From the moment, the first brand on Facebook collected 10,000 fans, marketers have been asking about the relationship between “likes” and sales. Initially Facebook found a dozen ways to deflect the conversation.
Facebook doesn’t really sell, they’d say. Its about relationships, buzz and engagement. Facebook is a tool for generating comment, creating warm fuzzies and enrolling fans as advocates for products and services and creating some sense of loyalty.
But the guys paying the bills kept asking. How many fans, followers or likers are buying my products? How many are referring friends? How many are buying repeatedly? Finally Facebook created ad units to address these ROI concerns.
The latest innovation, launched in May called Facebook Exchange (FBX), is inventory in the News Feed (the primo real estate on Facebook). FBX cannot be bought directly from Facebook. Units must be purchased only through an FBX qualified company. Unlike right hand side (RHS) Facebook ads, which are sold on a cost-per-thousand (CPM) or cost-per click (CPC) basis, FBX inventory is priced as a cost-per-insertion, limited to one each day.
These units, a 154x154 pixel image and several lines of copy, were created to enable precision targeting, links to outside websites where marketers actually sell stuff and pixel tracking to enable retargeting on Facebook and across the web. Consumers can like, share and comment on FBX ads, so a measure of virility is baked in.
Adroll, a Facebook retargeting partner and FBX qualified company, looked at 547 advertisers across industry verticals spending between $1000/month and $20,000/month to generate over one billion impressions using FBX and using ad inventory on the right hand side of everyone’s page. They zeroed-in on retargeting, their specialty, and compared results against traditional display and retargeting inventory from online ad exchanges like Google’s DoubleClick, Yahoo’s Right Medias Exchange and AppNexus.
The research validates FBX alone and in combination with RHS as a potential direct marketing tool. News Feed retargeting had a click-thru-rate (CTR) 49% greater than RHS and 21% better that standard web retargeting. News Feed cost-per-clicks (CPCs) was half of RHS ads and 1/5th of web retargeting. Conversion fared less well. FBX ads yielded 9% fewer clicks than the web and 16% less than RHS, which are generally considered anemic by direct marketers.
FBX plus RHS drove more clicks at lower costs, even though combined their reach is significantly less than standard web targeting. Finding the right inventory mix will be our next challenge. In the first seven days of adding FBX to RHS, Adroll discovered a 62% increase in total clicks with an average decrease in CPCs of 30 percent. In the campaigns studied FBX was just 0.5% of the impressions but drove 14.7% of the clicks – promising results.
Clearly Facebook is trying to create the right inventory to help brands link social activity with sales and loyalty. FBX is a step in the right direction worthy of further testing.