3 key findings influence how Facebook approaches advertising

data-trackingAs Facebook looks to prove its value to advertisers, it has focused on conducting research that demonstrates whether online advertising impacts offline sales and that uses large data sets to gain insight into how to make campaigns more effective.

Facebook’s Head of Measurement Research Development and Partnerships Sean Bruich today spoke at the Webtrends Engage conference about some of the results of that research. Understanding these conclusions could help advertisers with their own campaigns and give people a better idea of how Facebook approaches its ad products.

Impressions create value

Findings from Nielsen, comScore and Facebook’s partnership with Datalogix indicate that ad clicks don’t necessarily lead to sales or ROI. Impressions, however, can be powerful. Facebook found that 99 percent of offline sales came from people who viewed ads on Facebook but didn’t click them. Neilsen’s research found no correlation between clickthrough rate and ROI. Bruich didn’t get into details about comScore’s study, but it similarly found that clicks didn’t correlate with conversions as much as other factors did.

What this suggests is that Facebook and other display advertising is not unlike traditional advertising where the concept of building a brand and influencing purchase decisions through impressions is not often questioned. If impressions matter, then Facebook can deliver, and it can do so with more granularity than most channels. The hurdle the company faces before winning dollars away from TV budgets is proving that impressions on Facebook offer comparable or better ROI than impressions of commercials.

Reach drives sales

Along the same lines, Facebook says optimizing for reach leads to more successful campaigns than optimizing for clicks. Many advertisers, for instance, have found that the tactics for getting users to click Like in an ad are very different than the approach they would take to actually sell their product. Businesses should be aware that when they focus too closely on maximizing clickthroughs, they could skew their audience or creative in such a way that doesn’t actually impact sales. Facebook found that campaigns that emphasized reach as opposed to clicks or other objectives were 70 percent more effective at driving ROI. Advertisers should think about how to get the right message to the right audience with enough reach to see results.

Frequency is important

Beyond reaching a lot of people, the number of times an advertiser reaches someone is important. Getting additional impressions can increase profit, but only up to a point, Bruich says. After that point, which varies by business, additional impressions can increase sales but not enough to cover the advertising and production cost. Bruich says optimizing the frequency of impressions by household is key to maximizing profits. Facebook found advertisers could increase ROI 40 percent if they were able to more evenly distribute their impressions.

Facebook doesn’t currently have an easy way for advertisers do this sort of optimization. Many advertisers have wondered whether Facebook would add options for frequency capping in its ad platform. The social network reports the average frequency of a given ad, but doesn’t yet give advertisers a way to limit the number of impressions per user. Bruich says frequency capping has limitations because it only allows advertisers to say, “Don’t show my ad more than this many times to someone.” What it doesn’t do is ensure that an ad is seen by each consumer a set number of times. He says frequency optimization is something that will be more valuable. It’s something that Facebook is likely testing on its own end as it delivers ads, though Bruich couldn’t talk specifically about how this idea is applied to the company’s products.

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