April 28, 2009

Take Advantage of Facebook’s Ad Platform: Strategies to Get Great ROI

SUMMARY: Display advertising gets a bad rep for being low in CTR and tough to target. But what if there were an ad platform where display ads were ranked by relevancy and CTRs? Want to target display ads based on data provided by a qualified audience, and pay with CPC?

Check out Facebook’s evolving ad platform. We interviewed their Director of Monetization on how to best use their newest version. Includes great tips on improving ad spend and effectiveness on the social networking site.

With more than 200 million active users, 100 million of whom log on once daily, Facebook is a force to reckon with in the online marketing world.

Just a year and a half ago, the social networking platform had 46 million users, and those 25 and older was the fastest-growing segment. Today, 35 and older is the fastest-growing segment.

Facebook also has become an important traffic source for Google. Facebook drives 19% of Google’s unique visitors – a number that has increased at a rate of about 188% year over year, according to comScore data. Google drives 64% of Facebook’s unique visitors.

Find out what Tim Kendall, Director of Monetization at Facebook has to say about the ins and outs of using Facebook to drive search, CTRs, and conversions.

Improve Ad Spend/Effectiveness on Facebook: 5 Strategies

Seventy three of the top 100 brand advertisers in the world advertise on Facebook, says Kendall. Tens of thousands of advertisers use the self-service ad option.

Here are some strategies to ensure advertising success on Facebook:

Strategy #1. Generate Demand with Ads

Facebook ads include:
o A title no more than 25-characters-long
o An image no more than 80 by 110 px
o Text no more than 135-characters-long
o A link to a landing page, homepage, or Facebook page

Ads can be targeted toward specific audiences based on the information Facebook users provide in their profiles. That information includes: location, age, sex, keywords, education, workplace, relationship status, relationship interests, and language.

Facebook’s free self-service ad tool allows marketers to choose the audience for an ad based on those criteria. The tool even generates the approximate reach for an ad.

If you wanted to reach people in the United States who speak Spanish, for example, the tool calculates the ad would reach approximately 1 million people on Facebook. Changing the filter would change that number. Say you wanted to reach only Spanish-speaking women in the US. The number would decrease.

Facebook wants to help marketers find customers before customers search keyword terms in the major search engines, says Kendall. Kendall’s insight could be correct -- about 45% of monthly uniques go directly to Facebook as a starting page, up 39% from 2008, according the comScore data.

“We think that our solutions are very good at generating demand,” he says. Here’s how the demand generation aspect works:

Example: “Tent” buyers

Kendall estimates about 138,000 people search for the keyword “tent” in Google each month. He approximates that about 2 million people are interested in buying a tent on Facebook – meaning these people have indicated on their Facebook profiles that they’re interested in rock climbing, camping, and backpacking.

That’s more potential customers than paid search can offer (in some instances). It doesn’t mean those customers would convert nearly as well as customers searching for “tent” on a search engine.

“But if I’m REI and I’m selling tents … there’s a point at which I tap out,” Kendall says. “There are only so many moments in a month where I have the opportunity to meet my customer at the point where they’re raising their hand saying I want to buy this.”

In other words, Facebook offers the ability to reach people before they’re in the purchase funnel—often driving them to search.

Strategy #2. Test CPC/CPM payment models

Facebook offers the option to pay per click (CPC) or per impression (CPM) because some marketers’ objectives relate to brand awareness more than strict key performance indicators.

“We still get a portion that do CPM,” Kendall says. “That’s part of why we’ve kept that feature.”

Tip: Test both payment models to determine which is more cost-effective.

Marketers can’t always predict which model will be more cost-effective, so they’ll start with two identical lines running one CPM and one CPC, Kendall says. In most cases, CPC is more cost-effective.

Strategy #3. Let ROI Determine Spend

Search marketers generally spend up to a level of efficient response – meaning they’ll layer incremental spend in paid search until ROI stops being efficient. Marketers should think about CPC spend on Facebook the same way.

