The Year in Facebook Advertising 2012

This year Facebook made major strides with its advertising business. Rather than working on a single ads solution for the broadest possible audience, the company is now focused on building more specialized products for brands, direct response marketers, small businesses and developers.

As a result, Facebook’s developments in advertising this year span the spectrum from the Promote button, which makes it simpler for any page owner to boost the reach of their content, to a partnership with Datalogix to help its largest clients understand how well their ads converted to offline sales.

It was the year ads came back to the News Feed and started to appear on mobile. The fledgling Facebook Exchange is already proving to be lucrative, and the social network introduced a number of other new ad types and targeting opportunities that marketers will start to better understand and employ in 2013.

Here’s a rundown of major advertising-related innovations and changes Facebook made this year.

News Feed and Mobile Ads

News Feed ads, starting with Sponsored Stories, launched in January. These same ad types came to the mobile feed in March, and over time, the social network began allowing page post units and other non-social ads. Facebook previously allowed feed-based ads in 2007 but it had never shown ads on mobile devices until this year. Now, the social network is earning $4 million a day from News Feed ads, with three-fourths of that from the mobile feed.

Facebook Exchange

In June, Facebook announced its Facebook Exchange, an advertising system that allows third-party platforms to place retargeting ads on the social network after users visit external websites marked with cookies. FBX came out of beta in September, but only a limited number of partners have access to the exchange. Retargeting data cannot yet be combined with Facebook’s demographic and psychographic targeting options — nor can it be used for social ads like Sponsored Stories or page post ads in News Feed, but many expect these will become features of FBX in the future.

Custom Audiences

Facebook’s Custom Audiences feature enables advertisers to use their CRM data and apply it to social advertising. Advertisers can use Power Editor or the Ads API to upload files of email addresses, phone numbers or user IDs, which Facebook will hash and then match with its own hashed database. Ads can be targeted to the matches. With this type of targeting, companies can reach the people who are most likely to respond to their Facebook ads: those who have already connected with them in other channels. Advertisers can layer on demographic, interest or other targeting options to serve more relevant messages to different groups within their databases.

Promoted Posts

Facebook began testing Promoted Posts in April as a way for page owners to reach more of their fans and friends of fans through News Feed posts without having to create campaigns in the main ad dashboard. Instead, page owners can click the Promote button on their posts before or after they make them. This has since rolled out to most pages on the social network and replaced the Reach Generator program. Facebook has even made it possible to create Promoted Posts via mobile. Promoted Posts are the company’s first ad product for which this is available.

Offers

This year Facebook pages gained a new story type that allows page owners to post offers that users can collect from News Feed or ad units. Unlike check-in deals, which required users to first visit a physical location, offers can be redeemed in-store or online. Because they begin as a page post, offers can be turned into page post ads or Sponsored Stories. In fact, Facebook has begun requiring page owners to spend a minimum of $5 to post and promote an offer.

Open Graph Sponsored Stories

Facebook expanded the utility of Open Graph for marketers when it began allowing any action to be turned into a Sponsored Story. Few advertisers outside the social game realm have taken advantage of this opportunity. When they have, it’s often been to promote campaign-specific apps. For example, Starbucks sponsored stories about users “unwrapping gifts” in a holiday app. Frito-Lay sponsored stories about users “creating flavors” in its Do Us a Flavor app. When companies begin building Open Graph into their websites and transaction process, they can begin promoting even more powerful stories.

Mobile App Install Ads

In August, Facebook introduced a new type of mobile ad in the News Feed for developers to promote their apps. The ads link directly to an app download page in the Apple App Store or Google Play. Because they can use Facebook’s demographic, interest and other unique targeting options, they allow developers to reach more specific audiences than any other channel can offer.

