Facebook COO Sheryl Sandberg is busy pitching Wall Street and Madison Avenue on FB advertising, calling it "incredibly effective" in her first post-IPO interviews. She's not the only Facebook exec defending the efficacy of ad campaigns using the social graph, even as the FTC raises privacy concerns about FB's new partnership with Datalogix for ad metrics, and social ad skeptic GM challenged the site's analytics.
With its stock down 43% since its May IPO, new initiatives to increase revenue including mobile ads and now the Datalogix union are attempts by the social behemoth to wean marketers off clicks, which is the key metric pitched by Google. Instead, Facebook is focusing not on the click-through rate (CTR) but on the number of times a user sees an ad (and whether the campaign has reached its target audience) as more effective metrics to track in marketing.
Indeed, Facebook reports that fewer than 1% of in-store sales tied to brand campaigns come from people who clicked on an ad.
"We ended up in this world where the click is king," said Brad Smallwood, Facebook's head of measurement and insights, presenting at the IAB Mixx conference during Advertising Week in New York, as quoted by Reuters. "Using the Datalogix tool, we'll able to understand what that sweet spot is," adding that this allows Facebook to control how often each user sees the ad.
Breaking the habit of a click-centric focus raises concern from privacy advocates about not obtaining consent from users to share their personal information, but Smallwood countered on Reuters, that “the only information given to Datalogix is that people were exposed to certain marketing messages, adding that Facebook is not receiving any personal consumer information from Datalogix.”
"Advertisers have been increasingly vocal about concerns regarding effectiveness of Facebook," commented Pivotal Research Group analyst Brian Wieser in something of an understatement to Reuters.
“It has long been noted that Facebook ads really just aren’t as effective in generating sales as those on, say, Google,” writes Tim Worstall for Forbes. “One reason put forward for this is that on Facebook the ads are being shown to people as they socialise. On Google they’re being shown to people as they search for something, quite possibly search for something they wish to purchase right now.”
An interesting side-bar test of this comes with U.S. Election Day looming and the biggest social political campaigning to date.
AllFacebook.com notes that President Barack Obama leads Republican contender Mitt Romney in Facebook fan page likes, while Romney leads Obama in the people talking about this metric, and VP nominee Paul Ryan is outpacing VP Joe Biden in both fan page likes and people talking. All they care about, of course, is whether they'll click with voters on November 6th.