E marketer facebook_advertising-why_the_marketplace_ad_platform_deserves_a_second_look

June 2012

Facebook Advertising:
Why the Marketplace Ad Platform
Deserves a Second Look
Debra Aho Williamson
dwilliamson@emarketer.com
Contributors
Lauren McKay, Tracy Tang

Executive Summary: When General Motors pulled its advertising from Facebook, many took it as an indication
that the social network’s ad products didn’t work. But in reality, the pullout tells a different story.
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In 2011, major marketers dramatically increased their spending on
Frequency with Which US Facebook Users Click
on Online Ads or Sponsored Content When Using Facebook, buying up the site’s so-called “Premium” ad inventory—
Facebook, May 2012 ads on users’ homepages and in other exclusive spots—in a quest to
% of total acquire “likes.” This year, some marketers have reduced spending on
these Premium ads so they can reassess the ads’ effectiveness. As
a result, Facebook has seen weaker-than-expected revenues in 2012.
Often/sometimes
17% However, the company has another side to its ad business.
Marketplace, the self-serve platform, is gaining new prominence.
Hardly ever/never In May 2012, Facebook announced that it would start allowing
83%
advertisers to place Premium ads in users’ news feeds by tapping
the technology that supports Marketplace. The change is expected to
inspire marketers with bigger budgets to begin using the automated
system. This month, Facebook said it would launch Facebook
Note: n=476 ages 18+ Exchange, a real-time bidding platform for Marketplace inventory.
Source: Associated Press (AP) and CNBC conducted by GfK Roper Public
Affairs & Corporate Communications, May 15, 2012
The importance of Marketplace is often underestimated.
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Because the clickthrough rates on these ads are miniscule
and because their limited creative palette will never win them
awards, Marketplace ads get little respect.
Yet when Marketplace targeting and bidding are done correctly,
advertisers can be highly successful. Several ad-technology
startups use tools provided by Facebook to maximize the
Why Facebook Is Struggling to Increase Ad Revenue 2
effectiveness of these ads; other digital marketing firms have
Seven Keys to Success 4
taken notice and they too are entering the market.
Three Things Facebook Should Do 10
eMarketer Interviews 12 As the questions around Facebook’s advertising revenues swirl,
Related eMarketer Reports 12 the Marketplace business deserves a second look.
Related Links 12
About eMarketer 13 Key Questions
■■ What do Marketplace advertisers do differently?
■■ How can businesses use Marketplace and Premium ads together?

■■ What else should Facebook do to bring Marketplace-style
efficiencies to its Premium business and re-attract skeptical
big brands?
■■ Howare ad-technology firms helping marketers make their
Facebook advertising more effective?

Digital Intelligence Copyright ©2012 eMarketer, Inc. All rights reserved.

Why Facebook Is Struggling to Change in Online Display Ad Spending for Select
Increase Ad Revenue Platforms in the Next 12 Months According to US
Marketers and Agencies, Nov 2011
% of respondents
Facebook’s ad revenue fell short of expectations in
Social media advertising (Facebook, etc.)
the first quarter of 2012, and there are indications that 59% 37% 4%

Q2 was softer than expected as well. But in surveys Ad networks/exchanges
31% 58% 11%
conducted in late 2011 and early 2012, marketers
Publishers (content)
gave no clue they were planning to decrease their 29% 60% 10%
use of advertising on Facebook. DSPs (demand-side platforms)
24% 62% 14%
In a November 2011 survey, Advertiser Perceptions found that
marketers and agencies expected social media advertising to Portals
21% 64% 15%
receive a 27% share of online display advertising spending in
the following 12 months, up from a 22% share in the previous Agency trading desks
15% 69% 16%
12 months.
Increase Stay the same Decrease

Past and Future Online Display Ad Spending Share for Note: numbers may not add up to 100% due to rounding
Select Platforms According to US Marketers and Source: Advertiser Perceptions, "Advertiser Intelligence Reports Wave 16:
Digital Media Landscape," Feb 29, 2012
Agencies, Nov 2011
% of budget 138102

Past 12 months Companies surveyed by Efficient Frontier, meanwhile, said
27% 23% 22% 15% 9% 5%
they expected to dedicate 5% of their total online ad spending
Next 12 months
to Facebook by the end of 2012, nearly double the 2.7% of
26% 20% 27% 14% 9% 5%
total online ad spending they sent the social network’s way in
Publishers (content)
the fourth quarter of 2011.
Ad networks/exchanges
Social media advertising (Facebook, etc.)
Portals Ad Spending on Facebook by US Companies,
DSPs (demand-side platforms) Q4 2011 & 2012
Agency trading desks
% of total online ad spending

Note: numbers may not add up to 100% due to rounding
Source: Advertiser Perceptions, "Advertiser Intelligence Reports Wave 16:
Digital Media Landscape," Feb 29, 2012 Facebook Facebook
138103 www.eMarketer.com 2.7% 5.0%
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And 59% of these same survey respondents said they expected
to increase social ad spending, nearly double the percentage Other Other
who said they would boost spending on ad networks and 97.3% 95.0%

exchanges. At that time, only 4% of respondents indicated that
their social spending would decrease in the coming year. Q4 2011 End of 2012
Source: Efﬁcient Frontier, "Global Q4 2011 Digital Marketing Performance
Report," Jan 12, 2012
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However, surveys on expected spending plans are just that—
guesses about future plans. The reality for Facebook in the
first half of 2012 was that marketers pulled back. Ad revenues
declined 7.5% between Q4 2011 and Q1 2012.
Although the first quarter is typically soft for media companies,
the slippage at Facebook, whose revenues had been on a
strong upward trajectory, has been cause for concern.