Sponsored Results

Facebook introduced “Sponsored Results” ads that allow advertisers to promote their business in the social network’s drop-down search results. Rather than broad keywords, advertisers bid against specific pages, apps or places. Facebook’s other demographic and interest-based targeting can be layered onto these ads as well. We saw advertisers using four different tactics with Sponsored Results: seeking to steal traffic from competitors, paying to show up when users search for related pages or apps, getting impressions by bidding on the most popular apps and pages, and protecting their brand position with defensive bids. However, with Facebook’s current search product, users don’t have the same level of intent as they seem to with search engines like Google. This ad type will likely take form as Facebook evolves its search feature.

Self-Serve Ad Tool Updates

Facebook tried a number of new designs for its self-serve ad tool to simplify ad creation and help small businesses achieve their objectives. In March, Facebook began to use simpler language in the interface, asking advertisers “What do you want to promote?” rather than requiring them to choose between Sponsored Stories, Page Post Ads and other unfamiliar terms. Facebook expanded on this in August with clearer visuals and even simpler language. The social network has also built in some best practices so advertisers automatically create a combination of Sponsored Stories and other ad types. Some of the changes make the tool less useful for more advanced advertisers, but it seems to help those who are less experienced with Facebook and advertising in general. Facebook also announced that it will offer a self-service conversion measurement feature for direct response marketers and expand the capabilities of its Optimized CPM bidding option to incorporate conversion data.


Premium Ads Via API

In May, Facebook made its premium ad inventory — on the homepage and within News Feed — through the Ads API and Power Editor tool rather than working directly with a Facebook ad representative. This helps Ads API companies maintain and build their relationships with large advertisers and frees up Facebook’s internal team.

Logout Ads

Facebook began offering large premium ads that display on the logout page, immediately after Facebook users log out of Facebook using their desktop web browser. These ads still can only be purchased by working with Facebook directly, and they come with a price tag equivalent to takeovers on sites like YouTube or Yahoo. Advertisers like Microsoft, Ford, Samsung, 1-800 Flowers, Subway and others have used this ad type.

Reach Generator

Reach Generator was a premium advertising solution for large clients seeking to reach a higher percentage of their fans, which was scrapped later in the year. Reach Generator allowed advertisers to pay Facebook on an ongoing basis, as opposed to a CPC or CPM basis, to sponsor one page post every day, and guarantee a 75 percent reach of the page’s fanbase over a month-long period. Facebook decided to focus on Promoted Posts and Sponsored Stories instead.

Mobile Ad Network

Facebook began a test in September to allow its unique targeting data to be used for mobile advertising in third-party apps and sites. This seemed like the beginnings of a mobile ad network, but the company later said the test ended in December. Facebook says it is focusing on its own native mobile ads for the time being. We wonder whether the results weren’t compelling enough during the test phase or Facebook isn’t prepared to make the investment it would need to in order to scale the effort. AllThingsD and Business Insider reported that the social network was considering buying Microsoft’s Atlas platform, which could put the company in a better position to launch an ad network in the near future.

Datalogix Partnership

This year Facebook began working with Datalogix, which connects digital media and offline purchasing data, to help advertisers understand how their spends on Facebook affect in-store sales. Datalogix says it has purchasing data from about 70 million American households based on loyalty cards and programs at more than 1,000 retailers. It then matches email addresses or other information associated with those memberships with the email addresses or information associated with their Facebook accounts. After measuring 45 campaigns, the companies found that in 70 percent of cases, every $1 spent on Facebook led to an additional $3 in sales.

Action-Optimized Ads

Facebook changed its ad reporting to help advertisers measure a wider range of actions that consumers take after seeing an ad on the social network. With the change, advertisers are able to see comments, shares, app use and Credits spent, as well as Open Graph actions if they use the API. Advertisers can designate which actions they want to optimize for, allowing for more sophisticated goals beyond page Likes or app installs.

Open Graph Targeting

Action spec targeting allows advertisers to pinpoint consumers based on their activity on Facebook and with integrated apps. In February Facebook made it possible for advertisers to target any Open Graph action, including those they did not create. This type of targeting can be very powerful, but with Open Graph still in very early days, there is not quite enough activity to produce the type and size of audiences advertisers are looking for. As more apps and sites build on top of Open Graph, however, the more valuable this offering will be in the future.

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