Current Issue
This Month's Issue

Follow Fast Company

We’ll come to you.

7 minute read

The Truth About Facebook Advertising

My daughter Vivi was born on May 24, 2007, the same day Facebook CEO Mark Zuckerberg launched the ability for companies to build applications inside Facebook’s site.

Within days, I had conceived of my latest company, Buddy Media. And we have been helping advertisers succeed on Facebook, and the other major social networks, ever since. Today, close to 1,000 companies, including 8 of the world’s top 10 global brands, use our software to manage their social marketing programs.

This has given me a front-row seat to the social marketing game, and with it, access to a large set of aggregate data about the state of Facebook advertising. And I am here to report that the actual results we’ve seen are different from some of those cited in a story from The Wall Street Journal that mentions brand advertisers are souring on Facebook advertising.

Our aggregate, quantifiable numbers, as well as knowledge of our brands' ad spend, show the speed at which brand advertisers are investing into Facebook. Companies that spent $1 million last year are spending $5 million this year. Companies that spent $10 million last year are upping spend to $25 million or more.

I assure you they’re not doing this in the face of significant doubt. They’re doing it because it’s the most efficient way to enter a two-way dialogue with consumers today.

In the first quarter of 2011, our technology managed 3 billion social ad impressions. In the same period this year, we managed 127 billion impressions. That’s a 42-fold increase in just a year.

The Wall Street Journal quoted a brand manager at Kia Motors as evidence of advertisers’ "big doubt." "The question with Facebook … is, 'What are we getting for our dollars?'" asked Kia’s Michael Sprague.

To address Michael’s question—as well as any doubts about the state of Facebook’s advertising business—you need to understand three simple truths.

1) We’re in the first inning.

Facebook is focused on creating a wonderful user experience. And it’s an experience that close to a billion people worldwide have adopted and made an integral part of their lives. More than half of these people log on daily for an average of 30 minutes each. Facebook is more important than a cell phone and email for many users. A recent survey by advertising agency McCann London reported that one in three Facebook users wouldn’t even quit the site if given $1 million. 

Facebook has been very public in its desire to find a revenue model that is in line with how people use the service, to avoid the miscues of MySpace and others that splashed large, intrusive ads all over the site.

While advertisers would love to throw large branded images into every stream they could get a hold of, Facebook knows it would ruin the user experience, and the business, forever.

Facebook has tried many different ad formats, and in February announced it had settled on a series of very innovative ad units that put people at the center. Called Sponsored Stories, Facebook’s ads allow businesses to spread stories about how consumers interact with brands to their friends.

Facebook’s ad business is nascent, like the 7-year-old site itself. And, no doubt, it will continue to evolve its offerings. Any advertiser that completely gives up on Facebook advertising today, in the first inning, is destined to repeat the mistakes of the past. Specifically, brands that sit on the sidelines forfeit all early learning and proficiency development that leads to long-term success. Throwing in the towel on Facebook advertising in 2012 is no more prudent than stopping television ads in 1945.

2) Initial success is overwhelmingly positive.

Nielsen last quarter released results from 79 Facebook ad campaigns, and on average, Facebook’s social ads had 55% higher recall than non-social ads.

ComScore has released data that shows Facebook fans spend more than customers who are not Facebook fans. In Starbucks’ case, that number is 8% more non-fans who were also Starbucks buyers.

The Journal points out that Nielsen says, "not all types of ads are easy to measure all the way to purchase." The global marketing industry is half a trillion dollars, and most of it, including television, is not "easy to measure all the way to purchase."

Advertising is not always easy to measure. Facebook does not have a monopoly on this fact.

Though it can be challenging to organize your team around social KPIs that tie into your overall marketing goals, it’s not impossible. At Buddy Media, our data shows that every share on Facebook generates an average of $2.10 in incremental sales. Ticketmaster has reported that every time a user posted on their news feed that they bought a ticket from Ticketmaster, friends spent an additional $5.30 on Ticketmaster. 

