Today’s column is written by David Walsh, SVP of media at Integrate.
In the 2010 film “The Social Network,” Facebook co-founder Eduardo Saverin asks Sean Parker to settle an argument between him and Mark Zuckerberg: “I say it’s time to start making money from TheFacebook, but Mark doesn’t want advertising. Who’s right?” Parker responds: “Neither of you yet. TheFacebook is cool, that’s what it’s got going for it ...You don’t want to ruin it with ads because ads aren’t cool.”
As is the case with all of Aaron Sorkin’s screenplays, the dialog is pithy and engaging -- at the expense of historical accuracy. Facebook began selling ad space very early in its existence. In an informative Quora discussion among several early Facebook employees, Tricia Black, who later became Facebook’s first VP of sales, recalled running ads for companies such as Ford, Paramount Pictures, Verizon, Citi and The North Face in 2004 while working for the college-media firm Y2M. In the same Quora discussion, Ezra Callahan, one of Facebook’s earliest employees, also highlighted national ad campaigns -- starting with “The SpongeBob SquarePants Movie” -- beginning in November of 2004.
These early campaigns met with huge success. Now in its tenth year, Facebook’s inventory has increased dramatically, in both volume and sophistication, since then. Aside from its reach (Facebook currently boasts more than 1.1 billion active users), buying ad space on the platform is relatively simple and provides an environment in which anyone can be a media buyer, making it easier for advertisers to test new campaigns and tactics. Much like Google AdWords, Facebook’s platform has effectively democratized media buying.
Simultaneously, Facebook enables publishers to build their own social-media followings. This means publishers can gradually develop their own incremental audience as they test each offer for advertisers. When repeated consistently and effectively, this allows publishers to grow an organic base that they can later leverage on advertisers’ behalf, lowering costs, growing margins and increasing value to advertisers by providing a more engaged, organic audience instead of a paid one.
As a result of these advantages, brands have widely incorporated social-discovery tactics into their digital marketing strategies -- and Facebook’s user base continues to grow. Within the last 18 months, the social-media giant has rewritten the rules of digital advertising. It has opened up more and more of its ad interface, tracking options and feature sets, allowing advertisers to build and track campaigns on a granular level. The flood of newly available inventory is driving rapid growth in the performance marketing space. Nonetheless, while Facebook offers a more direct route to targeting the right audiences, it also presents plenty of challenges for performance marketers.
Facebook Challenges For Advertiser
First and foremost, Facebook’s lack of transparency regarding platform innovations and its advertising product roadmap presents major hurdles. Whether it’s managing the appropriate keywords, creatives or images, advertisers are forced to quickly learn and adapt to each tech update or product release in order to effectively optimize their campaign performance.
Another critical concern is the difficulty of limiting risk from a campaign-architecture standpoint. Many publishers have learned to arbitrage Facebook inventory, similar to the way affiliate marketers have learned to arbitrage search inventory. The Facebook marketing boom has, however, generated enormous competition, which has, in turn, raised ad prices and exacerbated the proliferation of copy-catting: Any time a publisher finds a successful ad, it’s almost immediately replicated by another publisher, reducing ROI, creating more work and generally increasing the volatility and risk in the Facebook environment. Meanwhile, many brands have begun bringing their Facebook marketing in house, which means that publishers are now not only competing directly with their clients, but -- due to the prevalence of ad scrapers and account watching -- also teaching their clients exactly how to be self-sufficient.
Publishers wishing to succeed in this environment must focus on optimization tactics, emphasizing value over volume and exploring the longer tail of Facebook’s targeting capabilities. This requires a much keener eye than previously needed in the space. It no longer works to simply build a campaign and create some bids and targets. Instead, publishers must give the Facebook environment the same attention to detail as an AdWords campaign, ditching the numbers game for efficiency tactics. Publishers must constantly evaluate each target, bid, geo-location, time of day and cost to identify the combinations that will yield the highest margin.
Facebook isn’t the only Internet player trying to monetize the social sector, of course. With Yahoo’s acquisition of Tumblr, Twitter’s recently announced exchange and speculation about further acquisitions to come, it’s clear that the performance-marketing landscape is on the verge of a major market shift. The question is: Which of these will rise to challenge Facebook and Google? With the rumors that Twitter may soon cross (or already has crossed) the $1 billion revenue mark, it would seem to be an early leader, but -- right now -- Twitter’s advertising option remains very internally focused. Affiliates have yet to figure out how to effectively correlate, track and bid against something as nebulous as a follower or a promoted tweet.
As for Facebook, its size will likely continue to attract marketers, no matter how saturated its platform gets or how much competing social-media platforms grow. Yet, in a rapidly changing landscape that yields fewer windfalls every day, strategy and meticulous campaign management will increasingly determine success.
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