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Clicks Don’t Matter According to Facebook

If you had invested in Facebook, Inc. at the time of its IPO, you would probably not be reading this article now but rather crying yourself to sleep; with a (so far) return of -50% it turned out to be a bad investment indeed1. And with General Motors stopping their ad campaign on the website, the worst is yet to come. However, Facebook claims the marketing industry’s obsession with impressions and CTR does not accurately represent the full impact of its marketing campaign.

Conversion rates for Facebook ads vary greatly: 18% for automotive, 45% for dating, 58% for consumer goods, 43% for media, and 40% for travel2. The differences in the sector numbers can be explained by a multitude of factors, like types of people who spend time on Facebook, their purchasing power and demographic group, and correlation between social media (an entertainment tool) and purchase price. For example, you wouldn’t consider buying an automobile based only on a Facebook ad, hence the low conversion rate.

However, the social mediagiant rightfully claims that, apart from e-commerce sales, impressions and CTR cannot be connected to higher in-store purchases and higher customer demand. Quite a few products are still sold predominantly in brick-and-mortar stores, and for them, clicks might not be an adequate measure of success.

Click through rates were popularized by Google’s advertising program, as it enabled marketers to quickly analyze their strategies and amend them for the best effect. Used in the context of online promotion and online sales, these presented a trustworthy estimate of the cost per lead, but outside this context, their reliability diminishes.

Facebook further argues that clicks are a short-term marketing strategy in order to simply sell a product, and have a limited effect on the long-term brand popularity and brand recognition. In the near future, it will aim to implement additional functionality that will cross reference consumption patterns and user preferences for a better estimate of the cost of marketing3.

For Facebook, brand advertising and marketing should focus on maintaining the public interest in the company’s products and sustaining a positive image of services and product quality. These objectives can be achieved by altering the number of times and intervals that a user sees an advertisement. These techniques involve carefully and equally distributing a company’s impressions across their target group so the ad reaches a maximum number of clients. This will undoubtedly lower the cost of marketing as it increases the effectiveness of ads as well as the likelihood of a user purchasing the product.

Evaluate Facebook’s proposition critically. One could argue that it is a desperate move in order to push the share price up and bring back revenue-generating advertisers. Nonetheless, it is a very reasonable proposition because CTR rates do not automatically mean more sales, and this is even truer for big established brands. Alternatively, the terms and conditions of a seemingly enticing offer may put off many users after they have clicked on the ad banner.

Seeing an advertisement a couple of times is more likely to spark your curiosity and subconsciously improve your perception of the brand’s reputation. Furthermore, if the different ads focused on different aspects or characteristics of the company’s products, this would enable marketers to paint a full (and enthralling) picture of wondrous products. It would further optimize marketing budgets if ad impressions are evenly spread out amongst users.

However, without a concrete number (much like the profit figure with companies), marketers would have no easy way of comparing ad effectiveness across different platforms. They would not be able to quantify any intangible improvements in public opinion.

References:

  1. http://uk.finance.yahoo.com/echarts?s=FB#symbol=fb;range=6m;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
  2. http://www.marketingcharts.com/direct/facebook-ad-conversion-rates-best-for-consumer-goods-industry-21741/experian-facebook-ad-conversion-rate-by-industry-april2012jpg/
  3. http://uk.news.yahoo.com/facebooks-pitch-brand-advertisers-forget-clicks-120227145–sector.html

 


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