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David Fischer(left ) oversees
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FACEBOOK'S NEW106 I FORBES DECEMBER 5.2011
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BY ROBERT D. HOF
DECEMBER 5.2011 FORBES I 107
FORBES
Facebook Chief Executive Mark Zuckerbergdoesn't talk much about his company's advertisingbusiness, even when it invents new kinds of adsthat could disrupt a chunk of the $500 billioninfluence industry. So it was up to David Fischer,
who left a star career at Google early last year to run Face-book's advertising business, to make a pilgrimage to the week-long annual confab of marketers in New York in October.
What he showed during his speech was somethingblandly dubbed "Expanded Premium Ad." It's simply a shortpost—"Rolling Stone calls Ides of March 'A big bmisingthriller'"—ti-ansformed into a right-hand-side ad that goes toa targeted audience. "Honestly, it doesn't look that interest-ing," Fischer conceded during his address.
Then he described one small wrinkle: If your fi4end Jimhas clicked the "Like" button back on Columbia Pictures' fanpage, a line of text will pop into the ad saying "Jim Squireslikes Ides of March" alongside his photo. People ai-e twice aslikely to remember an ad if their friend is in it, according to theNielsen Co., and they tend to click on it or share it with friendsmore often thiui they do plain-vanilla display ads. What'smore, their intent to purchase rises fourfold when they see"social" ads like this. Twice the recall. More clicks. Quadruplethe purchase intent More products flying off the retail shelves.These are not uninteresting concepts to marketers.
On the surface it's puzzling that Facebook feels the needto prove itself to Madison Avenue. With an audience of800 million worldwide, the social network will double its adsales this year, to $3.8 billion, according to eMarketer. Butthe way Fischer is pitching to advertisers, with a focus onthe results and not the fiash, is very telling. If Facebook is
'IT'S THE BIGGEST QUESTIONOUR CLIENTS ASK: 1S THAT
A GOOD NUMBER?'"
going to justify its $80 billion private valuation—let alonethe initial public offering widely expected next year—it willhave to show brands how these purposely plain ads will de-liver the goods. "The best ads on Facebook are the ones thatare most consistent with what's already being done onFacebook," says Fischer. Indeed, but for the tiny "spon-sored" label above them, you can hardly tell they're ads.
A lot of brands, however, aren't yet convinced. Facebookads are clicked on only once every 2,000 times they're viewed.Typical banner ads are clicked on twice as often. Googlesearch ads are clicked on 40 times as often. By most accountsbrand spending on Facebook has been focused on getting peo-ple to become tans of tlieir Facebook pages because, well.
everyone else was and they didn't want to appear clueless. Fancampaigns aside, just 12% of marketers and agencies in arecent survey by the ad tech firm Collective thou^t socialmedia such as Facebook works in an ad campaign.
There's so much activity on Facebook that marketersaren't sure what correlates with common advertising gaugessuch as brand awareness and propensity to buy. Facebookfan count? Ad clicks? How many times people shared a poston a brand's Facebook page? "It's the bi^est question ourclients ask: 'Is that a good number?"' says Sarah Hofstetter,who as senior vice president of emerging media and brandstrategy at the digital ad agency 360i helps companies suchas Coca-Cola and Kraft manage marketing on Facebook.
To make its numbers Facebook is crunching them.Dozens of data geeks are hunkered down in a nondescriptbuilding nicknamed "1050" for its address on Page MillRoad in Palo Alto, Calif They're mining the 250 millionphotos shared and the 100 million likes per day. They'relooking for clues as to which kinds of ads and other market-ing work best on this new canvas—and how it all compareswith other media. The overriding goal, says Brad Small-wood, Facebook's head of measurement and insights: "Wewant marketers to know that when they invest in Facebookand in online in general, they're going to see measurable im-pact in the same way they know TV works."
Social media offers tantalizing new possibilities for get-dng consumers' attention in ways that are strikingly differ-ent fi-om search and display ads, the two dominant forms ofonline advertising. Those older forms are, to vaiying de-grees, aimed at prompting immediate or near-term transac-tions, but the biggest ad spenders want to create a long-term affinity for their soap, cars or beer. Most products arestill bought in physical stores well after the ad was served.That's why marketers still love TV, where they can tell theirstories in a setting where people are relaxed and receptive.
Television didn't take off as an ad medium until it movedfrom ads showing people reading a radio script to forms ofadvertising that fit the medium. Facebook needs to find thesocial media equivalent of the 30-second spot. It's startingto do so by converting the primary gesture of socialmedia—sharing—into something potentially even better forbranding than TV ads: a supercharged version of word ofmouth. It's the most valuable form of marketing but toughto build quickly and even tougher to control.
Facebook demolishes those limitations. People have anaverage of 130 Facebook fi-iends, so when they "Like" abrand that endorsement spreads instantly to the news feedsof many of those friends—who then may spread it further totheir friends, potentially building to millions of people in afiash. Mai-s Chocolate North America, for instance, seededdemand before last yeai-'s launch of M&M's Pretzel by offer-ing samples through a virtual vending machine to 40,000
108 I FORBES DECEMBER 5,2011
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fans, who each could spread the offer to two of their friends.In less than 48 hours 120,000 samples fiew out the door.
