Facebook consultant argues that website's ads work

SAN FRANCISCO Tue Jun 12, 2012 9:49am EDT

In this photo illustration, a Facebook logo on a computer screen is seen through a magnifying glass held by a woman in Bern May 19, 2012. REUTERS/Thomas Hodel

In this photo illustration, a Facebook logo on a computer screen is seen through a magnifying glass held by a woman in Bern May 19, 2012.

Credit: Reuters/Thomas Hodel

SAN FRANCISCO (Reuters) - Marketing on Facebook influences consumer behavior and leads to increased purchases for the brands that leverage the social-networking site, consulting company comScore said in a report released Tuesday.

"The Power of Like 2: How Social Media Works," looks at paid advertising on Facebook as well as earned media exposure-- meaning mentions of the brand made by Facebook users in status updates and the like. It is based on the experiences of large brands such as Best Buy, Starbucks and Target.

The report follows up on a July 2011 paper, "The Power of Like: How Brands Reach and Influence Fans Through Social Media Marketing."

It swipes back at recent research questioning the effectiveness of Facebook messages. A Reuters/Ipsos poll published last week showed four out of five Facebook users haven't bought a product or service as a result of advertising or comments on Facebook.

Most brand exposures on Facebook occur through users' news feeds, comScore said, rather than visits to dedicated brand pages on Facebook.

Fans - consumers who click a button that they like a certain brand or product - tend to outspend others for that particular brand, comScore said, citing examples such as Amazon, Best Buy, and Target. Purchase data comes via information from loyalty clubs, credit card companies, and third-party collectors, with the permission of the study participant.

In the case of Target, Facebook and comScore studied two groups. One group, made up of fans of Target and their friends, saw "earned" messages about Target - updates about Target that run in news feeds and the like.

The second group was made up of Facebook users who weren't fans of Target and saw no messages. Both groups had identical purchase behavior at Target prior to the study.

After the four-week study, the fans who saw the messages were 19 percent more likely to buy goods at Target than the group that didn't see the messages, and their friends were 27 percent more likely. A comScore spokesman said he didn't know how much messaging the groups were exposed to.

To measure the impact of paid advertising, ComScore conducted a similar study involving a national retailer. It looked at groups of Facebook users who were exposed to a paid online Facebook campaign about that brand, and a test group that was not. Again, the two groups had identical purchase behavior before the study.

By the fourth week of the study, the group that saw the messages was 16 percent more likely to buy goods at the retailer than the group that did not see the messages.

Separately, Facebook said it had conducted research on about 60 campaigns to measure their return on investment, or how many dollars in sales were generated by every dollar spent on Facebook advertising.

About 70 percent of campaigns showed a return of three times or more on the money spent for the advertising, a spokeswoman said. About half of campaigns showed a return of five times or better.

Evaluating the effectiveness of advertising has proved challenging for Madison Avenue, no matter the media, brands have long said. They find it hard to gauge how many people saw a particular ad, and connecting the message with purchases is even more difficult.

Facebook is a comScore client. Along with many other large brands, it hires comScore to measure advertising effectiveness.

Shares of Facebook closed at $27 Monday, down slightly from Friday's close of $27.10, and 29 percent below their offering price of $38 on May 18.

(Editing by Steve Orlofsky)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (6)
Ropeman wrote:
Let’s see…my adds this morning are:
$29.00 Ipads…you betcha!
Contest to wine a trip to Sturgis…That’s where I want to go!
Women with huge mouth urging me to refi…I love advice from big mouthed women!
Do it yourself solar panels…made by a sexy smiling teenager
On-line yoga

By golly I think I will click on every one of them because I think Facebook has figured out what I want!

Jun 12, 2012 10:16am EDT  --  Report as abuse
@ Ropeman, go hang.
Sorry, I couldn’t help myself!

Give them some thime, they will figure it out. As the saying for Fields Of Dreams goes “If You Build It, They Will Come”. So far, that part is true, don’t you think?

Jun 12, 2012 1:02pm EDT  --  Report as abuse
MeritMan wrote:
The ads most certainly do not work and the interface for people trying to place ads on facebook is torture! What I do see as a promising source of revenue for facebook as well as a real service to companies and organizations are the pages. The data that these pages are capable of showing their owners could be monetized in the future. But the ads are a huge disappointment for everyone I know who has used them. One day I thought I added 25 fans to my page only to learn that all of them were from Asian nations which is of no value to my business.

Jun 12, 2012 2:00pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.