FEATURE19 November 2012

Facebook and the quest for ROI

Joe Fernandez talks to Facebook’s Kathy Dykeman about the efforts the social network is going to to prove that social advertising has a real-world impact.

Valued at $104bn and with over a billion active users worldwide, Facebook is massive. Yet as advertisers put more money and effort into marketing on the site, the social network needs increasingly sophisticated ways to prove its worth.

The person in charge of identifying these measures across Europe, Middle East and North African markets is Kathy Dykeman. From the firm’s London office, she works with Facebook’s US-based head of measurement and insights Brad Smallwood.

Dykeman is no stranger to the market research industry. Before joining Facebook she worked at Harris Interactive UK and had a long career in opinion polling stateside. Her attitude towards Facebook’s measurement challenge is straightforward: “It comes down to three Rs – reach, resonance and reaction. By focusing on sentiments on the site, you can maximise the opportunities that follow,” she says.

Model return

Working with a dedicated research and analytics team, Dykeman encourages advertisers to take an econometric modelling approach to their activity to really determine the ROI of online activity. “Such modelling gives you a deep understanding of how your advertising mix contributes to your profitability. It allows you to identify real opportunities for significant improvements in your ROI – by eliminating inefficient channels and by finding opportunities to increase revenues,” she says.

Monitoring real-time performance has been an essential component of her work with brands. The firm’s latest ad platform, Facebook Exchange, a real-time bidding technology, now offers instantaneous metrics. It allows marketers to automatically purchase targeted ads across a wide network of inventory using demand-side platforms and to adapt their strategy as and when they need to.

Dykeman says the system helps improve outcomes. “We encourage brands to determine campaign objectives first and then show them how to track it in real-time and adapt the content if it isn’t working.”

Facebook: ROI Success Stories

  • Ben & Jerry’s: Using Facebook tools and sponsored stories format helped achieve a 3x ROI based on a Nielsen Media Mix Analysis study. Katie O’Brien, global digital marketing manager explained: “For every $1 we spent on Facebook, it returned $3 in incremental sales.”
  • Kit Kat UK: Similar research for Kit Kat also found that Facebook produced the highest ROI of all media channels, making £1.34 in return for every £1 invested. Facebook was attributable for 11% of sales. Rob Marsh, assistant brand manager, said this was due to its “social dimension continuing the conversation with our fans and their friends in engaging ways.”
  • Nutella Germany: Research by GfK Deutschland on Christmas activity found that 15% of sales of Nutella over Christmas were attributable to Facebook and 3.8m new viewers saw the campaign on Facebook first – a 29% exclusive reach. Angela Kim, new media manager at Ferrero, said it “demonstrated that Facebook lifts sales for FMCGs in bricks and mortar stores.”
  • ASOS: A ComScore study for the fashion e-tailer found that Facebook campaigns achieved 130% uplift in sales because they exposed the brand to 28.5 million friends of the company’s 636,000 fans (at the time). Fiona Marshall, head of marketing womenswear, said the ROI was evident throught the “substantial uplift”.
  • Clinique Turkey: Measurements on Facebook activity complementing TV ads found that the site contributed to a 15% increase in sales. Firat Mercer, brand manager, said the campaign was “exponentially accentuated with a relevant and creative Facebook app combined with Facebook ads.”

Sales story

We’ve been flying blind and metrics haven’t moved from being focused on click-through rates as a result

New products are also helping with quantifying advertising ROI on the site. Facebook recently struck a partnership with Datalogix “to help advertisers understand how Facebook ads impact business outcomes, such as brand communication KPIs and product sales”.

The partnership is designed to help advertisers connect exposure to an ad on Facebook with in-store purchases. “For us, this is a turning point,” said Smallwood, at the recent IAB MIXX conference in New York. “We’ve been flying blind and metrics haven’t moved from being focused on click-through rates as a result. A study with Datalogix has shown us that this isn’t what we should be focusing on.

“Clicks are great, but it’s impressions that create value. In 99% of the campaigns we evaluated, sales generated from online branding ad campaigns were from people that saw, but did not interact with, ads. Just like TV advertising, it is reach that drives revenue for online brand marketers.”

