Recent reports have suggested that Facebook advertising is not very effective and in comparison to Google provides significantly less value. There has been some interesting debate about this comparison, which peaked when GM announced it was not finding Facebook advertising effective and cut its Facebook ad budget. However, other reports have suggested that brands such as Ford and P&G have indeed found Facebook ads to be effective. With such different brand experiences, I thought I might share some information and ideas on why we believe that Facebook ads and social ROI are real and can be highly effective.

There are many nuances to consider. First, what is the definition of Social ROI? We define Social ROI as the measure of efficacy of marketing on social media via paid, organic and earned media. The efficacy of the marketing campaign is measured by soft metrics pertaining to reach and engagement as well as hard metrics measuring the eventual impact on revenue, profit, margin, and offline store sales across all marketing and sales channels of a business.

While this definition of Social ROI typically sits well with a brand marketer, direct response marketers tend to be skeptical and find this definition hard to accept. Many marketers have traditionally been able to measure various metrics resulting from their digital marketing activities. Thus, they feel that social channels should be measured using the same measurement models and should be held to the same accountability as search marketing efforts.

Marketers who support this perspective and traditional measurement models for Social ROI, often find it’s often hard to prove (with notable exceptions such as shoes for women). Why? There are many possible reasons including the actual intent behind a consumer’s visit to a brand site. People in general are not spending time on social channels to immediately buy goods and services like they often are when engaging in online searches. Instead, people tend to use social platforms to connect with their friends, socialize, share content, and participate in dialogue around things that they are experiencing and thinking. Thus comparing Facebook advertising results to search results is inherently flawed. More importantly, advertising on Facebook is in many ways more like advertising on TV – it increases the proclivity of a person to buy a product, but it often takes time.

Keeping this in mind, here are some common themes we have learned from some of our clients’ successful Facebook campaigns.

1.       Significant and sustained ad budgets

Successful Facebook campaigns must have meaningful ad budgets with significant reach. Like TV advertising, small budgets will rarely cause a major impact because small budgets mean a lesser reach and also a lower frequency of the ad per user. Typically, tip-toeing into the Facebook world will not be effective. Only when the ads reach a significant percentage of users with a good frequency does one see the desired effects. Search marketing which is really a “demand collector” works differently and even small budgets can show a significant and more immediate ROI, as the schematic response curves below illustrate.

2.       A strategic long term view

The best run social campaigns are well thought out with strategies designed to build audiences and engage with them in a meaningful way, so they: 1) grow a fan base, and 2) increase loyalty to the brand. For the marketer this means a strategy to create meaningful content that is relevant to the fan base at a given point of time, and constantly updating content so that the message remains fresh.

This is true for apps as well as advertising on Facebook. Some advertisers believe that they can build an app and expect high engagement numbers for long periods. We have not found this to be true. In fact, audiences get bored and engagement numbers fall rapidly over the first 1-2 months. The question remains, when done right do apps work? The evidence so far shows that they do have a positive influence on purchase behavior. We have data from our advertiser set as well as anecdotal evidence from others that users who engage with apps have a 25-35% higher average order size than non-app users in the same period. Thus a long term view is necessary.

The most efficient ad campaigns leverage sponsored stories. Sponsored stories are more effective because they can be targeted to audiences in a context that builds a trust with the brand and the consumer. e.g. (if your friend interacted with a brand and liked it, chances are you will be more likely to trust that brand too). However, for sponsored stories to work you need a certain threshold of fans for the inherent virality to have impact.

In above examples of “Like” acquisition campaigns, clients were able to spend 50% of the budget for a campaign where the average fan base during the duration of the campaign was close to 1 million. The CPL was also significantly lower than the marketplace ads (40% lower). When the fan base was 500,000 clients could only spend about 17% of the Facebook ad budget economically. For the third campaign where the fan base was over 3 million clients could spend 80% of the total Facebook ad budget on sponsored stories with great efficiency.

A note: It might appear that the CPLs for the 3 MN fan case went up but in reality it was because we spent a very high fraction of budget on sponsored stories.

Facebook ad campaigns can be very effective with sponsored stories. But, the catch is that for sponsored stories to work you need fans and to build a significant fan base you need a marketing budget and patience.

3.       Data is used as an asset

The remarkable thing about Facebook advertising is both the targeting and data that the advertiser can obtain with appropriate permissions from the user. A good example of how this can be done is to build apps where the user voluntarily agrees to provide information and then launch and market to them with the support of Facebook ad buys. The ad buys drive audiences to the app and the data from the app can be leveraged to make the app experience more interesting and the whole process more efficient. For instance, if the app data shows that the majority of app users are women, then the app can be tweaked to appeal more to a female demographic. Further, ad buying can be done with the insights gleaned from app usage. For one advertiser, such an approach resulted in a 41% increase of fans at a 43% lower cost per fan.

 4.       Virality is not assumed

Many advertisers expect their Facebook campaigns to become viral. However, there is no guarantee that every campaign will go viral. While very high virality is a matter of serendipity, there are several best practices that can enable a campaign to go viral. Virality has to be achieved, it cannot be assumed. There are many best practices that encourage virality but they all center the idea that the campaign has to be inherently social and encourage collaboration and sharing. Many marketers miss this simple yet powerful truth.

5.       The Facebook ad buys are synchronous

Facebook advertising works best when the media buys and app launches are synchronized with TV ad buys. We have seen several instances of this. TV drives awareness and Facebook drives meaningful engagement. If the engagement is meaningful enough, it will drive virality.

6.       Good content is key

Advertising will have minimal impact if you don’t have meaningful content. You need a good community manager and moderator to understand when to place content, what content to place and how to measure the efficacy of content. The golden rule here is that people have become fans of your brand to engage with you in a meaningful way. If you fail to develop good content, your fans and the Facebook platform will ignore your message. Your fans will not engage and Facebook will give you a lower Edgerank, hence lesser reach.

In closing, Facebook is constantly experimenting with new ad formats that enable advertisers to reach fans more efficiently and effectively. Facebook is really at the beginning of their plan to innovate in this area. We believe that they will strike a balance between advertisers who want to show targeted and relevant ads in every possible context and users who want to see very few ads. Personally, we think it’s going to be fun to watch.