Facebook Advertising: Why the Marketplace Ad Platform Deserves a Second Look Copyright ©2012 eMarketer, Inc. All rights reserved. 2

Why Facebook Is Struggling to Increase Ad Revenue

The general feeling among many advertisers is that they spent
Facebook Ad Revenues Worldwide, Q1 2010-Q1 2012
millions too heavily in 2011, said Simon Mansell, CEO of Facebook
$943 advertising firm TBG Digital.
$872
“The whole market—us, Facebook, everyone—got a bit
$776 $798
distracted with all these brands piling in,” Mansell told eMarketer.
$655 $637 “Everyone was obsessed with getting more fans, getting more
connections, spending money on social media. Now I feel like it’s
$450 coming back to, ‘Well, why are we spending money here? Why do
$424
$340
we want to get to 20 million fans? What are they actually worth?’”
Others feel that Facebook advertisers need to change their mindset:
■■ “Alot of the brands that get caught up in ‘social advertising
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 doesn’t work’ tend to be more traditional marketers that
2010 2011 2012 are trying to provide a more traditional approach to social
Source: Facebook, "S-1 Registration Statement: Amendment No. 4," media—maybe the same approach they are applying
April 23, 2012
139447 www.eMarketer.com to search advertising or even applying to their display
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advertising or DSP campaigns,” said Dave Williams, CEO of
Facebook’s second quarter financial results weren’t available BLiNQ Media, in an interview with eMarketer.
before this report was published, but several investment banks
■■ “Before accusing Facebook of not having the solution for
lowered their expectations in advance of the social network’s
brands, brands need to be able to ask themselves how
May 2012 IPO. Morgan Stanley, for example, projected total
permeable they are to change their strategy to be aligned with
revenue (including ads and payments) of $1.111 billion in Q2
Facebook. Facebook is not like Google. There is no way that
2012, down 5.45% from its earlier projection of $1.175 billion.
the same ad that you are placing on NewYorkTimes.com or in
Facebook’s cause wasn’t helped by General Motors’ decision to Google.com will work without modifications from Facebook,”
pull its estimated $10 million ad budget from the site. Although Facundo Maldonado, vice president of Ybrant Social, a unit of
$10 million is a tiny fraction of Facebook’s $3.15 billion in 2011 ad digital marketing agency Ybrant Digital, told eMarketer.
revenue, the pullout indicates that some major marketers are not
finding success with the ad formats Facebook offers. The Two Sides of Facebook’s Ad Business
In eMarketer’s recent conversations with digital agency Facebook’s ad business is divided into two parts:
executives and marketers, there was a common theme: Marketplace and Premium. They serve different functions
The first part of 2012 got off to a slow start when it came to and are typically used for different marketing goals.
planning Facebook ad spending. Marketplace Ads
For example, at one digital agency, client spending on ■■ Self-serve/automated system
Facebook was flat year over year. A number of this agency’s
■■ Bought via online auction
clients had made annual deals with Facebook for 2011, but
most decided not to make a similar upfront commitment for ■■ Priced
based on cost per click (CPC) or cost per
2012. Instead, they planned to buy throughout the year. impression (CPM)
■■ Usually
appeal to advertisers wanting specific
A small survey of 21 agency media executives by ITG
performance results, such as playing a game, installing
Investment Research found that nearly half didn’t plan to
an app or signing up for an event
increase their Facebook ad spending in 2012.
■■ Typicallyappear on the right side of most pages in a
Some advertisers have balked at the $10,000 minimum vertical column; can also appear on photo pages and on
monthly spend that Facebook requires in order to place game pages; starting in mid-2012 can also be placed in
Premium ads. The result, in some cases, has been shifted ad the news feed (mobile, desktop or both)
spending to lower-cost Facebook ad options.
■■ Companies can buy ads themselves using the self-
Capstone Investments, an investment bank, said in an April serve tool, but larger businesses usually work with
2012 research report on Facebook that “in many cases large technology companies or media buyers that have access
CPG advertisers are seeing comparable ROI on self-serve to Facebook’s Ads API. These companies have built
ads [to those] they were achieving on premium ads and are technology and analytics on top of the API to help clients
allocating spend that otherwise would go to premium ads to with ad creation, campaign management and analytics
self-serve ads.” ■■ Can have social context (pictures and/or names of friends)


Why Facebook Is Struggling to Increase Ad Revenue

Premium Ads Seven Keys to Success
■■ Sold by Facebook’s ad sales team and placed via an
insertion order Facebook’s self-serve ad platform has evolved greatly
■■ Always priced on a CPM basis since it first launched in 2007. The ad quality has
■■ Typically
appeal to larger brands that want to build broad gotten noticeably better, the targeting has improved,
awareness and reach a large quantity of Facebook users and with the 2011 opening up of the Facebook Ads
■■ Appear on the right side of a user’s main news feed; API, multiple startup businesses have built technology
within the newsfeed (both desktop and mobile); and on
the logout screen
to automate the process of bidding and placing ads.

