as opposed to an obstacle.
Facebook is also trying to move down the purchase funnel by giving advertisers the ability to reach people who have already shown interest in a brand. Last year, Facebook introduced two new advertising products that do this. Custom Audience targeting lets advertisers upload their proprietary lists and match them with Facebook users to deliver sponsored stories or standard display ads to their existing customers. Early results show that these custom lists produce higher CTR and lower cost-per-lead. In February, Facebook reached an agreement with big data aggregators Epsilon, Axciom, BlueKai and Datalogix to import even richer audience segments.
Ulitmately, an even more important innovation might be Facebook Exchange, which allows marketers to retarget ads on Facebook. Through cookies and other tracking tools, Facebook can identify which websites users have visited—and even specific products they’ve browsed—and then deliver ads based on this information. Although the exchange is still in its early stages, it too has shown promising results.
Through Custom Audiences and its Exchange, Facebook is digging deeper into the buying process, but its big challenge remains attribution. It needs ways to span the gulf between advertising on the Facebook platform and the ultimate actions it produces. Custom Audiences and the Exchange have shrunk the width of this gulf but haven’t eliminated it—and its advertising team knows it.
That explains why Facebook bought Atlas Solutions from Microsoft right at the end of February. The ad server enhances Facebook’s ability to track online purchases. In announcing the service, Facebook’s Head of Monetization Product Marketing Brian Boland said, “Why we’re doing this is not to launch an ad network, and why we did do this is to improve measurement. We heard loud and clear from advertisers that they want to understand multi-touch attribution instead of just looking at the last click.” With the ad server, Facebook can deliver more types of ads to more publishers and, most importantly, it can effectively follow what users do online. It’s an incredibly powerful tool for online attribution.
It is made even more powerful when paired with Facebook Connect, a plug-in for online publishers that lets visitors log in to a website with their Facebook email and password. The service gives websites a simpler login process and gives them access to a rich layer of biographical information and connections that Facebook has amassed. Facebook, in turn, can see what people are doing all across the Web, not just in their walled community and, importantly, it can track activity across multiple devices, as long as a user has logged into Facebook from that device. If you see an ad on your desktop but convert via your phone or tablet, Facebook can track the activity.
Combining Atlas and Facebook Connect produces a powerful suite of online measurement tools. With a partnership with Datalogix, it can even track activity offline via loyalty cards and email addresses collected at checkout. With these tools, Facebook seems positioned to fully “close the loop” and overcome the last-touch bias. In classic direct marketing fashion, they also let Facebook better optimize who receives advertising. If you know who’s bought your products, you’ve found a great audience for future purchases.
Better measurement tools and advertising formats with higher click-rates transform Facebook into a legitimate direct marketing player. With Facebook experimenting with a slew of new DR formats and tools, including trigger-based Gifts, the social search tool Graph Search, redeemable Offers, and its gift card called—what else—Facebook Card, Facebook seems finally to have embraced it inner direct marketer.