It’s been about a year since GM made the big announcement that it was pulling its Facebook advertising. GM cited advertising on Facebook as being “ineffective” just days before Facebook went public. Since then, Facebook shares are down about 30% and about 15% so far this year as doubts about its business model remain. Social Media Examiner’s 2013 survey of 3,000 marketers found that only 32% said that Facebook advertising was effective, with 41% saying they were uncertain and 17% saying it was ineffective. New research from Facebook starts to address this perception.
It has been long-known that click-through rates for Facebook are lower than for other sites, most notably, Google AdWords. Facebook and others argue that clicks are not a valid measure of Internet or mobile advertising effectiveness. There is considerable face validity to this – of the few people who click on anything, many do not buy and of the majority of people who do not click, many do buy. Recently, Facebook has begun to develop an extensive body of research that shows that sponsored messages in a Facebook feed change behavior by getting people and their friends to buy certain products instead of others. The new Facebook information is based on linking actual product purchase behavior from an independent source with its own ad exposure data. In essence, buying behaviors among those who have exposed to a brand’s advertising are compared to those who are not to determine incremental lift. According to Sean Burick, Facebook’s head of measurement, “Of the first 60 campaigns we looked at, 70 percent had a 3X or better return-on-investment—that means that 70 percent of advertisers got back three times as many dollars in purchases as they spent on ads” and half of the campaigns showed a 5X return. Farhad Manjoo of Slate has an excellent recap of the interesting research.
What’s most striking about the Facebook research is that it shows that not only does advertising have the ability to drive website traffic and Likes, but it also has the ability to generate sales without clicks and despite that perception that many users have that they are ignoring the ads that they are served. Advertising has always had the ability to produce specific transactional or intermediate behaviors (e.g., promotion-based selling, incoming calls) and some forms of it have been particularly effective at doing so (e.g., FSIs, Yellow Pages advertising). But it has always been advertising that has also has a long term effect that has had the most value. Television campaigns in particular, as well as print and radio, have historically been able to offer the best and most consistent balance between content, form and placement to strengthen demand and build brand preference for the long run. With Facebook research now demonstrating the ability of the messaging that it carries to do the same, it is showing that it has the potential to be at least as powerful, and perhaps more so, as traditional advertising media platforms.
Oh, and a little less than a year later, GM is back advertising on Facebook.
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