■■ Can have social context The marketers that get positive results from these ads value
their deep targeting capabilities and the auction-style interface
A complete description of Facebook’s ad types is
available here. for bidding. Facebook advertisers can learn from the tactics
and techniques these marketers use, whether their goal is
Historically, eMarketer has estimated that Marketplace
performance or branding.
accounts for 60% of Facebook’s total ad revenue. That
translates to $1.89 billion in 2011 ad revenue from Here are the seven keys to their success:
Marketplace ads and $1.26 billion from Premium formats.
They let technology do the heavy lifting
Facebook Ad Revenues Worldwide, 2009-2011
millions and % change While companies can place ads themselves using the self-
$3,154 serve interface, larger marketers often work with one of the
145% companies that have access to Facebook’s Ads API. These
firms, such as AdParlor, Adobe, TBG Digital and BLiNQ Media,
have built technology on top of the API to give advertisers
$1,868 capabilities such as:
■■ Mass ad creation

69% ■■ Creative and target-audience testing
$764
■■ Automatic bid optimization
■■ Conversion tracking
2009 2010 2011 ■■ Cross-channel click attribution
Facebook ad revenues % change
As of mid-June 2012, there were 44 companies listed in
Source: Facebook, "S-1 Registration Statement," Feb 1, 2012 Facebook’s Preferred Marketing Developer Directory that had
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these capabilities, though there are dozens of other firms
that also offer advertising services on Facebook. Among
Facebook does not break out revenue from its
them were several demand-side platforms, including Turn,
Marketplace and Premium ad businesses.
MediaMath and DataXu, which in summer 2012 are expected
to start offering Facebook inventory via real-time bidding.
“A lot of advertisers, when they’re testing out Facebook ads
as a new advertising opportunity, fail to dig deep enough
into the targeting capabilities, and that’s the strongest value
proposition that Facebook offers for their ad platform,” said
Chad Warren, senior manager of product marketing of social
media at Adobe, in an interview with eMarketer.
According to Social Fresh, a social media education company,
the most common targeting criterion has been age, used
either always or often by 55% of respondents to a March 2012
survey. But fewer than one-third of respondents targeted
people based on their language (26%) or their education (24%).


Seven Keys to Success

■■ In June 2012, Facebook marketing company Syncapse acquired
Facebook Ad Targeting Used by US Facebook
Advertisers, March 2012 Clickable, a social media and search ad management company.
% of respondents
“People are realizing that they’re ready for this solution of
Age 55% scale,” said Peter Goodman, CEO of BuyBuddy. In the past,
Country 53% “people would say, ‘Oh, I can’t really—it’s almost too much.’
And I think what we’ve seen in the last couple of years is that
Precise interest 50%
people are realizing, ‘Actually, it’s not too much, I just need to
Broad interest 42%
embrace it.’ If you’re spending $10,000, $50,000, $100,000 in
Interested in 41% advertising in one month to promote content, you want to
Connections 37% make sure the right content is being promoted.”
State 35% As Facebook continues to grow, the targeting capabilities of its ads
City 34% will only increase. Working with a partner connected to the Ads API
Gender 34% gives marketers the ability to manage Facebook advertising more
Friends of connections 33%
efficiently and get the best price for reaching the target audience.

Language 26%
‘Test, learn and change’ isn’t just marketing-speak
Education 24%

Zip 18%
Advertisers that are most successful on Facebook routinely
test thousands of combinations of ad creative, targeting and
Workplace 17%
bid prices. They are able to get results in near-real time, and
7% Relationship
they use those results to refine target audiences, change their
Note: n=347 who chose "always" or "often" bid prices and remove creative that doesn’t work.
Source: Social Fresh, "The 2012 Facebook Ads Report," April 4, 2012
138899 www.eMarketer.com All this happens without active involvement from the advertiser,
138899
which means an advertiser must give up a certain amount
Marketers’ narrow use of Facebook’s ad targeting capabilities is due of control over its campaigns. But in return, a company gains
to the complexity of Facebook’s ad tool, according to Social Fresh. “It valuable experience in what it means to market in real time.
is easy to use, but the sheer number of options creates a lot for the
“The best success we’ve seen within Facebook Marketplace
average business to learn before they can maximize the power of
has generally been with customers that are able to run various
Facebook ads,” Social Fresh’s “2012 Facebook Ads Report” stated.
versions, understand that data, be willing to test and try new
Ad agencies and social media marketing firms are taking notice of versions quickly, and then scale what they see is successful,”
the developments in the Facebook third-party ad services business: said Grady Burnett, Facebook’s vice president of global marketing
■■ In January 2012, Adobe acquired Efficient Frontier, a paid search solutions, in an interview with eMarketer. “We certainly do see
and Facebook ads company. tweaks and changes in the Premium campaigns—probably
not as much as in Marketplace, but it’s still very important. It’s
■■ In February 2012, social media management company Buddy
important to learn. There’s a lot of data out there.”
Media acquired Brighter Option, a Facebook ads firm, and
created a new division called BuyBuddy. In a blog post describing In Social Fresh’s March 2012 survey, two-thirds of respondents said
the acquisition, Buddy CEO Michael Lazerow wrote, “The ease they were testing ad creative and 61% were testing ad targeting.
and speed in which Facebook ads can be generated, uploaded But that left one-third who were using the same creative for all ads
and managed via Brighter Option’s social ad management and 39% who weren’t comparing different ad targeting options.
software saves both time and money for brands and agencies.”
The percentage of respondents who were testing various
Buddy Media itself was acquired by Salesforce.com in June 2012.
types of landing pages was even smaller, at 35%.
■■ Also in February 2012, Wildfire Interactive began integrating
technology startup Adaptly’s social ad optimization services Parts of Ads that US Facebook Advertisers Are
into its social marketing product. Split-Testing, March 2012
% of respondents
■■ InMay 2012, Vitrue, a Buddy Media competitor, announced
partnerships with seven ad-technology firms that work with Ad creative 66%
Facebook, including Marin Software, Optimal and Nanigans. Ad targeting 61%
The same month, Oracle announced it would acquire Vitrue.
Landing page 35%
Meanwhile, WPP Group, an investor in Buddy Media, said its
Group M media buying unit would use Buddy for all of its Source: Social Fresh, "The 2012 Facebook Ads Report," April 4, 2012
Facebook ad buying. 138901
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www.eMarketer.com



