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The Globe and Mail: Facebook Battles Criticism Over Its Ad Power

June 13, 2012

More and more companies are asking their customers to “like us on Facebook” – but now the social media giant is making the case to its advertisers that it still deserves their friendship too.

By Susan Krashinsky, The Globe and Mail

Since Facebook’s initial public offering just over three weeks ago, it has faced intensified criticism that the ads it sells – which are its main source of revenue – are ineffective. Now the company is battling that message.

On Tuesday, comScore and Facebook will release a joint research paper entitled “The Power of Like 2: How Social Marketing Works,” ( http://blog.comscore.com/) which they are presenting at the Advertising Research Foundation conference in New York. ( http://www.thearf.org/) The first study conducted last July found that a brand’s “fans” on Facebook, and the friends of fans, both spent more money on that company’s products. The new study takes this further and tracks online and offline buying behaviour as it links directly to exposure to ads and brand pages on Facebook. The idea is to give a more direct measure of the return on investment for marketers in being on the social network.

For example, the study analyzed buying behaviour during the holiday season of November-December 2011 at leading retailers in the U.S. It found that fans of brands on Facebook spent more both online and in-store than the general population: more than twice as much in the case of Amazon and Best buy. But even friends of fans, who were exposed to the brands because of their friends’ behaviour on Facebook (seeing that a friend had “liked” a product, for example) spent more; twice as much as the general population in Best Buy’s case. Amazon had much more modest results with friends of fans, but they still spent 8 per cent more than the average.

“You’re seeing great results because they have committed to creating content that is social in nature ... but have also used Facebook paid advertising to amplify that message,” said Facebook spokesperson Elisabeth Dianna. “The paid advertising really does grease the wheels to get that message out to not only fans, not only their friends but everyone.”

The loudest voice in criticizing Facebook has been General Motors, which just before the initial public offering pulled $10-million (U.S.) in ad spending out of the social network. Chief marketing officer Joel Ewanick has since said that the company had heard from fans that they did not like Facebook ads and did not click on them. Ms. Dianna would not comment on the GM announcement but said it was important for the company to demonstrate its value to advertisers.

The value of this social “friendship,” known as earned media for brands, is rarely disputed. Even General Motors curates branded pages and has said it will continue to do so – Mr. Ewanick called the site a giant “car club”.

Advertisers are courting fans on social media more than ever before. Their ads are pointing to their Facebook pages more and more often as a primary representation of their brand; taking as much or more prominence than their own websites. According to the research, last November less than 1 in 10 banner ads online in the U.S. pointed to the company’s social media presence (with a call-out such as “like us on Facebook”). Just four months later, in March, that number rose to nearly 1 in 6 display ads.

But Facebook argues that the ads it sells go hand in hand with all this free socializing for marketers.

Facebook tracked the return on investment for more than 60 of its biggest advertisers, who are major spenders on the network (including companies such as Starbucks and Wal-Mart). It found that 70 per cent of the campaigns earned at least three times what they spent on their Facebook ads, in purchases linked to exposure to those ads. Just under half had a return-on-investment of five times or greater.

The study notes that Facebook has been criticized for below-average click-through rates (the amount that users actually click on one of those ads for belly slimming tricks or work-from-home opportunities in the right-hand panel of the screen.) It argues that ad effectiveness can also be measured through “view-through” rates, or the buying behaviour that occurs after someone sees an ad, even if they don’t click. For Starbucks, for example, Facebook users who had been exposed to the brand on the social network bought something at the cafes 38 per cent more frequently than those who hadn’t, according to comScore.

“These are some interesting results that begin to prove the value of the medium, and that Facebook can be a valuable marketing channel from both an earned and a paid media standpoint,” said Andrew Lipsman, comScore’s vice-president of marketing.

As seen here: http://www.theglobeandmail.com/report-on-business/facebook-battles-criticism-over-its-ad-power/article4250338/?cmpid=rss1

 

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