“We’re doing some things that are very similar to what Google did in the early days,” Kendall says. “[We] try to figure out if … you’re coming to us trying to find people who like camping and hiking. There’s sort of the exact match equivalent for us, which is that we’ll just hand you the set of people that explicitly like hiking and camping.”

If Facebook notices a disproportionate number of people who like camping happen to live in Northern California and are between ages 25-40, it can expand the pie and offer more ROI-positive leads.

“We’re doing an increasing amount of that,” says Kendall. “We’re trying to expand that, but it’s just the early days for us.”

Here are a few examples of how Facebook ads can get better ROI than search:

Example #1.

StorQuest, a self-service storage solution, got better ROI from an ad campaign on Facebook than from a paid-search campaign for the same promotion. The promotion targeted freshmen, sophomores, and juniors at the University of California Santa Barbara at the end of May – a time they were likely to be moving out of dorms and apartments.

Example #2.

If you’re a Chicago Cubs fan, it might not occur to you to search for Cubs paraphernalia or tickets on a daily or even monthly basis, says Kendall. But if you indicate that you’re a Cubs fan on your Facebook profile, you could get targeted ads for Cubs tickets, hats, and other items.

Bonobos, a company that makes well-tailored pants, took a chance on Facebook when it used the self-service ad solution to sell Chicago Cubs pants specifically to young men in the Chicago area who identified themselves as Cubs fans.

The ad was seen more than 250,000 times, according to an article in The Wall Street Journal. Bonobos sold out of the pants priced at $120 apiece. The total cost of the ad campaign was about $63.

“It was super effective,” says Kendall. “They sold out their inventory in a matter of days.”

Strategy #4. Find Lowest Bid Recommendations

Marketers bid on a person who indicated an interest in photography on Facebook the same way they bid on the term “digital camera” in search.

The self-service tool allows marketers to choose a daily budget, encompassing all ads associated with a campaign, and to run an ad continuously starting that day or on specified days.

The tool asks marketers to enter the maximum bid they’re willing to pay per click or per 1,000 impressions. The suggested bid range shows what other advertisers are bidding to reach people in the same target.

Certain cohorts of people actually get more expensive with increased demand, says Kendall. Engaged women, for example, have higher CPCs because they’re targeted by wedding planners, wedding photographers, etc.

Tip: Take the time to find promising keywords with low bid recommendations. Lower initial bids means less competition and greater ROI.

Bid at least the minimum recommended to get positive results.

Strategy #5. Don’t Make Annoying Ads

Each Facebook ad has tiny thumbs up and thumbs down icons along the bottom that allow users to vote for ads they like and reject ads they don’t like. The ads that get a thumbs-down receive a subtle penalty, while those that get a thumbs-up, get a boost in rank.

When users reject ads by clicking thumbs-down, they’re asked, “Why didn’t you like this ad?” Choices in the drop-down box include: “misleading,” “offensive,” “uninteresting,” “irrelevant,” “repetitive,” or “other.”

“Part of the reason we created this is that sometimes a high CTR isn’t a proxy for what is good,” Kendall says. “You can have an ad that is invasive or disruptive that has a really high CTR, but will result in high bounce rates from the landing page.”

The thumbs-up/thumbs-down results get factored into which ad Facebook presents as the best ad. Facebook multiplies the CPC by the CTR to get an eCPM – the metric used to rank ads.

“Every time [users] load a page, we’re actually running a new auction to determine the best ad to show the user,” says Kendall. “We’re running over 3 billion auctions a day.”

Each time Facebook runs an auction, they look at the stack rank and load the top 3 eCPMs – those are the ads they serve.

Tip: Don’t make annoying ads or you’ll get dinged by the algorithm.

“It ends up being a positive or negative coefficient on the CTR,” Kendall says. “We find it’s a very reliable signal for getting rid of bad/misleading ads.”

Useful links related to this article

Creative Samples from Facebook:

Past Sherpa articles:

Lead Gen with Facebook, LinkedIn, Twitter and Blogging – 6 Key Takeaways:

How to market yourself & your company on Facebook:



Facebook’s self-service advertising tool

Facebook’s advertising best practices

Facebook’s common reasons for ad rejection


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