This “test-learn-change” attitude extends to Facebook’s ad
Leading Digital Marketing Priorities According to US
formats that include social context, such as the name of a Marketers, Agencies and Publishers, March 2012
friend who liked or interacted with a brand, or a post that was % of respondents
turned into an ad using the site’s Sponsored Stories format. Marketers Agencies Publishers
Measuring campaign 64.4% 41.9% 25.4%
Marin Software, which provides technology to manage performance
online advertising, found that its clients devoted 23% of their Optimizing within channels 45.0% 16.1% 31.0%
Facebook ad budgets to social ads in early 2012, up from 5% Real-time measurement 31.3% 19.4% 11.3%
& optimization
the previous year. Marin predicted that half of all Facebook ads
Attributing results 28.8% 31.2% 15.5%
would have social features by the end of 2012. across channels
Uniﬁed customer view 23.8% 22.6% 25.4%
“The changes that Facebook has made around these social
Employing newer channels 23.1% 36.6% 42.3%
ads to increase their prominence on the website and make Dynamically serving ads 14.4% 17.2% 18.3%
them more accessible to advertisers have really paid off, and & content
we’re seeing advertisers shift their budget towards more social Consistent branding 13.8% 18.3% 28.2%
across channels
advertising,” said Matt Lawson, vice president of marketing and
Social listening for content 13.8% 16.1% 16.9%
partnerships for Marin Software, in an interview with eMarketer. & inﬂuencers
Applying cross-channel 13.1% 11.8% 7.0%
lessons
They place a high value on speed Paid, owned & earned 11.3% 24.7% 16.9%
media framework
Speed is a key attribute of successful Marketplace advertisers. Seamlessly execute 10.6% 17.2% 9.9%
Instead of agonizing over the wording of an ad or finding the across programs

perfect image, experienced Marketplace users simply launch Buying & targeting 10.0% 14.0% 36.6%
segments at scale
many versions. And they learn very quickly which ads are Reaching target audience - 10.8% 12.7%
working by tracking clicks, fan growth and other metrics. via real-time bidding
Note: top 3 priorities in the next 12 months
“The moment you launch a campaign on Marketplace, you get Source: PulsePoint, "Bridging the Digital Divide," May 8, 2012
data in 10 minutes, 15 minutes maximum,” said Nikhil Sethi, 140305

co-founder of ad technology firm Adaptly, in an interview
with eMarketer. They combine Premium and Marketplace ads for
Speed is also a key attribute of the Facebook Exchange real-time the biggest impact
bidding platform, which enables an advertiser to target an ad to a Facebook positions Premium ads as exclusive opportunities
particular user within 1 second of that user visiting a webpage. for brands to achieve broad reach in an environment with
This focus on swiftness has another benefit that extends less clutter. Marketers tend to use Premium ads for branding
beyond Facebook. Advertisers have long talked of being able goals, such as creating broad awareness for a new movie or
to place ads in response to events, trending keywords or hot announcing a new product.
topics, but many companies are not set up to approve media But the smartest Facebook marketers combine Premium ads
buys in real time. with Marketplace ads. They might use Premium ads as part
Marketers surveyed in March 2012 by PulsePoint, a digital of a larger branding campaign and Marketplace ads as the
technology firm, ranked real-time measurement and always-on engine that drives a steady stream of new fans.
optimization as their third-highest digital marketing priority, And now that advertisers can place ads in Premium slots in
behind measuring campaign performance and optimizing the news feed via the Marketplace platform, the need to find
marketing within various channels. The pace with which the right combination of Premium and Marketplace ads is
Marketplace advertisers can test and change their ads more important than ever. Previously, advertisers needed to
provides companies a way to achieve that goal. commit to a minimum monthly budget on Facebook in order
to get Premium ads. Now, advertisers can get certain Premium
slots without that hefty obligation.
Social Fresh found that ads placed with a Facebook ad rep’s help
(i.e., Premium ads) had a similar cost per click and clickthrough
rate as ads placed without a rep (i.e., Marketplace ads).