Despite its premise that brand advertisers are doubting Facebook, the Journal revealed that Ford, a Buddy Media customer, shifted dollars to Facebook instead of Super Bowl ads in 2011 for their Ford Explorer launch and, "shopping activity for the Explorer jumped 104% versus the average shopping lift of 14% following a Super Bowl ad." [Editor's note: Scott Monty, global head of social media for Ford, points out in the comments below that Facebook was one of, but not the only, digital platform used to engage fans for the reveal.]

Was this caused by Facebook ads, or just a mere coincidence? 77 percent of the Facebook users exposed to the campaign said the 2011 Explorer Facebook ads had "positively impacted" their shopping considerations.

Ford isn’t doubting Facebook ads. It actually shifted dollars significantly into the site and now spends 20% of the company’s digital advertising dollars on Facebook, according to spokesman Charles Zinkowski [update: Monty's comments indicate that 20% of Ford's total marketing budget goes toward digital and social efforts, which includes but is not limited to Facebook ads.]

Why? "The number-one trusted source of information for consumers is recommendations from friends and family. Facebook provides a reliable platform to leverage that insight at scale," said Zinkowski.

I assure you that Ford is not a fringe case. Pretzel Crisps, another Buddy Media customer, offered a buy-one, get-one free coupon exclusively for Facebook fans last year. Within 36 hours of posting the offer to its Facebook page, Pretzel Crisps doubled its Facebook fan base, and 95% of the fans who printed a coupon bought the product in store with the offer.

Did this translate into shareholder value? According to IRI data, Pretzel Crisps sales grew 131% for the 12-week period after the promotion.

3) Success is driven by the advertiser and not Facebook.

Facebook advertisers are diverging into two categories, and the differences are evident not only to marketing experts, but consumers as well.

The first are companies like Ford, Pretzel Crisps, and many of our customers who take a top-down approach. Like other important efforts at their companies, they organize internally. On Facebook, this includes determining the roles of each team within an organization and then creating great content and investing in the distribution and amplification of that content on Facebook and other social networks. These companies build large and vibrant communities that serve as valuable assets for the business, media channels they own and can program. And they focus on measuring their efforts.

The second are companies like Kia Motors, who are not taking a rigorous and systematic approach to measuring Facebook marketing, as evidenced by their inability to communicate their results to the Journal. They fail to build a community at scale.

Ford’s efforts have driven close to 10 million consumers to connect with them on Facebook, putting Ford one click away from almost every Facebook user.

But it’s not just about sheer numbers. It’s about the engagement as well. Ford’s communities are tight, intimate, and full of life. A quarter of a million breast cancer survivors, patients, and their friends and family members turn to Ford’s Warriors in Pink Facebook community as a source of strength.

"Just hitting my 2 year ‘out of chemo’ anniversary!!," declares Wiota, Wisconsin cancer survivor Linda Gebhardt on the Ford page. "I cannot and will not live every day worrying my breast cancer will return. Sending prayers to all breast cancer survivors, and encouraging everyone to be your own best advocate and be aware of any changes in your body."

Through Facebook, Ford has earned lifelong brand advocates who will forever think differently about the company.

How can one company selling the same type of product—a car—see unequivocal success while another says it doesn’t even know if a consumer has seen the ad?

The answer is simple: Facebook is a site that connects nearly a billion people to each other globally. However, it’s your job as an advertiser to say something that’s interesting, and to measure the results. Facebook has created a large and vibrant ecosystem to help you out.

In order to succeed, companies need to organize internally and optimize content to get the right message to the right people at the right time. If the advertiser isn’t organized to connect with people and publish the right content, failure is inevitable.

No wonder some brands continue to ask what Facebook is doing for them. In reality, these brands should be asking what they can do for people. Criticizing any platform is easy. Much easier, it seems for many advertisers, than organizing internally and publishing compelling content.

—Author Michael Lazerow is chairman and CEO of Buddy Media, a New York-based company whose social enterprise management system, the Buddy Media Social Marketing Suite, is used by 8 out of the top 10 global advertisers. 

[Image: Flickr user and one half images]