Efficient Frontier Insights

Adobe: Only Facebook PMD Awarded all Four APIs, including Ads

Facebook announced its Preferred Marketing Developer (PMD) Program today and Adobe is proud to have been the only partner awarded all four API badges– pages, apps, ads and insights.

Multi-channel advertising technology from Efficient Frontier and Adobe Social contributes support through the Digital Marketing Suite for the Ads API which includes:  advanced ad cre­ation, cam­paign man­age­ment and report­ing capabilities.  Adobe is currently the only provider to integrate ‘sponsored story creation’ within the Facebook publishing workflow. We also pro­vide not just large-scale ad buy­ing and ad cam­paign man­age­ment on Face­book, but we are also the only PMD to pro­vide auto­mated three-fold ad opti­miza­tion:

1) Opti­mize the cre­ative in the ad so the con­tent is the most impact­ful; 2) Opti­mize the audi­ence seg­ments that get served the ad ensur­ing the right eye­balls see it; 3) Opti­mize bid­ding using pre­dic­tive mod­el­ing algo­rithms designed to increase con­ver­sions while low­er­ing the cost per click. This three-fold opti­miza­tion strat­egy helps you get the biggest bang for your buck.

We're proud to say that Adobe enables cross-channel attri­bu­tion of social against other dig­i­tal adver­tis­ing chan­nels – search and dis­play – because our tech­nol­ogy man­ages all bid­d­a­ble dig­i­tal ad for­mats. Adobe is lit­er­ally help­ing you intel­li­gently spend your ad dol­lars where it makes the most sense.

For a complete overview of Adobe’s support for all four of the APIs, please see the post by my colleague, Lawrence Mak, on the Adobe Digital Marketing blog.

 -Christine Beury, Marketing Principal - Campaigns
Ad and Social Marketing Solutions, Adobe

 

Efficient Frontier & Context Optional release first joint quarterly State of Digital Marketing Report for Q2 2011

Today marks an important milestone for Efficient Frontier and Context Optional with the release of our first joint quarterly State of Digital Marketing Report for Q2 2011. While Efficient Frontier’s quarterly reports have long been a trusted source of data in the digital marketing industry, we are excited to add even more valuable insights to our social media analysis, using data gleaned from Efficient Frontier’s clients as well as Context Optional’s client index representing more than 15 advertisers and 20 million fans from a multitude of verticals including retail, entertainment, CPG and finance.

Many key findings this quarter indicated how competitive Facebook is becoming in the digital marketing sphere, and show that the longer brands take to engage on Facebook, the more it will cost them in the long run. We also found that advertisers are focusing more on Return on Investment (ROI) than on volume, which resulted in slower growth compared to Q1 of last year. In addition, Bing/Yahoo’s ROI continues to improve, resulting in them gaining a percentage of Google’s coveted spend share. 

Key highlights in the Q2 report include:

• Search spend growth slowed to 8%, down from 17% year on year in Q1 of last year. We believe this is due to advertisers focusing on ROI instead of volume, as well the slower than expected economic recovery.
• Facebook advertising continues to get more competitive, with CPCs increasing 22% from Q1. This means that the longer brands wait to engage consumers on Facebook, the more expensive it will become to acquire fans.
• Brands are increasingly focused on fan acquisition and engagement on Facebook. Between October 2010 and 2011, brands in our index are on track to double their Facebook fans. Consumers on Facebook are also increasing their engagement with brands. Our analysis reveals that one post made by a brand leads to 100 comments from consumers on average.
• Bing/Yahoo! gained 3.4% points of spend share from Google since Q4.

For the 2011 outlook, we predict:

• Facebook CPCs will continue to rise at a double-digit pace, and as a result, brands should not waste any time increasing their understanding and use of the channel, acquiring new fans and exploiting new ad formats such as Sponsored Stories.
• Continued testing and investment in Facebook will see advertisers evaluate and likely increase their spend. Looking ahead, we believe that advertising dollars will shift from offline media to search, Facebook and display. While we believe all online advertising channels will continue to grow, the Facebook channel will show the strongest growth in the months ahead.
• Bing/Yahoo! will benefit if ROI improvements continue.

To get the full story, download our State of Digital Marketing Report for Q2 2011.

Dr Siddharth Shah
Sr. Director, Business Analytics

 

 

Efficient Frontier's perspective on the Facebook ad marketplace on the Wedbush conference call

Yesterday, Justin Merickel, our VP of Marketing and New Product Development, joined  Lou Kerner of Wedbush for the call, “Facebook: The State of the State.” Justin kicked off the call and was followed by representatives from Epic Social, 8th Bridge, and Crowdstar. The speakers focused on current climate of Facebook advertising, video, and gaming, and looked to the future of Facebook as it becomes an even more valuable vehicle for online marketers.

