NEWS2 October 2012
NEWS2 October 2012
US— Facebook’s head of measurement and insights Brad Smallwood has urged marketers to stop looking at click-through rates (CTR) to measure advertising success and look instead at reach and frequency.
Speaking at the IAB MIXX conference in New York, Smallwood said that advertisers understand that reach, frequency and audience insights can lead to sales, but are too reliant on clicks to evaluate the success of online activity.
“Marketers have demanded metrics and we turned to clicks for a long time to offer this. The click model works well for monitoring direct response, but this is inefficient for categories that are not consumable. The onus is on us to find the right metric for you in this case, so we have been looking at what we can do better and how we can help.”
Smallwood told the audience that its recent partnership with Datalogix has been key to the company identifying new needs for brands who want to understand the return they get for their Facebook investment. The two companies undertook a study of 50 digital campaigns using a new tool that compares ad exposure on Facebook with in-store purchases.
“For us, this is a turning point. We’ve been flying blind and metrics haven’t moved from being focused on CTR as a result. Our 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.”
To support his argument, Smallwood cited research from Nielsen that showed a 0.07% correlation between high click-through rates and actual sales compared to the Datalogix figures on impressions. He said that the Datalogix study found that campaigns that maximised reach had a 70% higher return on investment and by reallocating high-frequency impressions to people seeing too few impressions, you could see a 40% increase in ROI with the same budget. (Facebook has posted a blog with more on this study here).
Smallwood did not make direct reference to the current privacy debates about the Datalogix deal, but stressed that the only information given to Datalogix is that people were exposed to certain marketing messages. He added that Facebook is not receiving any personal consumer information from Datalogix.
One brand who did endorse the Datalogix study findings was Nestlé. Tom Buday, head of marketing and consumer communication at the company, took to the stage after Smallwood, and said that its own studies on brands including Skinny Cow correlated with the social media giant’s latest work.
“Success or failure isn’t dependent on the advertising channel,” Buday said. “It comes down to brand messages. Once advertisers have a quality message and they understand their overall brand health and performance, they can apply it to platforms like Facebook. Message quality is more important than ever because nowadays not only do consumers have more control over the messages they see, they have the means to share whether they love or hate an ad with millions of people – so reach is important. Clicks have very little relevance to evaluating ROI.”