Average Facebook Ad CPC and CTR with vs. Without a They use the data they gain from a campaign to
Facebook Ad Representative*, March 2012 improve the next one
Cost per Clickthrough
click rate Facebook is often criticized because the metrics it provides
With a Facebook ad representative $0.78 0.05% never seem to be enough for advertisers. This is especially
Without a Facebook ad representative $0.83 0.04% the case on the branding side, for which the success of the
Note: *who will help you use their premium products and assist creating advertising is more difficult to assess.
ad campaigns
Source: Social Fresh, "The 2012 Facebook Ads Report," April 4, 2012
Ads API partners have created analytical tools that layer on
138903 top of the data that Facebook provides, enabling their clients
“Typically, marketers are using Marketplace as a way to drive a lot to build sophisticated targeting models. They take data from
of performance or scale through their campaign very efficiently. one campaign and apply it to the next campaign.
The cost in Marketplace is typically a lot less; there is the ability “We’ve had tremendous success with clients who have looked
to target users specifically; and there is a better ability to target at the data from the campaigns that they had run and saw
and deliver the right creative against the right audience,” said what was successful and were able to build subcampaigns
Williams of BLiNQ Media. “When advertisers are running Premium and to alter their program to more heavily target or more
placements, they are looking for reach and frequency at scale specifically target a specific audience,” said Adobe’s Warren.
during certain key periods. It could be for a Super Bowl ad they
are looking to run. It could be a one-day promotion. We’re seeing Examples:
the big brands want to do that, and they also want to support the Florida’s Natural: The juice maker (a client of BLiNQ)
lead-up into it, and even the post-campaign, with Marketplace.” assumed that its Facebook target audience would be “moms
Examples of combining the two ad types include: interested in juices and breakfast foods,” Williams said. “We
found out that the No. 1 performing segment for them was
Domino’s: For a December 2011 “Global Domino’s Day” people who are patriotic,” he added. “Every time we run a new
promotion offering 50% off of online orders in 20 worldwide campaign for a new brand we are always running ideas for
markets, the pizza chain used Marketplace ads to tease the new segments of audiences that are extremely responsive to
event and then placed Premium ads on the day of the event to the brand based on this research.”
drive clickthroughs to the app where orders could be placed.
The promotion resulted in 542,000 people visiting their local Acer: The computer company promoted a sweepstakes
online ordering site and led to a record week for online sales to give away a laptop a day to Facebook fans. Using Adobe
and orders in the US. technology, Acer was able to mine the data of the people
who had clicked on its ads and also those who then went
Expedia: The online travel agency wanted to increase its fan on to sign up for the sweepstakes. Acer found that the
base, so it asked Facebook users to enlist their friends’ help to target words it expected to perform well—terms associated
try to win a vacation package giveaway. Working with Adobe, with technology, smartphones or entertainment—actually
Expedia used a combination of Marketplace and Premium fared worse than ads that ran on clothing-oriented pages.
ads, as well as email and print marketing, to encourage The company was then able to quickly adjust the targeting
participation. By adding social context to some ads, Expedia parameters, and as a result, 71% of its new “likes” during the
was able to capitalize on friends’ relationships with each other. campaign came from paid media.
The company also segmented targets, aiming specific creative
at highly engaged audiences. The promotion led to a 750%
They use ad targeting technology to gain the right fans
increase in Expedia’s fan base to over 1.1 million.
Marketplace advertisers and the ad-technology firms that
Combining Facebook ad types can lead to greater efficiencies,
work with Facebook’s Ads API are using sophisticated
Adaptly’s Sethi said. “If you’re going to do a Premium buy, run
segmenting tools to make sure that their ads are aimed at the
a small portion of the budget on Marketplace, the exact same
people most likely to be supportive of the brand and who want
creative, and just learn from the data and then apply it to the
to share brand messages with their friends. Little by little, they
Premium buy,” he said. “In some cases we’ve seen anywhere
are helping companies get past the knee-jerk response that
from 15% to 25% improvement in pure CPM cost when you
on Facebook, the number of fans determines your success.
learn from Marketplace and apply it to Premium.”
Marketers aren’t giving up their fan-base fixation very easily,
though. According to a survey by Wildfire, 57.3% of respondents
considered increasing their fan/follower base a primary objective of
social media advertising, far ahead of goals such as extending the
reach of branded content (24%) or marketing to existing fans (17%).



