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Following GM's decision to ditch paid Facebook ads prior to the social network's much-anticipated IPO, reports surfaced indicating that the break-up was due to Facebook's refusal to allow the automaker to run bigger, bolder ads.

Although the world's largest social network has been ratcheting up its monetization efforts, it has understandably been cautious about giving advertisers free reign. After all, if advertisers had their way, Facebook would probably be plastered with ads.

But that doesn't mean that Facebook is willing to let brands like GM walk away. As I noted previously, if Facebook is ever to produce the revenue it needs to grow into its currently valuation, it needs brands like GM on side.

So it's no surprise that the Wall Street Journal is reporting that senior executives at Facebook have been reaching out to senior executives at GM in an effort to get the automaker to give Facebook ads another try. In fact, according to the Wall Street Journal's Sharon Terlep and Shayndi Raice, Facebook's COO, Sheryl Sandberg, has spoken with GM CEO Daniel Akerson about the relationship between the two firms.

For all of Facebook's efforts, GM apparently isn't yet committing to a comeback. It wants something first: more evidence that Facebook ads are effective. To which Facebook head of measurement and insight Brad Smallwood has good news: based on Facebook's internal research, a campaign starts to deliver results in approximately one year. Yes, that's right. According to Facebook, brands should be prepared to wait 365 days before a campaign produces something of value.

Will that satisfy GM? Time will tell. But if the Wall Street Journal's report is accurate, the situation doesn't look all that productive for either company. While there are strategic reasons for Facebook to try to lure GM back, despite the fact that the auto manufacturer was only spending $10m on paid ads, asking brands like GM to wait twelve months for any signs of ROI is hardly the type of proposition the social network would seem to need at this time. For GM, the $10m it was spending on Facebook ads is a drop in the advertising bucket, so it's not clear what it stands to gain by giving Facebook ads a second look at this point, particularly if it's going to take a year to see a return.

Smaller companies, however, should take note. If Facebook's official position is that advertisers shouldn't expect a return from their campaigns for a year, Facebook ads just became unviable for a whole lot of businesses.

Patricio Robles

Published 3 July, 2012 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Richard Ireland

Facebook seem to offer a lot of insight based on "internal research", but naturally can never provide the stats to back those up directly

It probably does them a disservice on this occasion. While a completely understand why an Auto manufacturer might have to wait a year to see a (tangible?) return, there are plenty of other businesses that see more immediate returns.

The year has as much to do with the purchase cycle of the product in question as it does with the medium, I suspect

almost 4 years ago

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Peter Chang (Socialrithmic Co-Founder)

While it's widely known that social media marketing tends to sit higher in the funnel so it may take many touch points after the original ad to get the return, but one year seems long and arbitrary. Of course, as hinted earlier, whether GM would accept this depends on how they fare with other methods of digital ads in comparison. It would be interesting to also see how they feel about the new ad forms Facebook is rolling out, such as promoted posts, since GM is still spending quite a bit of money creating content for Facebook pages.

almost 4 years ago

Anna Lewis

Anna Lewis, Google Analytics Analyst at Koozai

It's quite interesting to hear this from them, it would be good to see the data behind this statement.

I think some companies have managed to make money within a year but others are just throwing money at it without being able to measure it properly, which is likely to mean it takes them a lot longer to see any ROI but they may not realise this.

almost 4 years ago

Paul Halfpenny

Paul Halfpenny, Technical Partner at McCormack & Morrison

Is that what Facebook are actually saying though? According to the original article, it seems that the 'year' figure is how long it takes for them to measure effectiveness, working with the company's own teams:

"Behind the scenes Mr. Smallwood's group started working with measurement teams at big brands to help them track the effectiveness of Facebook campaigns. "Buried deep within these companies are measurement teams," said Mr. Smallwood. "The first step is finding those people and saying, 'What techniques do you use?'" Mr. Smallwood said it takes about a year to get the results of one campaign."

This doesn't say that it will take a year to deliver ROI, just that it will take a year to work out what the actual ROI was for a given campaign.

It's a subtle difference, and it is still far too long, but surely it becomes a different question?

almost 4 years ago

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brett

This is what people do not understand about Facebook advertising:

1. It is an awareness play -- not a direct response play. But since Facebook reports via cost-per-click, people assume it is a direct-response play, so get disappointed with results.

