How Facebook's Custom Audiences Won Over Adland

After Easing Marketers' Fears About Data Sharing, Tool Is Now Driving ROI

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St. Patrick's Day was a big opportunity for liquor companies hoping to connect with bartenders. A bartender, after all, is the quintessential influencer, and making that influencer feel special is smart marketing.

This year, rather than mailing thank-you cards to all the bars stocking its products, Jameson is using Facebook to send thank-you videos to individual bartenders.

To do so Jameson and its agency 360i took a list of bartenders who have attended the brand's bartender events and ran 3-D video ads aimed specifically at those bartenders' Facebook accounts through Facebook's Custom Audiences ad-targeting tool, said Tim Murphy, VP-marketing at Jameson's parent company Pernod Ricard USA.

Jameson's St. Patrick's Day campaign shows how advertisers are using Custom Audiences for seemingly any type of ad targeting on Facebook. Facebook first rolled out Custom Audiences in 2012 as a way for brands to target existing customers by uploading their customer email or phone lists, which are then matched with the email addresses and phone numbers tied to people's Facebook account.

Over the years, Custom Audiences has evolved into what 360i president Jared Belsky called "an easy button for relevance."

Instead of Custom Audiences being yet another targeting option on Facebook, it has become the targeting option.

Facebook's VP-business and marketing partnerships, David Fischer, said Custom Audiences is "incredibly central" to the company's ad strategy.

"It becomes a central part to just about any marketing campaign on Facebook," Mr. Fischer said.

Things could have played out differently. For the first year Custom Audiences was available, many advertisers questioned the idea of making their customer data available to Facebook. The social network promised it wouldn't actually be accessing brands' data. Instead it would use a process called "hashing" to match that data with Facebook's without either side being privy to the other's information. But for some marketers that wasn't comfort enough.

"Facebook was being pretty aggressive in being like, 'All right, what don't your lawyers or your general counsel like about this? Put them on the phone with our attorneys.' Which you don't get too often. … Stuff like that really helped the people who had to sign off on it feel OK," said Travis Freeman, Dentsu Aegis Network's head of social.

Facebook's legal team helped gain adoption, as did Custom Audiences' high match rates and campaign results.

Facebook declined to provide average match-rate figures, but one ad-tech executive said his company's clients, on average, see a 68% match rate when using Custom Audiences to target their Facebook campaigns.

Starcom MediaVest Group's senior VP-social media Kevin Lange said Custom Audiences has helped change clients' perceptions of Facebook. It "has actually helped them prove the case to marketers that they can drive ROI or brand metrics that go beyond just fans and engagement," he said.

Now marketers like Chase and Target are using Custom Audiences to build customer databases of people who use their mobile apps or visit their websites and advertise to those people on Facebook.

"It's almost like the second iteration of Custom Audiences. It has the value of the unique CRM you already had, but this is CRM they're almost helping you get," Mr. Freeman said.

Facebook is even discussing merging its Custom Audiences tool with the conversion pixel that advertisers can drop on their sites to track when people do things on their sites like visit a certain product page or add items to their shopping carts, so that no matter what someone does on a brand's site, the marketer can remarket to them with Facebook ads, according to people familiar with the matter.

Facebook declined to comment on any plans to merge Custom Audiences and the conversion pixel.

But the real opportunity lies in how Facebook connects Custom Audiences with its other ad-tech products, particularly its Atlas ad server that helps brands target and measure ads that run outside of Facebook.

As the first agency holding company to test Atlas, Omnicom has started experimenting with ways to incorporate data from its data-management platform Neustar.

For example, it's matching the people in households who purchase a specific consumer packaged-goods product to their Facebook IDs using Custom Audiences.

"And now with Atlas, you build Custom Audiences, and you're able to then utilize that Custom Audience targeting and use the Atlas ad server to deliver that messaging off of Facebook," said Gerry Bavaro, chief strategy officer at Omnicom's Resolution Media.

Examples like these indicate the potential edge for advertisers -- and for Facebook as it looks to rival Google's ad-tech dominance. "Custom Audiences is essentially the Trojan Horse by which Atlas has the reason and the higher ground to offer itself up as an alternative" to Google's DoubleClick for advertisers, Mr. Belsky said, "because it's potentially different and more special because they have this richer level of data."

"The key to the next three to five years of marketing is login data. … And no one has it better lined up for marketers than Facebook," said John Tuchtenhagen, senior VP-media at Digitas.

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