This document discusses Facebook advertising and the importance of metrics like click-through rate (CTR) and conversion rate (CVR) in optimizing ads. It notes that a high CTR allows acquiring clicks at a lower cost, while a high CVR means more conversions per click. It also explains how sponsored stories can achieve better CTR and CVR than regular ads, resulting in lower customer acquisition costs. Groupon's use of deal-specific dynamic ads that integrate with its deals API is presented as an example of optimizing ads based on CTR and CVR.

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