Archive for April, 2009

First Impressions of Facebook’s Ad Platform

April 15, 2009

As a long timer in the online advertising world, I have  had the opportunity to use many of the major advertising platforms, particularly the ones on the search side. I’ve even had the privilege of participating in the launch of Yahoo’s Panama platform a couple of years ago. Today, I’d like to offer my initial impressions of my recent experience with Facebook’s “performance” ad platform.

There has been lots of discussion in the media and blogosphere about social media advertising, the bulk of it decrying the poor monetization on the two major mainstream social networks — Facebook and MySpace (there doesn’t seem to be much chatter about LinkedIn, whose ad offerings I will review in a future post, and the second-tier social networks tend to rely largely on  Goolge AdSense). Last week, I decided to test out Facebook Ads, the company’s self-serve advertising platform. Here, I will share my experience to date with the system and provide suggestions on areas of improvement.

The sign-up process:

The sign-up process for Facebook Ads was relatively straightforward and intuitive to the experience online marketer. As soon as you decide to sign up, it kicks you right into the ad creation process. The first screen is divided into three areas: Design Your Ad, Targeting, and Campaigns and Pricing.

You first design the ad by filling out the ad creative (title & body text), upload a 110×80 image, and enter your destination URL. Facebook allows you to choose a traditional web page or a Facebook Group or “fan” Page as the destination URL. The last step in the ad design process is to choose whether you want to participate in “social actions”, which matches the user’s friends’ activities about your company or product (such as “became a fan of”, “commented on”, “is attending”, etc.) with your ad. This could be a bit confusing for an advertiser who’s not an active Facebook user, but it could potentially result in a big boost in the number of views & clicks your ad might get.

The second part of the ad creation page is all about user targeting, which is an area where social networks have a tremendous advantage over other forms of online advertising because of the richness of data that they have about the user. Here, you can select your geographic target by country, state/province, or city and surrounding area. Facebook allows you to type in your targeting criteria and uses “search assist” type auto-completion functionality to match and pick your targets, which could be multiple. You can also narrow down you audience by sex, age range, keywords (which matches free form user profile information such as favorite activities, books, etc), education level, workplaces (i.e. companies), relationship status, as well as language. As you pick your targeting criteria, Facebook provides an estimate of the number of people in its user base that match those criteria.

Lastly, you provide a campaign name for your ad (or select an existing campaign if you’ve created one previously), a daily budget for the campaign, as well as a schedule for running the ad. You then decide on a pricing model (CPM vs. CPC) and put in your bid. Facebook offers a bid range suggestion based on what others are bidding for your target demographic. This is a good guide, but I wouldn’t overly rely on it — test and tweak/optimize is the approach I would take.

Upon submission, Facebook allows you to review the ad along with the major targeting parameters and place the order by adding credit card information. You then have to wait for your ad to be approved (apparently by a human reviewer) before it can go live.

Incremental improvements I’d like to see, coming from a long time search marketer:

I created a single ad for an SEM consulting site that targeted the entire US, an age range of 25-50, and college grads. Facebook Ads estimated that my target audience was 2.2 million people. I used CPC pricing model with a max bid of $0.20, which was below the suggested range of 0.55 to 0.72 USD. I’ve had the ad running now for the past six days. I’ve received over 4,000 impressions and so far only 1 click, resulting in a CTR of 0.02%. Admittedly, I have not spent any time optimizing anything — basic vanilla creative, no targeting or bid updates — and am not leveraging Social Actions. No doubt these numbers could be significantly improved through testing and optimization.

Given my week-long experience with the Facebook Ads platform, I’ve already identified a few areas where I’d love to see Facebook augment the system:

  • Additional targeting parameters:
    • Zip code targeting — search marketers are used to identifying locations by zip code even if the 
    • Workplace “type” – e.g. enterprise software company, non-profit, CPG, etc. This would be especially valuable for B2B advertisers who want to target entire industries, and identifying all the major companies in an industry and inputting them one at a time is currently unwieldy.
    • Job position — e.g. Sales, Marketing, IT, research, engineering, etc.
    • Job level — e.g. Analyst, Manager, Director, VP, etc. This would be another indispensable tool for B2B marketers.
  • Forecasting tool — It would be nice to get a forecast of the number of impressions and  clicks you may get with the set of targeting & bid parameters you’ve selected. Search marketing platforms have this capability and marketers have become used to it.
  • Ad rotation/testing/optimization — In its current form, Facebook is tying the ad creative to the ad targeting and bidding parameters. If an advertiser wants to test different creative/offers, he would need to create a new ad (he can start by duplicate an existing one) with the new ad copy/creative and make sure to set all other targeting and pricing parameters to be identical to the original ad. It would be much easier if Facebook allowed marketers to add different variations of an ad to the same “ad group”, much like it is done in the search marketing world. They could also provide “optimization” by shifting impressions towards the better preforming (higher CTR) ads. This would not only make it easier for advertisers to more easily test and optimize their creative, but over time, it would lead to better clickthrough rates on Facebook as marketers test and optimize their creative.
  • Faster ad approval — While I only had to day one day to get my single ad approved, I would like to see Facebook move to a more automated, near real-time ad approval process. Again, as a search marketer who once dealt with Overture’s lengthy approval cycles, I’m now used to this instant approval process. There is the technology out there to make automated ad approval possible, even with image ads. Overall, this is a relatively minor gripe, however.
  • Day-parting — This functionality is now a standard feature on practically all online ad platforms. While it’s less important than other targeting capabilities, there are many use cases where day-parting could be a valuable targeting tool.
  • Better reporting — Admittedly, I have not spent a great deal of time working with Facebook Ads reports, given my ~3K impressions and 1 click! 🙂 However, here are a few things that I would want to see in future reports:
    • Geo-targeting reports — where did my traffic come from, where are the clicks coming from vs. impressions vs. conversions, etc.
    • Conversion metrics — this would necessarily require the advertiser to instrument his/her site with some type of Facebook or 3rd party analytics.
    • Placement report — Where/what position did my ad appear in, on average. Also would be helpful if they could show me how many of my ads missed out on impressions because my bid was too low.
    • Near real-time results — It appears that there is about one day lag time in Facebook Ads reports.  I would like to see this evolve into a near real-time reporting, ideally. At the minimum, 2-3 hours of lag time would be acceptable.
  • UI/Usability tweaks
    • In the main Ad Manager page, when I change the time period (e.g. Today, Yesterday, Ad Lifetime, etc) or the graph parameter (i.e. click, impression, or CTR), click over to a new page, then come back to the Ad Manager page, my selections are overwritten by the default values. The system should remember my previous selections and show me what I was looking at the last time I was on that page. This behavior should be maintained at least throughout my current user session on the platform.
  • Facebook Pages (I have not tested the Pages functionality and am only speculating here… this functionality may already exist.)
    • Provide “engagement” reporting. Show me the “virality” of the page – how many people came through to the page by clicking on their friends’ links vs. searching vs. directly, etc. Of those, how many joined the group or became fans of the page? What types of conversations did these actions lead to? Can I identity the influencers for my company/product, and what are their primary characteristics? I may be asking for the world here, but progress along these lines will surely be made.

