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]

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8 Comments

  • Marie

    WARNUNG VOR FACEBOOK UND DEN WERBEANGEBOTEN.
    Wir bezahlen für Facebook Ads seit einem halben Jahr. Die Zuwächse waren zunächst gut und die Erwartungshaltung schien sich zunächst zu bestätigen. Finanziell zwar aufwendig doch immerhin. Im Was wir bei der Zusammenarbeit mit Facebook feststellten und nun eine Vermutung hegen...Lauf der Zeit versuchten wir die "teuer erkauften Klicks" dann für unsere Zwecke zu nutzen. Wie sich bei der Umsetzung doch dann zeigte waren etwa 80% der Klicker eher dann Pseudo-Accounts. ( Fakes ) Die Werbung bei Facebook wurde im Verlauf trotzdem noch teurer! wir bezahlten für 1 Like umgerechnet teilweise 1 Euro und mehr. Das Kuriosum endete damit nicht, nun verloren wir aus unerklärlichen Gründen und zigfach die zuvor gekauften Liker wieder. Wir schalteten erneut um die "Verlorenen" aufzufangen. Ohne Erfolg. Erdrutschartig ist der Verlust. Ich vergass zu erwähnen: Wir stellten die Seite nun seit 2 Tagen auf "unpublished" Damit ist diese laut Facebook von niemand ausser den Administratoren zu sehen. Wie kann es sein wenn die Seite von Niemandem zu sehen ist trotzdem die beworbenen "Likers" abhanden kommen!!! Wie kann das sein. Wir verloren pro Tag um die 70 bis 100 der gkauften Werbe-Liker. Was mag man davon halten? Will man rausekeln. Wenn dem so wäre dann ist dieses Vorgehen trotzdem Betrug. Ein Liker kann die Page einfach nicht mehr sehen, dies auch nicht in seinen "Page-Likes" . Er ist nicht in der Lage zu "Unliken" Somit ist dies ein systemisches Problem oder eine Methode die dessen Geschäftsprinzip dann heissen könnte: Zahlen, Gewinnen, Verlieren, Kaufen, Zahlen. Nach Austausch mit befreundeten Partner sickerte Ahnliches durch. Böse Zungen würden vermutlich wohl eine Überprüfung die in die Sparte Wirtschaftskriminalität fällt empfehlen. Allerdings: Was dieses System mit Sozialem Netzwerk oder sozialem Engagement gemeinsam hat ist für uns jedenfalls schwer verständlich und irgendwie nicht mehr nachvollziehbar. Manch einer würde behaupten, da hat ein smarter jüdischer Emporkömmling mittlerweile die Bodenhaftung zum Guten verloren. Wie dem auch sei. Es bleibt zu hoffen dass "Heilbringer" dieser Kategorie der Menschheit künftig medial verschont bleiben. Als hart arbeitendes kleines Projekt benötigen wir keine sektiererische Hilfe auf Basis von überbordendem Datenfetish inklusive überzogener Verwaltermentalität. Wir haben uns mittlerweile von dem UNSINN FACEBOOK verabschiedet und investieren anderweitig besser. Wir haben einfach kein Interesse uns mit unserem Investment ins NICHTS zu befruchten. MW