Check out the presentation here. Special thanks to Lou for hosting.

http://www.slideshare.net/loukerner/industry-call-20110629

 

Building your Facebook fan base: Tips for CMOs

Roger: "So do you like me or like-like me?"

JWoww: "Like-like."

-Jersey Shore

JWoww seriously digs Roger; she “like-likes” him. A “like” would not have sufficed to communicate her intent -- something more had to be said. That is why Roger asked for clarification. It is this basic insight that CMOs have to understand if they want their Facebook marketing campaigns to succeed -- that not all “likes” are created equal.

There are five types of “likes” in the Facebook eco-system: 

TYPE OF “LIKE”	HAPPENS WHEN A USER CLICKS ON…
Fan page “like”	the like button on your fan page
An ad “like”	the like button on your Facebook ad
An app “like”	the like button in your Facebook app
An offsite “like”	the like button on your own web property
A comment “like”	the like on a Facebook comment

In all but the last case, the advertiser acquires a fan, which is reflected as a number on the fan page. And while the virtues of acquiring a fan have been discussed in detail on multiple forums, websites and in the blogosphere, it still begs the basic question: how many of these fans like you and how many really like you, eg “like-like” you ?

It is important to understand the nuances of intent between these “likes.” While someone “liking” an ad makes them a fan just like a person who “likes” your fan page, the value to your brand is arguably lower. An app liker might like your app, but do they like your business?

I am not arguing against “like” acquisition campaigns. In fact, I am firmly in the camp that believes in the value of “likes” and have seen several brands do a great job at acquiring, managing and communicating with their fans by following this strategy. The fans return the favor by becoming a part of the brand awareness consciousness and show a strong propensity to buy from the brand.

Well-thought-out Facebook marketing plans are now crucial. Understanding how to successfully deploy a “like” campaign is a vital aspect of this. I have seen marketing strategies successfully build a fan base of 5 million users seemingly overnight. It’s a great goal -- but wouldn’t you want to make sure these fans truly like your brand, eg “like-like” your brand?  The ones who really want to engage with you, the ones who will advocate your brand to their friends, the ones with a greater likelihood to buy your products and hence will justify your Facebook marketing budget in the future.

What can CMOs do when building a brand strategy?

1. Ask the hard questions first. 

-What is the goal of my Facebook marketing campaign?

-Why should I build this big fan base? 

-What value will I get out of it?

-How will I convince my bosses to give me a Facebook budget? (Remember, you need an initial  budget to advertise, build apps as well as an ongoing budget to engage with your growing fan base)

2. Build an execution strategy.

-How will I acquire fans?  Organically or with a combination of Facebook advertising?

-Shall I build an app ? What will my app do?

-Who will run my PR and brand engagement efforts once my fan base is built?

-How will I incentivize my users to engage with my brand? What offers and promotions will I use?

3. Figure out who will do it.

-Will I run this program internally or will I outsource it?

-Does my vendor have an integrated fan engagement and advertising platform?

These questions are difficult to answer and open-ended. However, by posing them I hope to inspire you to build a fan base that not just “like-likes” your brand but loves it!

Dr. Siddharth Shah
Sr. Director, Business Analytics

 

Sponsored Stories: Adding Efficient Scale to Facebook Campaigns

Our purchase decisions are strongly influenced by what our friends like and recommend. The research to prove this out is available in droves. The influence that friends have on our purchase decisions is one of the primary attraction points for Facebook’s Sponsored Story ads -- ads that derive content directly from friends’ interactions with a brand’s Facebook presence (page, app, place, domain). 

Facebook’s new Sponsored Story advertisements promise enhanced influence via the explicit endorsement of friends. But do they deliver? As we analyzed preliminary advertiser data from Sponsored Story ads, we felt validated by some of the results but were surprised by some others.

Sponsored Story ads vs. Conventional Object Ads

When we looked at the Sponsored Story and object ad data for a set of our clients over a period of four weeks, we found that Sponsored Story ads had a 39% lower CTR (click through rate) than object ads. At first glance, this is counterintuitive (and surprising). We expected users to respond with greater propensity to ads for brands that their friends liked. Hence, intuitively CTRs should be higher for sponsored story ads and not lower. A deeper look at the data unveiled the reasons for lower CTRs.

When we looked at unique CTRs, the Sponsored Story CTRs were 3.4 times that of object ads. In other words, CTRs on Sponsored Stories appear lower because the same users have been ad served many more times in the time period. This is further validated when we look at the average impressions per user. The Sponsored Story ads were ad served more than 10 times that of their object ad counterparts. 

