Hussein Fazal's (CEO @ AdParlor) presentation at SMASH Summit on 7/26 in NYC

1. Facebook Ads – The Math behind the Magic
www.adparlor.com

2. Hussein Fazal – CEO, AdParlor
Ads API Partner – manages ~1 Billion daily impressions on Facebook

3. What works on Facebook?
 Intent (search versus Facebook)
 Deep Conversions
o Does education, insurance, flowers work on
Facebook?
o Definitely not if you treat it like search!
 Shallow Conversions
o Playing a Facebook game
o Liking a Facebook fan page
o Registering for a web site via Facebook connect

4. Some Basic Terms
 CTR – Click Through Rate
 CVR – Conversion Rate
 CPM – Cost per 1,000 impressions
 eCPM – Effective cost per 1,000 impressions
 CPC – Cost per click
 CPA – Cost per acquisition
4 Clicks from 10,000 Impressions = 0.04% CTR
2 Acquisitions from 4 Clicks = 50% CVR
4 Clicks * $0.30 CPC = $1.20 Cost
$1.20 Cost / 2 Acquisitions = $0.60 CPA

5. Ad Server Fundamentals
 Any ad network wants to choose the ad with the
highest eCPM
o This is true for Facebook and amplified by their focus on
user experience
 A high CTR means you can buy cheaper clicks
 A high CVR means you get more conversions
for those clicks

6. The Importance of CTR
Difference in eCPM based on the CTR [hold CPC bid constant]
Impressions CTR Clicks CPC Bid eCPM
1,000 1.00% 10 $ 0.50 $ 5.00
1,000 0.10% 1 $ 0.50 $ 0.50
1,000 0.05% 0.5 $ 0.50 $ 0.25
1,000 0.01% 0.1 $ 0.50 $ 0.05

7. Seeing the Effect on Facebook

8. The Importance of CVR
Difference in eCPA based on the CVR [holding cost constant]
Cost Clicks CVR Conversions eCPA
$ 5,000.00 10,000 40.00% 4,000 $ 1.25
$ 5,000.00 10,000 50.00% 5,000 $ 1.00
$ 5,000.00 10,000 60.00% 6,000 $ 0.83
$ 5,000.00 10,000 70.00% 7,000 $ 0.71

9. Understanding Ad Optimization
 Don’t talk to me about pricing unless you
understand CTR and CVR
 High CTR = cheaper clicks
 High CVR = more conversions for those
clicks
 Create thousands of ad, learn in real-
time, and optimize CTR and CVR
 By optimizing on CTR/CVR you are
essentially driving down your CPA

10. Quick Tangent - Sponsored Stories
“Something that would appear on a users news feed – turned into an ad unit”

11. Why do Sponsored Stories get you cheaper fans (technical)?
Higher Click-Through-Rate (CTR) Higher Conversion Rate (CVR)
gets you cheaper clicks gets you more for those clicks

12. Why Do Sponsored Stories get you
cheaper fans (high level)?
 Because it is a story – not an ad.
 Remember - “Something that would appear on a users news feed
– turned into an ad unit”
 Before sponsored stories:
o More Fans = More expensive for the next Fan
 Since sponsored stories:
o More Fans = Cheaper for the next Fan

13. If the Ingredients are Perfect
Super Targeted
$.08 Able to achieve 0.29%
Fan Acquisition CTR and 81% CVR
through life of campaign
Campaign
Effective Cost Per Fan

14. Groupon’s Goal is to get sign-ups

15. Groupon
Generic Ads
 Constant creative rotation
Deal Specific Ads
 Combining the Groupon deals
API with the Facebook Ads API

16. Generic Ads
 It’s all about testing & optimization

18. Deal Specific Ads

19. Deal Specific Ads
 Integrate with Groupon Deals API
 Pull deals as they go live at
midnight in local timezone
 Machine learning to determine who to target
 Set Facebook Ads live within minutes of deal going live!

20. Bringing it all together

21. hussein.fazal@adparlor.com
www.adparlor.com
www.facebook.com/adparlor