Facebook News Feed Ads Dominate, Vindicate Exchange Model
“Ahh, what a difference a year makes.” I imagine those words or similar are being uttered at Menlo Park by Zuck and crew on the heels of the release of the new, uber-comprehensive (one-billion impression) Adroll study showing Facebook’s News Feed Ads are generating a phenomenal 21x higher click-through rates than standard web retargeting ads. As AdRoll President Adam Berke was quoted as saying in a Venture Beat post on the subject, “A year ago we were having the discussion that Facebook doesn’t work, and GM is pulling its ads…now we’re having the conversation on whether this rivals Google!”
I remember that discussion, when back in May of 2012 GM abruptly dumped its $10 million ad account with Facebook at a particularly bad time - three days before the company’s historic IPO. The move sent shockwaves through Wall Street and helped contribute to the social network’s underwhelming performance in the weeks and months that followed.
In the wake of this surfeit of bad juju, there was a decided air of negativity when Facebook officially rolled out its Ad Exchange in July of 2012. Ever the contrarian, I remember writing about it and instead taking an upbeat assessment of the move. I’ve always maintained that the Facebook stock has been undervalued from day one, a victim of a Wall Street Econorati that never truly understood the social network’s real value, and frankly, never really liked its black-hoodie wearing CEO.
Why News Feed Ads Work
By way of background, ad retargeting is an online advertising strategy that allows businesses to serve advertisements to potential customers who’ve previously visited their website as they browse the web, or in this case, Facebook. As the name suggests, News Feed Ads sold through Facebook’s Ad Exchange appear within the natural flow of a Facebook user’s streaming feed. Facebook Ad Exchange enables advertisers to manage their real-time bidding across Facebook’s ad inventory (which, according to the AdRoll study, accounts for nearly 28% of all US display impressions).
One of the big keys to the success of News Feed Ads is their “organic” functionality within in a user’s feed. Ads can be liked, shared, or commented on – in other words, they conform to the conventional mores that govern the organic ecosystem that makes up the Facebook social graph.
Highlights of the AdRoll Study
In the spirit of full disclosure, the study’s author, AdRoll, refers to itself as “most effective retargeting platform in the world,” so clearly they have an interest in arguing for the effectiveness of ad retargeting. However, one thing I did like about the study is that its analysis spanned multiple verticals and budget sizes, measuring the results of companies spending as little as $200 on News Feed Ads. Often such studies focus on the spending patterns of huge corporations, thus offering little value to SMBs.
Here are some of the highlights of the study, taken directly from the AdRoll Blog:
- News Feed retargeting had a click-through rate (CTR) 49x higher than RHS (right-hand side) ads and 21x higher than standard web retargeting
- News Feed CPCs were one-half that of RHS campaigns and one-fifth of web retargeting
- News Feed grew from 0% of our overall clicks to 15% in one month
- News Feed and RHS complement one another and result in an overall increase in clicks at a combined lower CPC
- News Feed alone doesn’t have the reach or scale of RHS or standard web, and should therefore be used in conjunction with the other channels
- News Feed has different applications from RHS. It’s ideal for content marketing and promotions (which can capitalize on social features) while RHS is best suited for dynamic product ads driving direct response.
Social Intent vs Transaction Intent
Perhaps the most significant reason News Feed Ads served up through the Facebook Exchange are so effective is because they are powered by transaction and search intent data as opposed to the social intent data that drives Facebook’s traditional RHS ad offerings.
Social intent data is a way of gleaning a Facebook user’s preferences from his or her profile and on-site activity (shares, likes, etc). Facebook’s vast trove of social intent data, coupled with its ability to micro-target users, represents the search giant’s primary value-add to advertisers and shareholders alike.
Facebook Exchange, on the other hand, is not driven by social intent data but rather by transaction intent and search intent data. Transaction intent data is comprised of the “cookie trail” of information users leave behind when visiting other sites throughout the internet. As the name suggests, search intent data relates to the search terms users enter into search engines.
In a post on Search Engine Land, Ben Plomian pithily summed up the value of Facebook Exchange’s transaction/search intent data when he wrote that Facebook Ad Exchange gives Facebook (and by extension its advertisers) “the power to target not by what people say about themselves, but about what they do.”
The Bottom Line
It should be noted that Facebook News Feed Ads are sold through the Facebook Ad Exchange, which has partnered with a limited number of DSPs (demand-side platforms) to serve up the ads. As such, businesses interested in experimenting with News Feed Ads need to find a DSP that offers Facebook Ad Exchange.
With News Feed Ads, Facebook may have finally figured out how to efficiently monetize mobile, a must-do in order to satisfy the Wall Street Econorati and finally boost its price-per-share north of the company’s IPO.
Now if we could just get Zuck to hang up the black hoodie…
Image courtesy of TPM.