Facebook has always been known for focusing more on product than advertising. While the social networking giant is verging on 1 billion users, it only reported $4 billion in revenues in 2011 – one tenth of Google’s 2011 revenues.
Common criticisms of Facebook’s advertising programs include limited creative options, lack of targeting precision, no mobile support, and generally questionable ROI. The weaknesses of social advertising in general are clear – Facebook users are online to socialize, not shop, and reaching someone through demographic and interest targeting doesn’t carry nearly the same power as keyword or cookie based targeting.
Sponsored Stories for Mobile
Leading up to the IPO, Facebook faced major criticism about their lack of mobile advertising options. Although almost half of Facebook users use the site from a mobile device, there was no way to advertise to these mobile users.
This has now changed – earlier this month, Facebook announced a new mobile ad format called Sponsored Stories for Mobile. Now, advertisers can buy ads specifically on mobile devices, either through the API or the Power Editor.
Early reviews of this new format have been positive. New studies from major FB advertisers TBG Digital, AdParlor, and Spruce Media have shown some amazing performance – an impressive 1.140% click through rate for mobile sponsored stories. That’s a huge figure for display advertising in general, and compared to other Facebook formats, is a massive improvement.
Why are mobile ads working so well? One thought is the mobile sponsored stories are just very well integrated, “organic” looking ads. Users are treating these sponsored stories as actual content, rather than ignoring them as ads. By making ads look like content, and heavily leveraging the social graph to improve relevance, Facebook’s mobile ads product is coming out of the gate looking very strong.
The Facebook Exchange
Another newly-launched advertising initiative, the Facebook exchange will allow 3rd party demand side platforms to show ads to retargeted users. This could be a huge leap forward in Facebook advertising relevance. Retargeting is known to be a very high-ROI format, and compared to the typically very low CTRs of Facebook ads, the Facebook Exchange could offer an unprecedented precision in FB targeting.
How will the system work? Basically, users who visit 3rd party (non-Facebook) websites can be identified with a cookie. When these cookied users browse Facebook, FB will identify them based on the cookies, and allow advertisers to show them specifically relevant ads.
Anyone familiar with traditional retargeting will get the concept right away. Facebook has just become a publisher for advertisers looking to reach retargeted users.
Apart from being a very significant overall improvement, it also represents a shift in the overall purpose of FB advertising. In the past, you could often say that FB ads were very “branding” focused, and generally existed to make users aware of companies, brands, and products.
Retargeting-based advertising, however, is generally more direct-response based. By definition, a retargeted user is already aware of whatever is being marketed, and retargeting usually aims to shift that user from awareness to purchase. Bringing FB ads lower in the funnel is a great technique for improving ROI and making a clear case to advertisers for the value of Facebook advertising.