Finally, and most importantly, we were able to drive a 22% lower Cost per Acquisition on Sponsored Story ads vs. object ads in this time period.

Sponsored Story vs. Object Ads: Key Metric Share

How much incremental volume can advertisers drive from Sponsored Story ads economically? As we optimized Facebook campaigns of our clients on both ad formats, we found that we could drive about 33% of conversions from Sponsored Story ads spending 28% of our total budget. What’s more, the impression share and click share were 49% and 25% respectively. Thus Sponsored Story ads are an economical way to gain impression share while at the same time an easy way for advertisers to scale their conversion volume by about 30%.

 
Should you advertise in the Sponsored Story format?

We are optimistic about Sponsored Story ads. Our enthusiasm is echoed by Facebook, which recently unveiled three new Sponsored Story formats, bringing the total to seven. Advertisers would be well advised to try Sponsored Story ads to leverage its three key benefits:

(1)   It’s an economical way to scale Facebook campaigns.

(2)   It’s an easy way of gaining impressions on the Facebook platform.

(3)   It’s a great way to leverage the explicit endorsement of a “like.”

Dr. Siddharth Shah
Sr. Director, Business Analytics

 

Facebook 101 – Images/Ads

In case you haven’t heard, you can advertise on Facebook now. Great! So how do you get started? Here are some things we have learned so far (through our own testing, as well as conversations with Facebook reps and engineers). It’s not an exact science yet, and I wouldn’t presume to define it as “best practices,” but it’s a good place to start. Enjoy!

Image Size
Our recommendation is to use a 110 X 80 or 85 X 62 image in your ads. Facebook accepts various sizes, but they are then resized down to the 110 X 80 size, and the image can become foggy or distorted. Therefore we recommend the 110 X 80 size so your image will appear crisp and clean.

Image Quality
There are three main recommendations in regards to which images to use. The first is to try not to use white space in the image. Since the background on Facebook is white, an image with a white background will blend into it, whereas an image with a dark background will be distinguished from the rest of the page. The second two recommendations go hand-in-hand: try to avoid using logos, and product action shots work best. Logos are great, but images where the user can click on the product action shot perform best. For example, if you are offering a travel deal, use a shot of a plane taking off or a picture of the beach. If you are selling laptops, show someone using one, instead of your logo. 

Ad Language
Facebook recommends the following as good drivers of click-through-rate (CTR):

• Ask questions in the ad
• Use third person
• Include a time prompt (now, today, limited time)
• Emphasize discounts & free offers

On the flip side, Facebook suggests avoiding the following pitfalls (so CTR is not diminished):

• Being too wordy
• Being too trendy in verbiage
• Using first person
• USING TOO MANY CAPS
• Percentage signs (it works better to include the actual dollar discount)

We hope these suggestions will help maximize your Facebook advertising campaigns. Happy Facebooking!

Karen Maciolek
Senior Account Manager/Master Social Media Strategizer

Tips For Managing Ad Fatigue on Facebook

In my latest Search Engine Land column, I take a look at the phenomenon known as “ad fatigue” and offer tips for how to combat it when managing your ad campaigns on Facebook.

Due to the nature of Facebook, it’s likely that users will see your ad repeatedly, which may potentially render them less effective over time. So what can you do to keep your Facebook ad campaigns fresh and effective and combat “ad fatigue”? Here’s a link to my analysis and several tips:

http://searchengineland.com/tips-for-managing-ad-fatigue-on-facebook-73554

Dr. Siddharth Shah
Sr. Director, Business Analytics

 

Facebook: Let’s Get Personal

Everett Rogers published the “Diffusion of Innovations” in 1962, which according to Wikipedia, is “a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures.” In layman’s terms, it’s this classic graph that they show you on the first day of business school:

  Source: Wikipedia

The most interesting aspect of Facebook is that depending on how old you were between February 2004 and September 2006, as well as whether or not you had a .edu email address, there were restrictions on where one fell in the above graph. It wasn’t until September 2006 that anyone over the age of 13 with an email address could join. By that time you probably heard about Facebook from a friend, or a friend of a friend.

A friend of a friend is now an important metric on Facebook. It’s called Friends of Connections (FOC) and refers to the friends of users who like your page/brand. The Facebook reps I work with (who are fabulous, by the way) inform me that the FOCs are one of the most important segments you can target since people are highly influenced by their friends and networks.

This original study has been advanced to the realm of retail and buying patterns, where it’s become proven that the early and late majority are your potential customers, those most likely to buy the product. So what I wanted to look into were how many friends these early- and late-majority Facebook users have versus early adopters. I didn’t include innovators, since I only have two or three friends from Harvard on Facebook, or laggards because the laggards I know (hi, Dad!), still aren’t members of Facebook.

