Facebook listens and finally responds to advertiser needs for better targeting based on behaviorial data and social data gathered by the social network
Since its IPO in May 2012, Facebook brand marketers have voiced their need for better tools and options for targeting customers. This was obviously necessary if Facebook was to optimize the monetization of its 1 billion user. As a public company, Facebook now has to answer to Wall Street and Main Street investors. The move to improve its advertising targeting comes amid growing shareholder pressure for Facebook to prove the value of its advertising platform, and prevent a further decline in the value of its stock.
Beginning in September 2012, Facebook began introducing a series of tools and options to help brand marketers better target their customers. The first of these tools and options was Custom Audiences which allowed brands to show ads to their current customers who were on the social network.
This was almost immediately followed by the formation of a Facebook Ad Exchange (FBX) which makes the social networks ad inventory available to real-time bidding (RTB) and retargeting using behaviorial data, not just the social data gathered by Facebook. FBX has proven to be very successful to the point where Facebook now controls 25% of all real-time bidding (RTB) advertising.
The success of FBX was quickly followed by the announcement of a partnership with Epsilon, Acxiom, and Datalogix, a trio of third-party data intelligence and analytics vendors. Facebook is partnering with these companies to gain consumer insights that will enable them to target users with more personalized ads based on online and offline user behaviors.
Finally, on March 19, 2013, Facebook announced the launch of Lookalike Audiences, a feature that lets brand marketers reach users similar to those in their Custom Audience databases, who are not fans of the brand.
Facebook Ad Exchange (FBX)
After a beta period lasting a couple of months, Facebook officially launched Facebook Ad Exchange (FBX) in September 2012, which makes the social networking giant’s inventory available to real-time bidding (RTB) and retargeting.
Facebook is working with the exchanges of several partners, including AdRoll, AppNexus, Brandscreen, Criteo, DataXu, MediaMath, Nanigans, Kenshoo, Optimal, RocketFuel, Tellapart, TheTradeDesk, Triggit, Turn, Xaxis, and X+1. The company says that through these partners, advertisers can access capabilities like multi-touch attribution, view-through conversions, global frequency capping, day-parting, and creative optimization. The most obvious application, though, is retargeting.
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Given that Facebook controls 25% of the display ad inventory on the internet, according to comScore, the availability of FBX has had a significant impact not just on Facebook, but on the overall advertising ecosystem.
Brian Lesser, CEO of WPP Group’s Xaxis, said in a press release.
“It is difficult to overstate the impact that Facebook Exchange will have on the entire digital media landscape. With the launch of FBX, Facebook not only instantly multiplies the overall size of the RTB market, it provides high-quality inventory that is brand safe and extremely targeted.”
During the beta period, partners applauded the positive results, touting FBX’s volume and the responsiveness of the audience when targeted using their additional data and technology. Nearly every partner’s web site prominently features their FBX capabilities.
That's great news for Facebook. Finally it can monetize its ad space at a meaningful rate and drive more revenue. But it's also terrible news for Facebook because it proves that Facebook's internal social data alone have little value to advertisers. To be blunt, most social data are worthless.
The FBX exchange is increasing the value of Facebook ad space by allowing an advertiser to use behavioral data to determine whom to target on Facebook. Behavioral data perform much better than Facebook's social data and command a higher rate at auction.
Facebook's biggest revenue opportunity in the near future can be realized if the company can figure out how to integrate its social data with high-value behavioral data to create a stronger targeting product. The combined data will be stronger than either data set is on its own.
Reports from leading demand-side platforms that access FBX for advertisers show that ads placed on Facebook through FBX are outperforming the traditional ad exchanges that offer advertising on a wide range of news, information and entertainment web sites.
The Trade Desk CEO Jeff Green said,
“The results to date have been impressive – one retailer is sourcing conversions at half the CPA they find on other inventory sources.”
The Turn ad exchange didn’t release specific metrics but it said.
“Advertisers have achieved their overall campaign goals very quickly.”
Xaxis says it’s worked with several Fortune 1000 advertisers and achieved positive results, citing specifically an unnamed quick-service restaurant (QSR) worked to drive new orders, lowering its cost-per-order by an average of 22% versus similar campaigns that didn’t use FBX inventory.
Triggit CEO Zach Coelius, in a blog post, said the company is able to find customers on FBX, achieving four times the return-on-investment at 1/5 of the cost-per-acquisition. And Coelius expects those metrics to stand up post-beta and into the “foreseeable future.”
MediaMath said that for one campaign FBX accounted for nearly 40% of the conversions driven within three weeks of launch, representing nearly four times the conversion rate of non-Facebook media.
Personalized Ads Based On Behavioral Targeting Using Third-Party Data Intelligence And Analytics
Facebook’s recent partnerships with data intelligence and analytics vendors Epsilon, Acxiom, and Datalogix could have a large impact on the retail world. (See AdAge article: Facebook To Partner with Acxiom, Epsilon to Match Store Purchases with User Profiles.
Facebook is partnering with these companies to gain consumer insights that will enable them to target users with more personalized ads based on online and offline user behaviors. So, for example, if you buy Doritos at your local grocery store, shortly after, you may see an ad for Doritos on your Facebook page. This new approach is being touted as a way for Facebook to bring together the worlds of online and offline shopping.