2. It is ridiculously cheap awareness advertising. As example, Runner's World magazine charges $12k for a full page ad for a magazine with a circulation of 121,000. So you pay $0.10 per reader, whether it results in an impression or not.

Meanwhile, the CPC for Facebook (in my experience) is about $0.50 and ONLY is charged to people who have actually taken action on your ad AND that have self-reported interests that match to your product.

CASE STUDY
I will leave my client confidential, by I recently spent $2,100 of Facebook advertising for a client. It reached 4.4 Million impressions -- which is 36x more than a $12k slot with Runner's World would achieve.

It generated 4,912 clicks -- all people who have some level of actual purchase intent of my product. Assume 5% of those people actually buy -- that is 245 sales. I'm in the travel sector, and my margin is several HUNDREDS of dollars per sale. So assume $100 for nice math -- I've generated $24,560 in margin for a spend of $2,100. Where else are you going to get an 11-to-1 ROI on MARGIN (not sales)?? Nowhere.

You just need to be smart about your ads. Don't think "direct response" even though thats how it's measured (and that is how my case study is shown). You dont give a crap about clicks, really. You care about long term brand awareness. Build awareness and you'll get qualified clicks. And those will lead to sales. And awareness takes multiple impressions, and takes time. It often takes 7 impressions to move the needle on awareness!!

If you want to complain about how Facebook advertising isnt worth it and want to keep throwing money into banner ads, print ads, or something else, have a great time. But FB ads needs to be a part of your marketing mix. Nothing is more targeted or a better value. You are doing your brand (or client) a huge disservice if you arent getting involved with targeted ads on Facebook -- as well as Google Adwords, but that's a conversation for a different day.

Talk to me at http://www.twitter.com/bkrudy

almost 4 years ago

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Umair Mohsin, Director at MI Digital

Agreed with Brett. It's the difference between agencies measuring effectiveness and techies measuring effectiveness. Digital agencies such as ours look at things beyond performance and use digital panels to validate our findings.

So far FB is way ahead of other media in terms of value when it comes to awareness metrics. We tell our clients not to expect sales (if we get any that's a bonus and clients have had as much as 10% of their revenue come in from this media) and to use it as a cheap advertising medium and earned media medium. Both it satisfies in full.

almost 4 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Brett,

"I will leave my client confidential, by I recently spent $2,100 of Facebook advertising for a client. It reached 4.4 Million impressions -- which is 36x more than a $12k slot with Runner's World would achieve."

1. How many of those 4.4m impressions were actually seen?
2. Who were those impressions delivered to and how does that compare to the Runner's World demographic?

"It generated 4,912 clicks -- all people who have some level of actual purchase intent of my product. Assume 5% of those people actually buy -- that is 245 sales. I'm in the travel sector, and my margin is several HUNDREDS of dollars per sale. So assume $100 for nice math -- I've generated $24,560 in margin for a spend of $2,100. Where else are you going to get an 11-to-1 ROI on MARGIN (not sales)?? Nowhere."

Why do we have to assume anything here? You can easily track clicks and tie them to sales. In other words, did your client really generate $24,560? If not, what were the actual sales? If you don't know, why not?

Frankly, the fact that you are suggesting that your client turned ~$2,000 into ~$25,000 on Facebook leads me to believe that you're using hypothetical (as opposed to actual) numbers for a reason, and not a good one, but I'd love to be proved wrong.

Umair,

Putting aside the fact that awareness really matters most to large brands that can afford to spend big bucks on campaigns that don't drive sales, the question still remains: how much awareness is Facebook *really* generating and is it actually influencing sales at some point?

almost 4 years ago

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Tarun

This doesn't hold true for the E commerece companies like Amazon, Groupon or say Flipkart. Which gets their ROI within a week. It might hold true for bigger manufacturing brands but more insight needs to be cited.

almost 4 years ago

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Dave

Paul makes an important point that most likely everyone is confused about: It doesn't take 1 year to to see ROI, it takes one year to get the results back.

"Behind the scenes Mr. Smallwood's group started working with measurement teams at big brands to help them track the effectiveness of Facebook campaigns. "Buried deep within these companies are measurement teams," said Mr. Smallwood. "The first step is finding those people and saying, 'What techniques do you use?'" Mr. Smallwood said it takes about a year to get the results of one campaign."

over 3 years ago

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