Here’s what I found by taking a random sample of 10 friends from each category:

According to the theory, the groups in blue (above) are your potential customers. The interesting finding is that if I look at the average number of friends in each of these categories, there is a definite trend that develops in the late majority based on age.

So is this good news? Yes. Focusing on the late majority group, I broke this up into the three age ranges listed above. What’s unique about the late majority (over 40) is that their friends on Facebook are actually their friends in real life, which brings more legitimacy to the power of suggestion. What’s unique about the late majority (under 20) is that they have a huge quantity of friends to advertise to, and since late majority users generally move in a pack mentality (eg, they only buy when someone in their circle does does), this is great news for advertisers. Also worth noting is that a good portion of the late majority (under 20) users haven’t even been to college yet, where their friends on Facebook will grow exponentially. Add these factors together, and the late majority user on Facebook looks like a promising target audience.

 

Karen Maciolek

Senior Account Manager

Master Social Media Strategizer

Facebook: True vs. Unique CTR

In the search world, we calculate click-through-rate (CTR) as clicks divided by impressions, and it measures the number of times an ad was clicked versus the number of times it was viewed. This works a bit differently for Facebook. Here, a user can see the same ad multiple times per day, which leads to both a true versus unique CTR for that ad.

For example, assume you and I see the same ad on Facebook 10 times a piece, and at the end of the day, you click on it and I don’t. This would equate to one click on 20 impressions, or a CTR of 5%. But, if we were to look at unique CTR, we each saw one ad throughout the day, you clicked, and I didn’t. This would equate to one click on two unique impressions, or a CTR of 50%, which is obviously quite different.

Looking at this on a larger scale over the course of a week, we see the following trend:

If we analyze this campaign based on true CTR, we might assume a steady trend of clicks to impressions. But, if we include the unique CTR in the analysis, we see an increasing trend in the proportion of clicks to impressions (or user interest), which starts to decrease after the third day.

This brings up the next line of questions in regards to ads on Facebook. When does ad fatigue kick in? At what point do we need to refresh ads or images to interest the user again? At Efficient Frontier, we’re currently testing these questions and uncovering some interesting findings, so stay tuned for more on this topic.

Karen Maciolek

Senior Account Manager

 

 

 

$50, $65 or $100 billion; Just how much is Facebook worth?

Although Facebook has recently been valued at $50 billion and $65 billion, a consensus value on the company remains unclear. Some analysts think it’s grossly overpriced while others think its value is bound to be higher. While we shall steer clear of a potentially contentious opinion on Facebook’s true value, we thought it would be an interesting exercise to assess the expectations on Facebook’s revenue and growth to justify its varying valuations.

Rather than build a traditional valuation model, we have used an unorthodox approach. Using Google as the benchmark, we have assumed that Google and Facebook have a similar low discount rate and similar margins. These assumptions allow one to use revenue as a proxy for earnings.

Google has a market capitalization of $200 billion, i.e. four times Facebook’s value. Yet Facebook’s revenues in 2010 were 16 times lower than Google’s. All things being the same, the only way one can justify the current Facebook valuations is if we expect higher growth of Facebook’s revenues than the Google benchmark. 

Using a discounted cash flow model, I calculated Facebook’s required growth based on an estimated growth of Google’s revenues. For instance, if the market expects Google’s revenues to grow at 20% a year for the next 10 years, Facebook’s revenues would have to grow at 46% a year.

The red line shows how much Facebook’s growth would have to be relative to Google’s growth. In the wide range of reasonable scenarios that we have considered, Facebook would have to grow between three and five times faster than Google over 10 years to justify its $50 billion valuation. When we repeat this exercise for different valuation scenarios, the following trends emerge:

1. Between $50 billion and $100 billion, at a 10-15% expected Google growth rate, the pressure on Facebook’s growth increases by a multiple of the expected Google growth. Thus, if we expect Google to grow at 15%, Facebook would have to grow by 36% for a $50 billion valuation and 47% for a $100 billion valuation.
2. By our estimates, Facebook would have to grow three to four times faster than Google over the next 10 years to justify its present valuation. If we assume that the expectations on Google’s revenue growth are between 10-15% for the next 10 years, then the expectation on Facebook’s growth are 30-50%. Google’s history is instructive in understanding if this could be done. Between 2004 and 2010, Google’s Q4 revenue growth was 43% compounded annually. It did so by rapidly growing at first and then steadying to a slower but robust growth mode. Facebook appears to be where Google was in 2004-2005. Thus, if Facebook is able to rapidly grow over the next four to five years and then slow down, it should still be able to meet its lofty growth expectations.

Dr. Siddharth Shah
Sr. Director, Business Analytics