Spotlight: Jackson Hewitt Boosts Engagement
Primary Objective of Marketers Worldwide When
Running a Social Media Ad Campaign, April 2012 with Facebook Marketplace Ads
% of respondents
Tax prep service engages consumers and grows fan
base with social site campaign
Increasing Keeping pace
engagement
with existing
with competition Jackson Hewitt, an income tax preparation service, does
1.6%
fan/follower base the majority of its business between the months of
17.0%
January and April. In order to promote its services during
Increasing reach of tax season, and to build and strengthen its Facebook
branded content Increasing
24.0%
fan base, the company launched its first Facebook
fan/follower base
57.3% Marketplace ad campaign during the early months of
2012. The goal, according to David Koroghlian, director
of interactive and social media, was to not only acquire
Note: numbers do not add up to 100% due to rounding more Facebook fans, but to use paid advertisements on
Source: Wildﬁre as cited in company blog, May 17, 2012
the site to create engagement.
140633
The Marketplace ads promoted Jackson Hewitt’s Digital
But the next generation of Facebook advertising optimization Dance-Off game and a sweepstakes running on its
tools seeks to generate the best fans, not just any fans. Facebook page. The game encouraged players to use
their keyboards to match dance moves on the screen.
“If a company is saying, ‘We want to add 100,000 fans to
The contest entered users to win a gift card to Wal-Mart,
our fan page,’ they should be getting the right 100,000 fans where Jackson Hewitt has about 2,800 locations. For
through their ads—fans who are going to continue to engage current fans of its brand, Jackson Hewitt advertised an
in the brands, who are going to talk about it favorably, who incentive: They could opt in to receive a coupon for $25
are going to foster more viral engagement—rather than off tax preparation.
getting fans who are not really fans,” said Tom Rikert, director
In launching the ads, Jackson Hewitt used Facebook’s
of product management at Wildfire, in an interview with Marketplace self-service ad platform and also implemented
eMarketer. “They might click on the ad once because it was a number of add-on tools to fine-tune the ad targeting.
enticing but they never come back to the company’s fan page. According to Christopher Tuff, SVP and director of earned
They never engage.” and emerging media at Jackson Hewitt’s agency, 22squared,
predictive modeling, targeting and optimization tools from
Examples:
Facebook advertising service provider BLiNQ Media were
BLiNQ: The company’s pre-planning tool, LIFT (Like Interest used to ensure the campaign was only targeting users with
Fan Targets), is a database of over 500,000 topics and interests an inclination to like the brand.
of Facebook users. BLiNQ uses it to help determine which “By going through Facebook’s API, we can profile our
interest categories are the closest match to a brand. “What consumer against 10,000 pages and pull out about 1,000
that allows us to do is launch a campaign out of the gate different targets,” Tuff explained. “We can see what
almost fully optimized, instead of having to try and find those interests to target without doing it retroactively through
targets later on in the campaign lifecycle. We know which optimization.” Based on the modeling, 22squared was also
targets we should be going after,” said Williams. able to target the user interests that rose to the top.

Adaptly: Over time, many companies have focused on The intense modeling and ad targeting delivered solid
the cost efficiency aspects of gaining fans. In other words, results. “Our fan growth was north of a 2,000% increase,”
the cheaper the fan, the better. But in the next phase of Koroghlian said. “Engagement also increased 900%. Both
are pretty high numbers for us.” The engagement metrics
advertising optimization, improved analysis of the costs of
took into account the average number of comments,
targeting various fan groups will become more important.
“likes” and shares year over year. Jackson Hewitt’s
“Based on cost efficiency, some brands may say, ‘I just want
fan base grew from 6,709 fans pre-2012 tax season to
to get as many fans as possible for as cheap as possible. Let’s 162,513 at the end of it.
go after any interest that drives cost efficiency,’” said Sethi. “I
When it comes to using Facebook ads for fan acquisition,
think from a targeting point of view it becomes really, really
Tuff underscored the importance of gaining the “quality
pertinent to start to look at quality as an important factor, in
fan,” rather than the random user who will never engage
some cases even more than cost.”
with the fan page again.
“Coupling the engagement KPI with interest targeting,
we’re delivering not only low cost for spend but
high-quality fans,” Tuff said. On top of that, Koroghlian



pointed out: “We are trying to acquire fans who are not
Average Worldwide Clickthrough Rate (CTR) on
only likely to interact with us on the page, but are also Facebook, by Industry, Sep 2011-Feb 2012
likely to transact with us in-store.”
Movies/entertainment 0.11%
In the future, Koroghlian said, it would be beneficial
for Facebook to develop more paid local advertising Electronics 0.10%
opportunities for franchises like Jackson Hewitt. Given Automotive 0.08%
Jackson Hewitt’s business model, the brand would
Apps 0.06%
someday like to give franchises their own pages and the
Promotions 0.04%
ability to run paid ads to help build engagement with
local fans. —Lauren McKay Beauty/cosmetics 0.04%

Food/CPG 0.04%

Tourism 0.03%
They look beyond clickthrough rate
Health/fitness 0.03%
One of the worst raps Facebook ads have gotten is that their
0.03% Merchant/banking services
clickthrough rate (CTR) is abysmal. According to TBG Digital, the
US average CTR for Marketplace ads in 2012’s first quarter was Note: bulk of the traffic studied is from the US; figures were calculated by
averaging daily CTRs from Sep 1, 2011 to Feb 27, 2012; data based on ads
0.034%. In Canada, the UK and Germany, the rate was even lower. purchased through AdParlor
Source: AdParlor, March 2, 2012
At Google, a company that Facebook is often compared to, 137673 www.eMarketer.com
paid search ads had a CTR of 2.12% in Q1 2012, according to 137673

