Facebook Ads Are Effective, Just Not Relevant, Yet

… and that’s partly the fault of the advertiser, and partly the fault of Facebook.

A friend of mine was crapping all over Nasdaq:FB — not because he’s rolls with popular opinion, but because he decided for himself that Facebook is wildly overvalued. My friend is a disciple of Warren Buffet — and anyone who pays homage to the church of Buffet is going to stay far away from Facebook.

He’s right, Facebook is definitely overvalued. But what I disagree with him over, and many of the analysts, is the potential for their advertising business. And for them, GM’s shrugging of Facebook, among other commentary, is enough to discredit advertising on Facebook altogether. They say the advertising just isn’t effective — that it’s like “hanging signs on the wall of a house during a party.” I say it’s not. Social ads are relatively new, and I think that most advertisers have yet to leverage them effectively.

I got a little press last week for my rampant Facebook fanboyism. But blind loyalty is not my thing.

Anyway, that friend asked me an intriguing question: “Describe a TV commercial you saw recently.”

You should try it. Go ahead, recollect one. Got one in your mind?

Then he said, “Describe a Facebook ad you’ve seen recently.”

I totally get what was supposed to happen here. I was supposed to remember a TV ad, which is pretty likely. And then I was supposed to draw a blank when I tried to recall a Facebook ad. Too bad I barely watch TV! (and I wonder if that’s a growing segment of my generation, hrm) It didn’t work. In fact, I recalled a Facebook ad for some Master’s program at Cornell.

His point was that people on Facebook aren’t really paying attention to, or engaged with the ads. And that same point is all over the internet with General Motors as the poster boy. In contrast, search ads are the holy grail for a lot of companies. For instance, users who search for cars on Google are explicitly expressing their interest in purchasing a car.

Remember, people didn’t always think search ads would work. At least Jerry Yang didn’t. Oh snap!

Facebook is not Google, and Facebook has plenty of personal information it can leverage to play a completely different game. Facebook can expose one the most important factors in my, and my friends’ buying decisions: The opinions of those in my inner circle. And FB is already doing that to some extent, but the advertisers are guilty of not targeting me correctly. Maybe Facebook is guilty of not providing the granular tools needed to target ads toward me.

So here’s what’s currently in my ad-bar on Facebook.

My complaint is that most of these ads aren’t relevant. Now, you might say “Kenny, chill out. Not all ads are going to be relevant online.” Oh yeah? Facebook has the most information about me, second only to my wife (I think), but there can’t be things I consider interesting in that sidebar? If something cool pops up, I’ll click. Facebook ads are effective when they’re relevant, and they are in position to make them socially and demographically relevant better then anyone else.

Ah, but some say they won’t. Apparently 44% of Facebook users said they would never click a Facebook ad. No kidding. Most people have the same convictions regarding online ads in general. I call those numbers meaningless for two reasons:

  1. People rarely click on ads, period. I’ve run OpenX instances for some high-traffic sites, and the click-through rates are pretty low. Guess what? The average CTR is something like .3% for the most effective ad formats.
  2. A weaker argument, but what the hell: Does anyone else know someone who complains about how much they hate Facebook (and everyone on it) but that same person just happens to be extremely active on Facebook? What people say and what they do are often two different things.

Facebook could be the home of the most compelling ads, product searches, and reviews in the world. They can tap into the most powerful influence in getting me to buy a product: my friends’ opinions.

So GM: I never saw any of your ads, but what were you trying to push on Facebook? Cars? Are you aware that over half of Facebook is 18-34 year olds — the jobless Occupy Wall St types that probably associate you with corporate failure and government bailouts? I hope you weren’t targeting them, sheesh.

Snarkiness aside, maybe Facebook simply proved ineffective for them. Who’s looking to buy cars on Facebook anyway? Google and Cars.com can probably make big bets that you’re looking for cars. It would make sense for GM to pull their budget if it just wasn’t working. Facebook, although, is certainly more effective than existing solutions for other products. What products? Exactly.

I declare Facebook ads the kings of impulse buys. Facebook doesn’t know exactly what you want like Google does, but the definitely know what you might like better than anyone. Amazon might be a close competitor, but a wrench gets thrown in when multiple people (like me and my wife) are using the same account, and I bet that happens a lot.

Being honest, all the Facebook ads for products I’ve clicked on were for things that would be impulse purchases. With the social backdrop, this is so, so powerful.

If I saw an ad and it said “John Crepezzi likes apple-flavored oranges”, I might actually buy the damned things. These exist in primitive form right now (the ads, not the oranges), but that needs to expanded greatly.

Two far-out ideas for Facebook:

  • Social-circle reviews: When a users ‘likes’ a product on FB, why not try and get a little more textual info? Why can’t Facebook be the center of the review universe rather than Yelp, which hasn’t innovated at nearly the rate of Facebook? FB already owns the local business market with their Facebook ‘pages’. I don’t think it would hurt existing relationships with small businesses — each FB user’s social circle would yield a different set of ratings and reviews. A bad small biz won’t be able to tell that everyone hates them.
    Side question: Maybe reviews in the context of your social circle are more valuable? For example, a pizza joint in Portland might have 5/5 stars, but I’m from around NYC and bound to be a classic pizza snob. I want to hear what my friends think.
  • Sentiment targeting. You can bank on the fact that a given Facebook user has publicly touted or complained about some company or product via their feed. This isn’t a perfect science by any means, but wouldn’t it be interesting?

This is stuff Google can’t do unless Google Plus starts getting used. I don’t think Twitter can do it because the social context isn’t as powerful.

Hey Facebook — you work for me now. I’ll stop there. Share your thoughts. Replies me-to-you are 1:1.

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  • hakan yartaşı

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  • http://twitter.com/jerseybites Deborah Smith

    Great post. I’ve used Facebook ads and social ads in the past with some success, mostly from the 18 – 34 yr. olds clicking through. The fact that you can filter by age, location, interests, is fantastic and as far as I know, can’t be done anywhere else on the web.  I love the new promoted post feature which really works to get your posts seen by more of your fans. 

  • katzgrau

    Thanks!

    You can attempt to target by age on ad exchanges like RMX and Double Click, but the age data is really guessed based on what sites the user has been to. FB has hard data. 

    And on FB you can get an estimation of how many people meet your criteria before hand so you aren’t blowing a budget too quickly if the rules are too lax (or not using it at all if the rules are too restrictive)