This is an excellent article that really nails down the secrets to acquiring customers through Facebook and the costs associated to do this.
Kate Harrison, Contributor
This week I wanted to share more insights from the Performance Marketing Insights conference
in New York – a “two-day content-led performance marketing conference aimed at senior decision makers & marketing professionals from advertisers, publishers, networks, agencies and tech companies.”
Speaker: Marc Grabowski. COO of Nanigans. Marc has managed over $200,000,000 worth of ad spending.
Focus: “In October 2012, Facebook’s newsroom announced that the social networking site had topped 1 billion users. The huge traffic volume and growing spend on Facebook advertising won’t have gone unnoticed. Web stakeholders are looking to target different demographics within Facebook’s opportunistic user base. Whilst the potential to reach new eyeballs through Facebook ads isn’t a new concept, optimizing your return on ad spend by gaining lifetime value from new customer acquisition encompasses a need to move away from pure CPA marketing. By considering ad inventory, sponsored stories, mobile app adverts and Facebook exchange, you can create a more efficient Facebook acquisition strategy.”
Marc Grabowski and Ken Mohring from Nanigans
Key Points:
1. Facebook fan pages are not what they used to be.
As an advertiser on Facebook you have two choices. You can buy ads in the side bar or create an ad as a post and sponsor it. Only 16% of posts organically end up in your fans’ newsfeeds so if you don’t pay/sponsor your posts, they are not seen. The advantage of sponsored posts is that the images are much larger and the ad is interspersed with content — so it is more likely to be read. The CPMs for sponsored ads are much higher than side bar ads: $3.50/ $4.50 CPM for the large format vs. the old sidebar format, which was about $.050 CPM, but the new format is performing better. Marc says he is seeing14% higher ROI, 3.3 click-through rate (CTR), and 46% lower costs overall.
2. There are two ways to buy ads on Facebook
1. API = Audience (native Facebook) which is based on the users defined interests. Using the API you can reach people who like yoga, organic gardening and are engaged to be married in the New York area. The API allows you to buy large target audiences when you clearly identify parameters.
2. FBX = Facebook exchange. Real time bidding basis. FBX now makes up13% of the 15 billion dollar display ad market. Real time bidding is growing quickly, and is projected to grow to 28% by 2016 or a projected $7billion in revenues. The big difference is that FBX lets you buy impression by impression. If you have site level data or third party data, you can bid a specific CPM per user. However, FBX currently only works for sidebar (small format) ads.
3. CPA is not what you should be measuring.
Marc says most companies are focused on the cost-per-acquisition (CPA) of a customer instead of the life-time-value (LTV) of customers. His point is that there are different types of customers — and you should be willing to pay more for a customer who will yield more in the longterm for your company. The illustration he provided of this principle was a t-shirt store selling graphic Ts. A teenager who might buy a single shirt is worth less than a mom who might buy shirts for her family and friends. By understanding your customers and how they segment, you can afford to pay more for targeted acquisition, via API, and get more out of retargeting the most valuable subsets of potential customers.
Paying a flat CPA has other drawbacks, too. In high demand times such as the last week of the quarter, during Thanksgiving, etc. , supply becomes constrained. If you pay flat CPA you are less competitive than if your budget is elastic. Instead take a look at the revenue generated from each cohort of customers as related to the price you pay for them. How fast are your cohorts maturing? How much can you expect them to spend overall? You may be able to afford higher CPAs than you thought for certain groups that are particularly good targets for your business offerings.
4. Re-targeting Facebook fans: API wins.
Marc did a study to find out what happens when you retarget Facebook fans visiting your site from different types of ads. It was a 4-month study that generated $4.2 million in revenue for the company in question, so it offered a robust data set. While only an N of 1, the company saw 89% higher revenue per user if the user originally discovered the company’s website via API then if they were converted from FBX. Once you know who they are, API lets you remarket to users that have significantly greater lifetime value for your site than one time shoppers.
5. How to test.
Someone in the audience asked what the appropriate first test on a Facebook spend would be. Marc said it depends on how many segments you are trying to test. He suggests creating a three -phase plan for ads and running them to 95% confidence (there is a complicated equation buyers can use to figure out how many people this is per segment).
Phase 1: Start 6 ads. Optimize them around performance. Get to 95% “significant impressions. “
Phase 2: Move 4 test ads to Phase 2. Run six more in phase 1.
Phase 3: Whittle down test results to find the best two.
6. Running ads to your own fans — yes or no?
When you are running Facebook ads, unless you can track how many fans become purchasers, Marc says to forget your fans. He prefers building a custom audience by bringing your CRM data to Facebook and building anaffinity model (a.k.a., creating a base that looks like your current customers but have not purchased from you yet). You can do this through the power editor tool.
7. Strategies that sell.
As Country Outfitters has shown us, contests work well. Product feeds with FBX also work well. Remarketing to users with “dynamic creative” using FBX is another good strategy.
Popular Country Outfitters Ad on Facebook
If you have not heard about these — and I had not — this is a great new tool for advertisers. If you want to use sponsored posts, but don’t want to have them show up in your user feed, you can now create dark page posts. This keeps clutter off your feed and lets you create ads targeted just to specific demographics.
Summary
Testing Facebook ads can be expensive. Based on Marc’s experience, to be effective you need a $30,000 minimum spend. If you have the cash, and the user data to make it worthwhile, Nanigans has created the calculator to help you get to 95% confidence and the experience to help you craft campaigns that pay. While not the right fit for a lot of start-ups, serious Facebook advertising seems like a great option for companies with good customer data and the cash to invest in growth.
Check out my latest e-book entitled: "Social Media Marketing in Agri-Foods: Endless Profit and Painless Gain".
The book is available on Amazon and Kindle for $4.99 USD. Visit amazon/Kindle to order now:
http://www.amazon.ca/Social-Media-Marketing-Agri-Foods-ebook/dp/B00C42OB3E/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1364756966&sr=1-1
Written by Bruce MacDonald, a 30 year veteran of the Agri-food industry, in "Social Media Marketing in Agri-Foods: Endless Profit and Painless Gain", Bruce applies his background and expertise in Agri-foods and social media to the latest trends, tools and methodologies needed to craft a successful on-line campaign. While the book focuses on the Agri-food market specifically, I believe that many of the points Bruce makes are equally applicable to most other industries.
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