Marin Software. Facebook, of course, is defensive about the low clickthrough
rate: “It’s really important that an advertiser knows what their key
Meanwhile, at Facebook, CTR declined between Q4 2011
objective is because the clickthrough rate is not the end-all be-all,”
and Q1 2012 in France, the US and Germany, TBG found; it
Burnett said.
suggested that the cause may have been an increase in the
number of ads per page. “We now have the ability to report on campaigns by ‘likes,’
app installs, or ‘people talking about this.’” Burnett added.
Average Clickthrough Rate (CTR) for Facebook “There are other key metrics that really matter for a business,
Marketplace Ads in Select Countries, Q1 2011-Q1 2012 and it’s just a matter of figuring out, ‘Is that an install? Is that
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 a sale? Is that a list sign up? Is it something different?’ And
France 0.034% 0.022% 0.023% 0.045% 0.039% that’s probably the most relevant thing to track towards.”
US 0.031% 0.031% 0.037% 0.037% 0.034%
But while click rate is a standard metric across the web,
Canada 0.054% 0.028% 0.028% 0.029% 0.030%
UK 0.027% 0.023% 0.024% 0.027% 0.030%
successful advertisers on Facebook are starting to focus less
Germany 0.023% 0.021% 0.036% 0.030% 0.029% on driving clicks and more on understanding what happens
Note: figures based on 268 billion impressions served after the click. They are beginning to use more sophisticated
Source: TBG Digital, "Global Facebook Advertising Report: Q1 2012,"
April 16, 2012 tracking tools—provided by Facebook and also by ad
140265 www.eMarketer.com technology companies—to determine how to attribute an
140265
action when it occurs and also how to target ads to people
Click rate is highly dependent on what type of company depending on what sort of action they want to inspire.
the advertiser is. AdParlor analyzed the cost per click and
“If [CTR] is the only metric that people look at on Facebook, then
clickthrough rates for more than 1,000 ad campaigns
it’s like pushing water uphill. But that’s not what Facebook’s about;
purchased through the company between Sept. 1, 2011, and
it’s about looking at every data point that’s possible—engagement,
Feb. 27, 2012. The analysis showed that industries typically
‘likes,’ shares, whatever it may be,” said BuyBuddy’s Goodman.
perceived as more exciting saw a higher average daily CTR,
with ads for movies and entertainment performing nearly five Features that help marketers go beyond the click include:
times as well as those for banking services. Facebook’s Conversion Spec: In April, Facebook began
offering a tool that allows companies using the Ads API to
segment ads so they are delivered only to people who have
the best chance of taking some sort of post-click action, such
as talking about or sharing a brand’s content, installing or
using an app, or checking in.
Facebook’s Optimized CPM: This feature lets advertisers
optimize their campaigns based on goals such as actions
taken on Facebook, reach, clicks and social impressions.


Nanigans’ Ad Engine: The company’s Facebook advertising Three Things Facebook Should Do
software allows marketers to optimize ads for post-click
activity, such as completing a form, adding something to an Facebook’s advertising business is constantly evolving
online shopping cart or making a purchase.
and changing, and, as highlighted earlier, the companies
Attributing actions from Facebook is very much a work in
that achieve the most success are those willing to
progress, but gaining insight into response beyond the click
will help advertisers to see what is successful. experiment and use technology to make better, faster
decisions. The final verdict on Facebook’s ability to build
As Mark Hughes, CEO of attribution measurement firm C3
Metrics, said in a blog posted on iMedia Connection in May 2012: a strong advertising business won’t come overnight.
“100% of the success with current ad tracking systems goes However, there are three things that Facebook could do
to that last-clicked ad, merely a navigational endpoint before in the near term to make a better case to the advertising
purchase, not what got the consumer going. If a consumer saw
community that its products do work.
an ad for Zappos on their Facebook page and eventually made a
purchase, the last click before their purchase—in many cases a
search engine—would get the credit.” Break down more walls between the two sides of
its ad business
As long as Facebook continues to refine post-click tracking,
it will go a long way toward convincing marketers to pay less In May 2012, Facebook began allowing its Ads API partners to
attention to clickthrough rate. place ads in users’ news feeds, something previously reserved for
Premium advertisers. Advertisers can use Facebook ad-technology
firms to place Sponsored Stories ads in the news feed on the
desktop, on mobile devices, or in a combination of the two.
It was a major development toward simplifying the Facebook
ad-buying experience. Said Maldonado of Ybrant Social:
“Premium is an amazing format, but is lacking on detailed
stats, ability to optimize and faster implementation. Allowing
clients to buy [Premium ads] through API access will for sure
be a solution for these three issues.”
“It represents a new opportunity for true premium ad
inventory, with the clearest benefactors being large brand
advertisers,” said Adobe’s Allen. “The Facebook newsfeed is
some of the best real estate on the web: very highly engaged
audience, deep behavioral targeting, very powerful.”
And the drumbeat is getting louder for Facebook to bring
down another wall and allow all Premium ads to be purchased
and placed in an online auction. Facebook has resisted
this idea, seeking instead to position Premium as exclusive
territory for high-paying advertisers willing to commit to a
minimum budget—and to pay on a cost-per-impression
basis instead of the cost-per-click rate that most Marketplace
advertisers use.
However, Facebook is struggling to make the case for
marketers to cough up money for Premium slots, and it has
performance advertisers who eagerly want to break out of the
growing clutter of the right-side column.
Facebook’s Burnett says:
■■ “As we’ve talked about Premium over time, it’s generally been
a big, top-of-the-funnel, brand awareness type push, which has
generally been a longer discussion with bigger marketers who
have a certain calendar and a rhythm to that business. I think