  • Tommy Toy

    Michael,

    I appreciate your enthusiasm for Facebook and social media adverting in general.  However, your claims fly in the face of a study polling 1000 Americans 18yrs+ by Associated Press and CNBC showing that 46% of Americans consider Facebook a fad (http://mashable.com/2012/05/15....  Another study by marketing firm Greenlight found that 44% of respondents never click on Facebook ads, while only 3% said they regularly click on ads, and 10% said they click them often.  In addition, 30% of those polled by Greenlight said they mistrust Facebook due to privacy concerns. If Facebook can hype the value of its stock to the high heavens, they can certainly hype the effectiveness of their ads.  I would be interested in the ROI's based on sales generated by FB ads.  I think you will find they are terrible, which is why GM cancelled $10 million in FB ads.  The viability of Facebook commerce or F-commerce is also being questioned after the abrupt closure of Penneys, Gap and Nordstrom Facebook stores after only just a few months. http://xurl.at/6gq  Facebook couldn't even get Facebook Offers to work. Now they are coming out with Facebook Deals. Good luck with that one.  Facebook couldn't make location-based check-ins to work. Facebook Places was supposedly shutdown, now its alive, or is it? In December 2011, FB acquired Gowalla, an location-based social network with only 2 million users (foursquare claims 15 million), but shutdown the site in January 2012, and told the world they bought it just for the talent. $30 million is a lot of talent. http://xurl.at/6tv  I keep hearing that Facebook is still in its "infancy" or "developing" as a social network, and that they have just started monetizing their site. I have to ask myself, what have they been doing about monetizing those nearly 500 million mobile users? Answer: Nothing or little. Very few have said it, but I will. Facebook is rampant with a management team that simply doesn''t know how to monetize their 900 million users. They don't have a real clue. Although they have succeeded in selling display ads, and are ahead of Yahoo and Google last time I looked, their ads are not growing in proportion to their growth in users. In short, they are not monetizing effectively. They are selling bigness, and are arrogant enough to tell advertisers, "where else are you going to get those kind of numbers?"  Social media metrics and ROI's continue to be a problem with nearly 50% of social media managers puzzled about ROIs. Madison Avenue is still skeptical about Facebook. http://xurl.at/6tw Martin Sorrell, CEO of WPP, the giant advertising conglomerate said. "It's one of the most powerful branding mechanism in the workd, but its not an advertising mechanism." Ahh, really? He did double ads on Facebook going into 2012, but it was the clients that said run ads in Facebook, not WPP.  Most companies remain committed to Facebook as a way to engage and connect with consumers. However, once they realize that they can connect and engage for free, they will, like General Motors, stop paying for advertising altogether. Many brands have already reached this conclusion. Brands like Home Depot, Wells Fargo Bank, and Merck have a presence on Facebook with their own pages, but they are mainly focused on fashioning content to build brand loyalty, rather than creating targeted advertising.  Hey social media guru's and experts, the body of evidence against Facebook as an effective advertising platform can no longer be ignored. Main Street investors said it by refusing to buy the stock and the price plummeted. If I were you, I would listen to what Main Street says.  

  • Ben Straley

    Some really valid points made in this article many of which are consistent with the experiences of brands we work with.  Brands are VERY interested in using Facebook as an advertising platform.  The big question I have that's not addressed in this piece is if Facebook advertising opportunities perform so consistently well, if the volume of ad impressions delivered is increasing as rapidly as indicated by the examples cited in this article, and if the CTRs are going up as reported elsewhere, then why the decline in the company's ad revenue last quarter?  The only explanation I can come up with is that more advertisers are leaving or decreasing spend than are staying and increasing spend with Facebook.  To be clear, Facebook presents a massive, revolutionary way for brands to connect and engage with consumers.  There is no arguing that point.  What is up for question is how effective Facebook's current "paid" offerings are at delivering on that promise. The "invisible hand" of the marketplace appears to be saying "meh" in response.  To wit: ad revenue growth began slowing last year and actually declined by 6% this quarter compared to last quarter while profits declined something like 30%.  Anyone have any theories as to what's going on? 

  • Anthony Green

    Couldn't agree more Michael! It's early days, as I tell anyone who doubts the future of Facebook. They themselves are working much of this out on the fly and are far from finished balancing the user experience with the needs of advertisers. 

    Has Mr. Sprague called you yet?? 

  • Anita Loomba

    Great article. Optimizing content to get the right messages to your community is so important. It's always frustrating when companies want to push sale messages because they think all the fans will see it. Facebook (and twitter) provide an opportunity for companies to connect with their followers on another level. The example of Ford earning lifelong brand advocates illustrates this fact.

  • scottmonty

    Michael, thanks for your leadership at Buddy Media. Ford is proud to be working with you.

    A couple of clarifying points about the Explorer reveal, since I was intimately involved in that project. We didn't only use Facebook ads for the reveal; there were digital media buys outside of Facebook and there was a heavy degree of content creation and engagement with fans that we executed on the Explorer page directly.

    And the Wall Street Journal misquoted us - we spend over 20% of our total marketing budget on digital and social efforts, which includes Facebook ads. We do NOT spend 20% of our budget on Facebook ads.

    Scott Monty
    Global Digital Communications
    Ford Motor Company

  • Victoria Gibson

    Couldn't agree more with the points raised here. Facebook not only has a canvas for brands that is more relevant and connected to their target markets, but it is vastly more measurable than traditional media and infinitely cheaper.