Last month, based on the work of its data teams, Facebookinti'oduced a series of new metrics that gives a marketer adashboard for word of mouth. A new measure called "PeopleTalking About This" counts the number who have liked apage, shared a post or taken other actions involving the brandin the past v\'eek. Marketers can also see potential reach (howmany friends of finends could fwtentially see a brand's post)and actual reach (the number of people who did see the post).
Most of these impressions are people seeing free brand mes-sages in their news feeds, eitlier fit)m the companies they'veliked or from their fHends who did die same. If tliis unpaidmedia works so weü, why should brands pay for ads at all?
"I don't think the big opportunity [on Facebook] is a lotof advertising," says Randall Brown, Gatorade's global direc-tor of digital engagement. He uses Facebook mostly to bol-ster the brand connection with sports nutrition by monitor-ing conversations. In one case a Gatorade television ad wasprompting people on Facebook to fixate on the word "swag-ger" in the ad's voice-over, diverting attention from the corebrand message. So rather than mnning ads on Facebook,Gatorade simply used it to help edit the TV ad.
In anticipation of such shrug-offs, Facebook's researcherscame up with data showing that ads are crucial for goosingthe viral spread of messages from and about brands. In earlySeptember British luxury fashion brand Burberry ran a typeof Facebook ad called a "Sponsored Story," which converts a
IF UNPAID MEDIA WORKS SOWELL O N FACEBOOK, WHYSHOULD BRANDS BUY ADS?
friend's like or similar actions unaltered into a paid ad on theright side of the Facebook page. The reach of Burberry's pageposts immediately rose from well under 1 million uniqueusers to 3 million, then sank back down after the ads stopped.And Facebook says when Sponsored Stories are followed by a"social ad," which are paid marketing messages such as "Jilland three of your other friends like Burberry," the brand getsUvice as many clicks, likes and comments.
What advertisers really want fi-om Web publishers areratings for display-ad campaigns that are similar to thoseused in television ad campaigns. Until recently Web pub-lishers have declined, insisting that they offer more measur-able stats such as clicks. Smallwood, a former Yalioo adexec, realized after he joined Facebook three years ago thatthe company was in a unique position to bridge that gap.Unlike TV or radio, Facebook has highly accurate demo-
SOCIAL CLIMBERFACEBOOK TRAILS FAR BEHIND BOTH TELEVISION AND GOOGLE INAD REVENUES, BUT IT'S GROWING FAR FASTER THAN EITHER.
TELEVISION
ADSPENDING
2011
$36.9 BiL
$3 .8 BIL
$60.5 BiL
REVENUEGROWTH
RATE
24.5%
104%
2.5%
AVERAGE COSTPER THOUSAND
IMPRESSIONS(CPM)
N/A1
$3.80
$14GOOGLE ^ARCH ADS ARE SOLO 8Y THE ŒICK NOT CPM, SOURCES. THOMSON FINANCIAL EMAPKfTER, MEDIA ÛV7MM/CS
graphic data about its users. And because so few peopleclick on Facebook ads compared with publishers' websites,Facebook was keenly motivated to find alternative metricsto measure the real impact of social activity.
Smallwood started talking with Nielsen last year aboutcreating a system to rate online ad reach in gross ratingpoints, or GRPs, which multiply the size of the audience bythe number of times the audience sees the brand. Althoughthe idea was not limited to ads in social media, Facebook'sdata were instrumental in providing accurate demographicdata similar to Nielsen's TV panels.
The system, called Online Campaign Ratings, launchedin August, so the results are still uncertain, but 18 of the top25 advertisers have run more than 120 campaigns using it"It gives the client the ability to compare the reach of onlineand the reach of TV," says Steve Hasker, Nielsen's presidentof media products and advertiser solutions. Not least, Face-book is working with Nielsen to scale up a service calledBrandEffect. Similar to what Nielsen does with TV viewers,BrandEffect polls people on Facebook who saw a particularad and measures changes in brand recognition and pur-chase consideration.
Facebook can succeed wildly in online advertising if itcan convince Madison Avenue to look beyond its ads' lackof creative sizzle. Facebook ads work best, the company'sresearch indicates, if they're used in conjunction with morecreative brand efforts on fan pages and branded apps. Butthat's a tough sell to an industry whose creative infrastruc-ture is still set up around the ad. "Facebook needs to comeup with something more beautiful," says Coiy Treffiletti,cofounder of digital marketing firm Amplify Social.
Even Facebook concedes as much. Closing Facebook'sAd Week presentation with Fischer, Mark D'Arcy, a formerTime Warner ad exec who's now Facebook's director ofglobal creative solutions, said of Facebook ads, "We're sortof like 1951 television."
To put it another way, Facebook still needs to marry itssocial ad science with the ad industry's creative dark arts.
n o I FORBES DECEMBER 5.2011
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