When advertisers worked to maximise reach, the study found that advertisers had approximately 70% higher return-on-investment. And by reallocating high frequency impressions to people seeing too few impressions, there could be a 40% increase in ROI with the same budget.

How The Datalogix deal works

Alex Jeffries, head of communications strategy at LBi, explains the mechanics behind Datalogix and Facebook’s relationship: “Datalogix is a US-based data-mining company which, via the data it collects from store loyalty programmes, claims to hold a dataset including almost every US household and more than $1 trillion in consumer transactions.

“The Facebook deal works like this: Datalogix IDs are first associated with individual Facebook members by matching a list of Datalogix members, containing encrypted personal data, to Facebook’s member database. Facebook advertisers are then are able to run advertising and measure whether an exposed group of Datalogix members have a greater propensity to buy their product than a control group.”

The Datalogix tool is expected to reach the UK next. Dykeman says: “A focus of Datalogix’s research will be to find the common themes among the campaigns that work, so Facebook clients can apply the principles for successful Facebook marketing activity to markets around the globe.”

However, the partnership is not without its critics. Two privacy watchdogs have filed a joint letter with the Federal Trade Commission alleging that Facebook’s deal with Datalogix may infringe on an earlier commitment made by Facebook to be clear about how it handles user data. Yet Facebook stresses that it has “taken great care to make sure that we measure the effectiveness of ads without compromising the commitments we have made onprivacy”.

For Dykeman, the partnership benefits are twofold – “advertisers can show that their ad spend is generating ROI off Facebook beyond simple clicks, and they can apply insights from current campaign results for greater ROI later”.

This might help to dispel concerns found in an AP-CNBC poll, suggesting 57% of Facebook users never click Facebook ads or other sponsored content and another 26% said they hardly ever engaged in such activity.

Dykeman says: “While clicks are a great metric for direct response advertisers, brand marketers online should be optimising for impressions, reach and frequency. These are the crucial drivers of ROI.”

Preferred partners

As Facebook tries to build confidence in its advertising ecosystem and the insights offered by its partner companies, it has created a ‘badge of honour’ initiative known as the Strategic Preferred Marketing Developer (SPMD) distinction.Initial firms to be recognised for best-practice in insights are Adobe, AdParlor, GraphEffect, Salesforce and 77 Agency.

I believe that at the moment the market is plagued by too many models that conflict with each other and work to different metrics. We need to take a step back and look at what’s actually important for each client to do, so that the playing field is more level.

Dykeman would like to see other research businesses added if they can meet the “rigorous selection process… based on shared values, strategic alignment, and growth potential with Facebook”. Currently this seems unlikely. Dykeman says that marketing platforms have advanced exponentially but measurement methodologies have not kept pace. Facebook is currently reviewing entries from a competition with the Advertising Research Foundation to develop ideas for tying social marketing back to business metrics in ways that allow for cross-platform comparability globally.

Dykeman says the problem has stemmed from too many firms working on metrics independently. “I believe that at the moment the market is plagued by too many models that conflict with each other and work to different metrics. We need to take a step back and look at what’s actually important for each client to do, so that the playing field is more level.”

She praised Nielsen’s Online Campaign Ratings initiative, which was launched in the US last year and in the UK last month, as well as studies by ComScore (both of whom Facebook partners) as having helped to develop a more consistent approach to measurements. But she said not enough firms are “actively tracking real-time trends and helping brands adapt to behavioural patterns to get the best possible ROI across different platforms”.

It is evident that Facebook is taking research seriously as it tries to prove its worth – both to advertisers and, by extension, its shareholders. Its efforts at creating research platforms to provide a more holistic view of how advertising works should only strengthen its hand.

Kathy Dykeman CV

  • 2010-to date: EMEA measurement solutions group lead, Facebook
  • 2008-2010: Director, Harris Interactive Europe
  • 2005-2008: VP, high technology practice, Socratic Technologies
  • 2002-2005: Director, Knowledge Networks
  • 1995-2002: Exit poll operations manager, Voter News Service