By Alexei Oreskovic
SAN FRANCISCO Oct 1 Facebook Inc, stung
by doubts that advertising on the social network delivers enough
bang for the buck, is preparing to unveil data to counter its
critics and show that "clicks," the current metric of choice,
tell only half the story.
The world's No. 1 social network, embarrassed just days
before its initial public offering in May when General Motors
declared it was pulling the plug on all paid advertising
on its network, will argue that big-brand marketers should
abandon the industry's obsession with numbers of clicks and
focus on more effective advertising techniques.
Fewer than 1 percent of in-store sales tied to brand
advertising campaigns on Facebook come from people who clicked
on an ad, according to a new study that Facebook has conducted
through a partnership with Datalogix, a data mining firm that
tracks real-world retail sales.
"We ended up in this world where the click is king," said
Brad Smallwood, Facebook's head of measurement and insights, who
will present some of Facebook's findings at one of the
advertising industry's biggest conferences in New York on
While designing online ads to garner clicks makes sense for
certain types of companies - such as e-commerce firms trying to
ring up immediate online sales - clicks are not relevant to
brand marketers, Smallwood said.
Through its partnership with Datalogix, Facebook says it can
now give brand marketers data on the actual in-store sales that
their ad campaigns on Facebook have generated - a more useful
piece of feedback than total clicks. Datalogix tracks the
relationship between ads on Facebook and real-world spending by
compiling consumer purchasing information from retail stores and
matching it with data about Facebook ad impressions.
THE SWEET SPOT
Facebook's push to provide marketers with more feedback
comes as the company's revenue growth slows and the
effectiveness of its ads remains a hotly debated topic.
Facebook, whose stock by the end of the third quarter was down
43 percent since its IPO, has unveiled a variety of new
advertising capabilities in recent months, including ads
designed to be viewed on smartphones.
"Advertisers have been increasingly vocal about concerns
regarding effectiveness of Facebook," said Pivotal Research
Group analyst Brian Wieser.
Clicks became a metric of choice in part because they had
become tied to Google Inc's performance. The world's
No. 1 Web search engine offers an effective and easy-to-measure
form of advertising because it lets marketers reach consumers at
the moment they are searching for a particular product.
If a consumer clicks on the search ad, the job is done.
Facebook argues that for brand advertisers, fine-tuning the
number of times a consumer sees an ad as well as ensuring that
the ad has reached all of its target audience are far more
According to Smallwood, marketers can increase the return on
investment from their ads by 40 percent by focusing on an ad's
so-called frequency. Instead of one Facebook user seeing an ad
100 times and another user seeing the ad only twice, for
example, Facebook says it will soon offer advertisers' insight
on the ideal number of ad impressions for a particular campaign.
"Using the Datalogix tool, we'll able to understand what
that sweet spot is," Smallwood said, adding that Facebook will
then control how often each user sees the ad.
Many large brand advertising campaigns are not even hitting
half their target audience, he said. But ad campaigns that focus
on getting the optimal reach are 88 percent more effective at
improving their return on investment, Facebook says its studies
Getting online advertisers to break their focus on clicks
will not be easy, but Facebook says the techniques it is
advocating are standard in the television advertising world.
Vik Kathuria, a managing partner at GroupM, the parent
company of WPP's media agencies, said there has been a
longstanding desire in the industry for different ways to
measure the effectiveness of online display ads.
The click-through rate "as a metric was probably irrelevant
five or six years ago," said Kathuria, who said his firm has
talked with Facebook about this.
"What (Smallwood) is doing is what we have been saying all
along. Let's talk about bigger brand dollars and in that context
how you measure the efficacy, not click-through rates."
Still, persuading the online brand advertising industry to
change its habits could take time, said eMarketer analyst Debra