That is it for today. I will have more to say as I get additional experience with the platform. But overall, I’m impressed by what Facebook has accomplished in a relatively short period of time, and the potential for user targeting on Facebook is huge and I’m excited to see where it goes over time!

In an upcoming post, I will share some ideas about how Facebook could better monetize their platform. Stay tuned.


Amazon Ending Affiliate PPC Arbitrage Game

April 7, 2009

I have a “dummy” website where I test out various online advertising products (AdSense, YPN, Amazon Affiliates, etc).  I got an email today from Amazon informing its affiliates that it will no longer pay referral fees for direct referrals through the paid search channel (affiliates can still use paid search, but they would initially need to direct that traffic to their own website).

There’s lots of speculation in the blogosphere around why Amazon would make such a decision. From my experience in the paid search industry, my guess would be the following:

Unlike others like eBay, Amazon has traditionally not been a ubiquitous PPC advertiser, instead relying on its affiliate network to monetize search traffic, especially in the tail. It is very likely that Amazon is in the process of significantly expanding and enhancing their internal SEM initiatives, having observed for years the effectiveness of the paid search medium in generating high-ROI leads.

By eliminating affiliate PPC direct-links to, Amazon seems to be counting on getting these referrals directly themselves, bypassing the middleman and its sizable commission, leading to higher ROIs. At the same time, the secondary effect on the paid search marketplace may also be favorable to Amazon’s SEM campaigns. By disallowing affiliates to use direct links to, it would make the economics of arbitrage less attractive to the former, since any type of intermediate landing page in the acquisition “funnel” would likely result in a large drop off in conversions, as only a portion of the traffic clicks through to Amazon’s site. The effect is to discourage affiliates from playing in the SEM space and help Amazon face less competition, especially in the shallow marketplaces of the tail.

Second-Tier Social Networks Struggling

April 1, 2009
News is out today that social networking site hi5 is laying off a large number of its employees (TechCrunch speculates that it could be up to 50%). Word on the street has been that hi5 was in the middle of another round of financing, so these latest layoffs indicate that perhaps the expected funding won’t be coming through.
While this is unfortunate for hi5 and its employees, it should not come as a surprise to anyone who has been paying attention to the social media space over the past year. On the professional side, LinkedIn has clearly established itself as the top player. Facebook has done the same on the “social” side (although plenty of people are now using Facebook as a career networking tool), with Twitter coming on strong as a potential challenger. MySpace, while still the second largest social network after Facebook, seems to be losing traction with growth practically flattened out. Here is a market share snapshot (sans Twitter) as of August 2008, image courtesy of TechCrunch.
The disparity of users has become even larger over the ensuing six months, with Facebook and Twitter getting the overwhelming majority of the new audience as well as media attention.
Given that the “network effect” phenomenon is a critical driver in the success of social networks, what will happen to second tier networks such as hi5 and Friendster as this migration of users to the handful of “winners” continues? If these social networks continue down the path of trying to compete with the likes of Facebook, trying to define themselves as the leader in this country or that, they will find themselves out of business in short time. While I haven’t come across any hard data, I’m hearing plenty of anectodal evidence that audiences across the globe are migrating over to Facebook in large numbers quickly. This will certainly doom second tier networks in the coming months.
The only viable choice these smaller, second-tier social networks have for survival is to find a place in the ecosystem around the “winner” networks, bringing their differentiating functionality to the users of FacebookMySpaceLinkedIn, etc. hi5 seems to have recognized this recently (at least partially) and begun a shift to become a hub for casual online games. Alternately, the second-tier social networks could adopt a vertical strategy a la Ning and focus on specific categories with highly specialized functionality. However, this would imply a much smaller user base (although such users would likey be more engaged and loyal) and thus likely a smaller business opportunity. What will others such as Friendster and Beebo do? Stay tuned…
Update: VentureBeat is corroborating my hypothesis that an expected new round of financing at hi5 collapsed today.