Of Course Social Media Works -- If You Measure It Right

If You're Judging Facebook by Click-through Rates Alone, You're Doing It Wrong

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Dave Williams
Dave Williams

When Facebook's popularity started to take off a few years ago, just about every digital marketer had the same thought: "There's marketing potential here. But how do I harness it?" There's a reason Facebook is valued at $41 billion, and it's not just the fact that it has 600 million registered users. It's that fact that those people willingly share personal information about themselves, opening the door to uniquely targeted advertisements based on age, gender, interests, location, occupation and even friends' interests. That's what makes Facebook a marketer's dream come true.

Yet critics still propagate the myth that Facebook display ads offer no return on investment. A study from research firm Webtrends last month found that Facebook's click-through rate declined to 0.051% in 2010, about half the industry average and down from 0.063% in 2009. This means that just one out every 2,000 ads is clicked, even though Facebook's CPM actually increased during that period.

But the study doesn't tell the whole story. It fails to differentiate between targeted and untargeted ads on the social network, and that is a huge distinction. Remember the value proposition of Facebook: Users share their data. That sharing creates unprecedented targeting opportunities. Dating sites can target single users and ignore the rest. Small bands can use their tour itinerary to target local music lovers. Domino's can target people who say they like pizza, but even better, it can serve ads to people who "like" Papa John's, telling them about a new recipe or a lower price.

Our own study of more than three billion impressions over a seven-month period showed that while the click-through rate of untargeted ads averaged 0.02%, the CTR for targeted ads averaged 0.15%. That's higher than the industry average for display units across the entire web, and three times the CTR described in the Webtrends study. Targeted ads were also off the charts when it came to engagement metrics, scoring 150 percent, compared to only 22.5 percent for non-targeted.

When you take this into account, Facebook is really the best social media platform for delivering relevant messages with both reach and frequency. The targeting capabilities allow advertisers to use Facebook as both a broadcast and narrow-cast channel. The best targeting strategy is to make use of member interests on national and/or local levels. Then divide these targets into sub-segments by splitting demographics and genders. Most brands don't utilize enough interest segments -- they restrict their options to demographic and gender targeting too early in the process. Facebook serves a massive amount of display inventory, and most of the advertisers are small local businesses. National advertisers can easily follow this targeting strategy to find success on a local level.

But targeted click-through rates are just one indicator of success, and as we know from regular display, CTRs aren't the end-all metric for measuring a campaign's success. Marketers need to view Facebook advertising the way they view visiting a cocktail party -- where the goal isn't to close a deal, but to come away with a business card. Getting a user to "like" a brand or engage with it is like getting that business card. Trying to get a user to buy when you first meet them is a mistake too many marketers make, and it makes them look like an overeager insurance salesman, cornering people at a party.

With this in mind, your ads should only drive consumers off of the Facebook domain if you absolutely must. Once they leave the page, you lose the ability to take advantage of the social graph to target friends and friends of friends, as well as the ability to include social relevance in the ad creative (that is, the names of friends who also like the brand). Conversions are a lot lower when you drive consumers off the network. It's far better to use display ads to drive users to a custom tab on your page. You can then use this as a landing page before driving to your brand site.

At the same time, make sure you have a strong engagement and page strategy once you get users to "like" the brand. You don't want to shuttle them to a useless Facebook page before bringing them to your brand site. Your Facebook page should offer value, functioning as a gateway to conversations and transactions, either online or offline. In addition to clicks, page comments, likes, and consumer-provided testimonials provide powerful ways to measure your social media success.

Facebook has massive value as an advertising channel, but using it right requires a sound strategy, and a thorough understanding of its unusual metrics. Simply buying ad space and hoping for the best is a practice of a bygone era, not only in social media, but online in general. Use Facebook's full potential to find the right consumers, and then use your marketing smarts to keep them engaged. That's how you can make social media work.

Dave Williams is the founder and CEO of Blinq Media.
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