We’ve talked a lot about customer loyalty and how to increase engagement and it all comes back to knowing your customer. Having a holistic view and connecting the dots of data available in a database, enables retailers to deliver a more personalized experience. Most consumers are willing to give up some privacy, such as their name, email and address to join a loyalty program and get a discount, but is Facebook taking this one step to far?
According to Ad Age,
“Targeting will function through anonymized matching of loyalty-program members and Facebook users through email addresses and phone numbers.”
The opportunity could be huge for retailers by helping them to get in front of people they know are already interested in their products and up-selling them on additional items. Retailers should tread carefully though, as there is such a fine line to balance when it comes to customer data and privacy.
Consumers want to receive personalized offers and to know that the companies they frequent are looking out for them. However, they also want to be assured that their privacy is protected and they may get an eerie feeling that “Big Brother” is watching if the retailer pops up with an offer when they are checking out the status update of their old college roommate.
Ariel Silverstone, Chief Information Security Officer and author of The Security Blog said.
“Historically, Facebook has been less than forthright in the way it has disclosed its privacy policies, but that has changed recently and the company has invested a lot of time and effort into improving this. The first thing they must do is add an ‘opt-in’ option. They should ask permission before they turn this on and allow consumers to opt-out later on if they want to.”
Facebook has overcome many obstacles when it comes to consumer privacy and with over one billion active monthly and 618 million active on a daily basis, my guess is that after the dust has settled, Facebook will prevail and we’ll all be on the receiving end of some hyper-targeted ads.
Facebook Lookalike Audiences
On Tuesday, March 19, 2013, Facebook announced that it was offering advertisers another tool to target consumers on the platform with Lookalike Audiences, a feature that lets them reach users similar to those in their Custom Audience databases.
Lookalie Audiences, which Facebook began beta-testing in February, will launch this week as a targeting option on the social network’s power editor, allowing advertisers to reach out to potential customers with similar characteristics to their current customers.
Facebook launched Custom Audiences in the fall of 2012, which allowed brands to show ads to their current customers who were on the social network. Lookalike Audiences extend this ability to other Facebook users with similar attributes.
Both Custom Audiences and Lookalike Audiences work off hashes, which are bits of text that uniquely identify data (such as an email addresses) but are designed to protect against reverse engineering that would reveal those data, so no customer information is shared with advertisers or any third parties.
Facebook said in a post on the Facebook Studio blog announcing the launch of Lookalike Audiences:
"Both online and offline, lookalike targeting has worked well for businesses, so we are excited to launch it as a targeting option on Facebook. This feature will be available in power editor starting this week."
"Lookalike audiences builds off of a targeting feature we launched last fall called custom audiences. Custom audiences lets marketers take their current customer lists and show ads to those people on Facebook. Now, with lookalike audiences, Facebook can use attributes like interests or demographics and show ads to people who share common attributes as their existing customers. Advertisers can serve any type of Facebook ad to these new groups of people potential customers."
"We’ve seen this new type of targeting drive a wide range of success metrics for direct response companies like Fab.com, including lower cost per checkout, lower cost per acquisition, larger purchase size, and faster and increased return on investment."
Steve Pole, chief technology officer of Alchemy Social, an Experian company, commented on this news in an email to AllFacebook:
"Custom audiences have been providing great results for advertisers, but many have been struggling to get the reach that they need. This new system helps expand the reach potential, which should help advertisers scale out their performance. The only drawback for advertisers is a lack of clarity around how the lookalike group is formed; an advertiser may target a certain audience group because of their spending behavior on an ecommerce website, while Facebook may create a lookalike group based on their movie and music preferences. The advertiser currently has no way to tell Facebook why they chose that group, and to direct Facebook to find other users based on similar criteria. This presents an opportunity for SPMDs (Strategic Preferred Marketing Developers) to build expanded audiences using directly related third-party data."
In a blog post heralding the new feature, Facebook noted that marketers can buy Custom and Lookalike audiences in conjunction with any ad buy. The post explains.
"For instance, a business could choose to run an Offer to both people who they know have bought from them before, and to people who share similar attributes with those customers. Like with custom audiences, marketers can further refine lookalike audience targeting using Facebook’s standard interests and demographics targeting (i.e. a company could reach lookalikes with an Offer and use standard targeting to make sure that Offer only reaches lookalikes in Florida)."
Facebook Lookalike Audiences allows advertisers and their agencies to target a specific group of individuals based on attributes like spending behaviors, interest preferences, and so fort, such as the Lookalike Audiences attributes of "Top Customers - October" used below.
Facebook Small Business Targeting
Facebook already provides small business users with the ability to target their classified ads and Sponsored Stories ads. Facebook regular ad targeting for small business provides the following targeting options:
- Location targeting (By city and country)
- Age & Birthday targeting (Reach individuals in a specific age group)
- Interests targeting (Based on a users "Likes")
- Education targeting (Targeting specific colleges and universites and educational subjects)
- Connections targeting (Taret people who already or do not have a connection with you on Facebook)
Courtesy of an article dated March 19, 2013 appearing in AllFacebook, an article dated January 18, 2013 appearing in AdAge Digital, an article dated March 19, 2013 appearing in Mashable, an article dated March 8, 2013 appearing in Engage Retail Today, an article dated December 19, 2012 appearing in Mashable, an article dated January 3, 2013 appearing in Business Insider and Facebook Advertising Help: Targeting Options
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