Three Things Facebook Should Do

the point of making things simpler is a good one, and we’re “The past 10 to 12 years of advertising have always been about
always working to try to improve that, and we’ll continue to do real estate—let’s corner off a piece of the website, corner off a
so over time, but it’s been important to have that discussion piece of your mobile app or corner off a piece of video or a pre-
and sort of fall into the rhythm of the business of how most roll,” said Adaptly’s Sethi. “If you look at things like Sponsored
Premium buys are purchased, on- and offline.” Stories, these are ad units that say, ‘We’re going to endemically
take the content that already lives within our environment that
But ad-technology firms say:
consumers have created or that you’ve created as a brand, and
■■ “The problem is that once I have taken the position to buy, promote those as the media that gets attention.’”
say, a one-week campaign on this [Premium] format, if I am
seeing that the results that I am getting are not aligned with
Deliver a consistent message to advertisers
the goal of the campaign, or the ad is underperforming,
there is nothing I can do,” said Ybrant Social’s Maldonado. Facebook has made multiple changes to its ad offerings over
“If my ad is not working, I would toss that ad. I’d look for the years and there is no sign that the experimentation is over.
another alternative in order to align the results of that This frustrates marketers who are used to consistent ad formats
campaign. I can do that with Marketplace ads. Every time and analytics and who want ways to compare ad results from
Facebook competed in formats between Marketplace and Facebook to other forms of advertising, both online and offline.
Premium, Premium lost.” But Facebook has made things even more challenging for
■■ “Where it really makes sense for them to do both and for marketers by using multiple webpages, microsites, blogs and
them to be tracked together—it isn’t currently available— online handbooks to explain its ad offerings. The result is a
is to specifically understand reach and frequency across confusing mishmash of information.
both channels,” said BLiNQ’s Williams. “Right now they are Case in point: Many marketer and agency executives, as well
separated. So you could be running your reach and frequency as the media who follow Facebook, do not understand the
metrics for Premium, but those are not necessarily going to basic differences between Premium ads and Marketplace ads.
overlay with your Marketplace reach and frequency metrics. In addition:
So, a lot of big brands want to know, ‘What exactly are my
■■ Facebook’s “Premium and Marketplace Products” guide
reach and frequency metrics across the entire Facebook
describes over 30 different ad formats, such as the “Page Like
audience?’—not necessarily in these two silos.”
Sponsored Story,” “Page Post (Video)” and “Page Post (Text).”
They may sound self-serving, but these executives’ statements
■■ Otherad-related documents include the “Facebook Ads
have more than a grain of truth. By segregating Premium ads to a
Getting Started Guide,” the “Facebook Ads Optimization
different selling mechanism, one with less flexibility and reporting,
Guide” and “Measuring Success with Ads Manager.”
many of the benefits of Premium are lost.
■■ Awebsite created for the February 2012 Facebook
Prove that adding social features to ads works Marketing Conference has its own set of product guides,
case studies and information for vertical industries.
Facebook in early 2012 began a concerted push to convince
marketers to add social context to their ads. These features ■■ Facebook Studio, aimed at ad agencies, showcases examples

range from adding the name of a friend who has “liked” a of creative pages and paid advertising and includes a directory
brand to turning fans’ comments or a brand’s own wall posts of marketing agencies that work with Facebook.
into ad units dubbed “Sponsored Stories.” As Facebook continues to experiment with new ad products
In early case studies, marketers did see increased clickthrough and tweak existing ones, clearly communicating the changes
and interaction when ads carried social features. TBG Digital and reducing the clutter of guides and help documents will
found in a three-client test that Sponsored Stories ads had a give more marketers a better sense of the site’s possibilities.
46% higher CTR than standard Facebook ads. In addition, the
cost per click was 20% lower and the cost per fan fell 18%.
AdParlor has found that the clickthrough rate of a Sponsored
Story can be as much as 30% to 50% higher and the conversion
rate 20% to 30% higher than other Facebook ad types. “That just
results in cheaper fans,” CEO Hussein Fazal told eMarketer.
The next step for Facebook is to show more results from
Sponsored Stories campaigns and other social ad formats.
These ads are unlike anything that marketers are used to.


eMarketer Interviews
Nikhil Sethi
Who Succeeds with Facebook Ads? Those Who ‘Test Co-Founder
and Learn Quickly’ Adaptly
Interview conducted on May 10, 2012

Grady Burnett
Vice President, Global Marketing Solutions
Facebook
Chris Tuff
Senior Vice President, Director of Earned and
Interview conducted on June 14, 2012
Emerging Media
Spotlight: Jackson Hewitt Boosts Engagement with 22squared
Facebook Marketplace Ads Interview conducted on May 21, 2012

David Koroghlian
Director of Interactive & Social Media
Chad Warren
Senior Manager, Product Marketing, Social Media
Jackson Hewitt
Adobe

Hussein Fazal
CEO
Dave Williams
CEO
AdParlor
BLiNQ Media

Peter Goodman
CEO Related eMarketer Reports
BuyBuddy (a division of Buddy Media)
Brand Advocates: Scaling Social Media Word of Mouth
Facebook and Twitter as Media Platforms: News,
Video, Photos, Music and Games
Matt Lawson
Vice President, Marketing and Partnerships Related Links
Marin Software
Adaptly
Adobe
AdParlor
Facundo Maldonado
Advertiser Perceptions
Vice President, Ybrant Social
BLiNQ Media
Ybrant Digital
Buddy Media
Capstone Investments
Efficient Frontier
Simon Mansell Facebook
CEO
GfK Roper
TBG Digital
iMedia Connection
ITG Investment Research
Marin Software
Tom Rikert PulsePoint
Director of Product Management Social Fresh
Wildfire Interactive TBG Digital
Wildfire Interactive
Ybrant Digital


About eMarketer
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Production Contributors
Nicole Perrin Associate Editorial Director
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Dana Hill Director of Production
Joanne DiCamillo Senior Production Artist
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