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July 11, 2012
Facebook's Bogus Ad Sales Pitch
Facebook has to sell a lot of ads to satisfy Wall Street. Unfortunately, the latest sales blitz aimed at brands and agencies is lame.
Facebook’s huge user numbers, nimble targeting using 15 possible variables, and average 80 cent CPC are enticing. Facebook had 151 million unique U.S. visitors in April 2012. Facebook attracts 7 out of 10 Americans online. The average person had 28 sessions for 379 minutes during the month, basically once a day, accounting for an average time spent of 7:09 hours. Although, with a 0.04% CTR, 4 out of 5 users say they’ve never been influenced by an ad on Facebook.
The initial attraction gets stopped dead when you realize that the system has been purposefully constructed and rigged to harvest ad dollars, not necessarily to facilitate brand communication. Like everything else Facebook does, they know better. Their mission is to reinvent advertising.
Brands spent money, big money in some cases, to accumulate large fan bases. Then Facebook limited access to those fans (and their news feeds) by inserting the Edgerank algorithm to filter content. Estimates are that only 7–16% percent of brand communications actually reach fans’ news feeds. What’s worse, according to PageLever, as the fan base increases, the number of impressions created by distributed brand content decreases! The brands that most effectively used Facebook to build audiences got the shaft. Facebook hijacked the fans that brands paid to accumulate. Now Facebook will sell access to fans and guarantee reach levels using a new series of ad units, like Sponsored Stories, based on a new Reach Generator tool.
It’s a closed coercive cash-generating circle. Great for Wall Street, but not so helpful to Madison Avenue. Lauren Fisher, writing on the Simply Zesty blog, observed, “By squeezing more and more from brands, they’re making the platform an unattractive option for social marketing from a cost basis if nothing else.”
Most large brands on Facebook are trying to understand whom they attracted and if there is a relationship between fans and customers. Since Facebook won’t share the data that brands helped generate, brands are left to either guess, test new third-party eCRM tools, or rely on Facebook’s vague representations to dissect their fan bases.
Most brands know that fans are much more likely to engage and probably buy than the average Joe. But most also suspect that those fans are multi-channel customers and that they may already be reaching and persuading them through email, branded websites, loyalty programs, and general advertising. Since nobody has convincingly studied the impact of Facebook engagement in isolation, savvy marketers cannot determine the relative or incremental marketing value of Facebook. Some suspect they are duplicating efforts and essentially preaching to the choir.
To try to make a strong sales case, Facebook collaborated with ComScore to create a series of reports titled “The Power of Like.” The latest version merchandises Facebook’s Like button and new ad units as ways to reach friends of friends and achieve stronger reach with the implied endorsement of people you know.
Calling this phenomenon “amplification,” the report scored different brands on their relative success at virility. “Most leading brands on Facebook achieve a monthly earned Amplification Ratio of between 0.5 and 2.0 meaning they extend the reach of their earned media exposure … by 50–200%.” The implication is that exposure to Facebook’s premium ads had something to do with this.
The report goes on to cite specific, though specious, cases of successful brands activating consumers on Facebook. The first case focuses on Amazon, Best Buy, Target, and Wal*Mart during Holiday 2011. Citing these leading brands as active in social media and offering special deals via Facebook, the results “showed significant higher rates of purchase among fans” and modest increases in spending among friends of fans.
But this ignores several key factors that could easily inflate these results.
  • These are well-known, heavily advertised brands
  • Awareness, preference, and purchase intent already existed
  • Most focused on multi-channel customers, who are known to purchase more and more frequently based on RFM models
  • There was no source data on purchases
  • Exposure to Facebook ads was not isolated  
  • During the holiday period, each brand was blasting away with offers and messages in many channels
It strains credibility to attribute the results exclusively to Facebook ads. Moreover, we don’t know whether purchase data was self reported or based on shared data sets. It’s very easy to doubt the implied correlation or causality, which might actually have just been coincidence.
For Starbucks, there were four weeks of exposure to Facebook ads compared to a control group of non-exposed customers. The test was designed to identify a spike in-store purchases. At the end of four weeks, the exposed group “had purchase incidence 0.58 percentage points higher” than the control group.
There was also a claim that “Users who saw unpaid marketing messages ... about Starbucks Corp bought an item at the coffee chain within four weeks, 38 percent more often than those who didn’t.” There is no reason to believe that Facebook exposure alone impacted behavior.
After four weeks, it’s not clear if the cash value of a half-point incremental lift in purchase intent is worth the cost of the ads. Nor is it clear that Facebook ads were the only factor in generating this theoretical lift. This is an attempt to use soft branding metrics (intent) to demonstrate hardcore direct marketing impacts (sales). This isn’t selling me or anyone else on ROI.
For Target, the test was designed to understand the sales value of earned media, or the impact of friend-to-friend pass-along messaging. “Fans of Target were 19 percent more likely to purchase at Target in the four weeks following exposure to earned messages. Friends of fans were also likely to buy at Target with a lift of 27 percent compared to the control group.”
Here, too, the data is self-reported purchase intent; not the most reliable data source. The idea that fans of Target are likely to buy more and that their friends are likely to be open to what appears to be a personal recommendation has little or nothing to do with Facebook. They are most likely fans in their consciousness, so attributing the lift to Facebook is bogus on its face even if the math is statistically significant.
Making the case for Facebook ads might be a case of applying an old paradigm to new media. There is a sneaking suspicion that social media plays a supporting rather than a selling role in customer purchasing. Many of us believe that social media’s key marketing value lies in enabling brands to understand, listen, converse, and connect emotionally with customers. Social media builds and sustains relationships incrementally over time. It may not have the retail striking power of email, rich media, or search in which the ads have more long-term or CRM value than immediate ROI value to marketers.
So far, social media has been about friends and family, not necessarily brands. Facebook reported that just 9% of likes are bestowed on brands. At the moment, and for the foreseeable future, social commerce is not really a factor. And the value or impact of Facebook ads is uncertain. Nothing in these sales pitches convinces me otherwise.

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Danny Flamberg, EVP Managing Director of Digital Strategy and CRM at Publicis based in New York, has been building brands and building businesses for more than 30 years.Prior to joining Publicis, he led a successful global consulting group called Booster Rocket, as Managing Partner. Before becoming a consultant, he was Vice President of Global Marketing at SAP, SVP and Managing Director at Digitas in New York and Europe and President of Relationship Marketing at Amiratti Puris Lintas and Lowe Worldwide.
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