There is pressure from all sides to leverage Facebook as a key component of a successful advertising program, but some brands still have reservations about investing a significant share of their ad spends in social media. However, in today's digital landscape, Facebook is one of the best and most cost-efficient platforms for driving actionable results with real, quantifiable ROI.
Recent years have seen an explosion of targeting, testing, and measurement products for Facebook advertising. Facebook has rolled out advertising tools such as Facebook Exchange, which pushes retargeted ads into Facebook users' news feed; Facebook Offers, which promotes sales or special offers in the news feed; and Custom Audiences, which uses the brand's first-party data paired with Facebook user IDs to deliver ads to the brand's existing customer base. And that's just a few of the tools rolled out in recent years.
The ability to target and customize ads, making them more relevant to users, means that Facebook can prove to be an incredibly robust allocation of an ad budget. Looking at recent successful Facebook advertising initiatives from the following six brands, we can see how these resources are proving to be very effective.
Las Vegas-based MGM Resorts reported about 2.5 times more revenue from Facebook advertising in Q1 2013 compared to the same period a year earlier. By leveraging multiple Facebook advertising tools, MGM is taking a tailored, multi-faceted approach to retaining existing customers and reaching out to new ones.
Facebook is an ideal platform for ad retargeting programs such as Custom Audiences because of its ability to define Facebook audience segments culled from customer data, which gives brands highly targeted reach and relevancy. MGM saw a five-fold return on ad spends through the Custom Audiences feature alone, thanks to its versatility and ability to target specific repeat customers with special offers. MGM also experienced 15-fold ROI with Facebook Exchange and three-fold ROI with Facebook Offers. The company also gained 1.5 million new Facebook fans during the latter half of 2012.
MGM clearly understands the value of Facebook advertising and continues to leverage the platform in ways that drive its business.
Facebook gives numerous options for advertising tools, allowing you to find and leverage the right combination for your brand -- and your budget. Popular daily deals site LivingSocial combined Facebook's Domain Sponsored Stories, which promotes a user's third-party website activity in his or her friends' news feeds, and Custom Audiences to attract new customers and encourage repeat purchases.
Domain Sponsored Stories typically have 20-times better click-through rates than regular Facebook Marketplace ads because they appear essentially as a regular post from a friend (the only difference is a "Sponsored" label). Add in Custom Audiences, which allowed LivingSocial to target ads to both current subscribers and potential customers who had made purchases in specific categories, and LivingSocial saw 58 percent ROI. In addition, this particular combination of advertising tools resulted in 60 percent lower costs per click than past efforts.
For Tough Mudder, which hosts popular obstacle-infused mud runs throughout the world, Facebook isn't just another ad platform -- it's the primary marketing channel. CEO Will Dean credits Facebook advertising for building momentum and achieving success in the company's early days. With such low costs, Tough Mudder can easily experiment with every type of Facebook ad available -- from Sponsored Stories to Facebook Exchange -- to test and measure exactly what works best for its unique brand.
Geographic data is particularly important for the company, whose customers generally attend events in their hometowns. Through a tailored combination of various Facebook advertising tools targeting age, location, and interests (such as extreme sports), the young company has seen a 24-fold sales increase, five to 10 times ROI, and a five-to-eight-times higher click-through rates thanks to Facebook's myriad advertising tools.
Online design store Fab is another brand that credits Facebook advertising for its early success. The company initially spent $50,000 to advertise on Facebook, and it acquired more than two-thirds of its early members from the social media platform.
Fab has scaled up its Facebook advertising accordingly, now spending millions per month on targeted ads across 20 countries -- and seeing a quarter of all site traffic coming from Facebook (half in Europe). From January 2012 to January 2013, Fab's sales grew by 300 percent. Fab has also been aggressive in Facebook mobile advertising, and today the brand sees about one-third of its U.S. revenue coming from mobile.
For online retailer Zappos, Facebook is so integral to its advertising success that the company recently created a new position focused solely on driving Facebook marketing. In the past two years, Zappos has spent $10 million on Facebook ads alone, with 3.5-fold ROI.
Almost all of Zappos' Facebook ads are straightforward direct-response ads that drive traffic to a Zappos landing page with an assortment of products. But the power is in Facebook's ability to effectively target specific audiences. Zappos uses a combination of Custom Audiences, where Facebook users are targeted based on the customer data Zappos provides, and outreach to potential new customers based on fan page overlap and other customized metrics. This is one of many powerful combinations that Zappos uses to drive qualified, high-converting visitors to its e-commerce site.
Another brand that has experienced big success with Facebook's Custom Audiences feature is men's online retailer JackThreads. The targeting capabilities of Custom Audiences allowed JackThreads to show specific customers the most relevant ads for them. For instance, one group might see an ad for sneakers while another might see an ad for clothing, based on the person's previous JackThreads purchases. Furthermore, by combining Custom Audiences with special offers, users can receive customized discounts. By leveraging Custom Audiences, JackThreads saw a 30 percent lower cost for acquisition than with other platforms and achieved six-fold ROI.
Facebook continues to roll out new tools and refine existing ones regularly, making it easier for brands to leverage Facebook advertising effectively. In June, Facebook announced that it would be reducing the number of ad products from 27 to nearly half that figure. Over the next several months, Facebook will morph or eliminate Sponsored Stories, Offers, and other ad products to better streamline the options for advertisers. While some of the brands mentioned in this article have used these soon-to-be changed options, their continued efforts to increase the effectiveness of their ad spends will likely result in their ability to quickly adapt and succeed.
In June, Facebook also announced a new version of Ad Manager Reports that gives marketers even more ease and flexibility when tracking their Facebook ad data. Now marketers can see reach data in any date range rather than a prescribed timeframe, and they can receive streamlined cost metrics rather than having to look at and combine different reports. Marketers can now also track ad performance in real time across age, gender, country, and type of Facebook ad placement. Furthermore, marketers can track stats including unique clicks, unique click-through rates, cost per click, cost per 1,000 users reached, activity (such as page "likes") due to an ad, and more.
But in addition to all of these new tools, Facebook is offering greater customization in analytics reports -- essentially both adding more metrics and simultaneously making data easier to access and understand. Travel site Priceline has already been experimenting with these new tools and reported that it now only needs to generate half the amount of reports to get the same data.
Whether you are spending $1 million per month or $1,000 per month, Facebook adverting is an effective channel to acquire customers and drive repeat purchases. As we have seen from these six examples, brands of all sizes stand to benefit from leveraging this powerful advertising ecosystem to drive their business.
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