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Facebook is an increasingly important tool for marketers, many of whom are purchasing ads on Facebook to drive consumers to their Facebook Pages.

Qualitatively, Facebook's importance is hard to deny, but plenty marketers have largely struggled to quantify the costs and ROI associated with their Facebook marketing efforts.

Web analytics provider Webtrends is, however, shedding some light on costs. It looked at more than 11,000 Facebook advertising campaigns which sought to drive users to 'like' the advertiser's Facebook Page and found that achieving the desired is costing marketers $1.07 per conversion. It also discovered that costs are rising. In 2009, these ads had an average CPM of 17 cents. Last year, that rose to 25 cents. At the same time, click-throughs decreased, going from .063% in 2009 to .051% in 2010.

For marketers purchasing display inventory and search ads off of Facebook, such numbers probably look downright cheap, despite the rising costs. But does that mean that Facebook advertising is a great bargain? No.

Webtrends Justin Kistner told the Wall Street Journal that the value of the Facebook fans these ads is designed to acquire "depends on the kinds of campaigns you are driving at that fan base." A Facebook spokesman echoed a similar sentiment, telling the Journal, "On Facebook, the magic of marketing happens when brands activate their fans in ways that inspire people to share those messages with their friends."

In theory this all sounds good. But marketers have an uphill battle in getting their Facebook fans to take meaningful action. At the very least, it requires time and a strategic, dedicated effort. Neither is free. In some markets, such as online retail, social media offers great promise but currently seems to be playing a minor role in driving traffic (and therefore logically sales), as evidenced by the fact that one new study shows social media only drives 3% of traffic to e-commerce sites. In this market, Facebook-based retail, or F-commerce, may be the answer, but that too requires investment.

None of this, of course, means that marketers shouldn't make investments in Facebook. But they should remember that getting consumers to do business with you through world's largest social network involves extra steps and there are few shortcuts. The marketers who succeed on Facebook will be those who recognize that just because completing one step is relatively inexpensive, it's the entire process that counts.

Photo credit: jaycameron via Flickr.

Patricio Robles

Published 4 February, 2011 by Patricio Robles

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

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Jenny Simpson

Jenny Simpson, Head of Digital PR & Content at Stickyeyes

It's far too early to use statistics like these when companies are using in Facebook in so many different ways.

Spending a fortune boosting "Likes" is just one part of it, how about looking at how Facebook integrates with PR strategies (and often, how it can form the basis of PR campaigns)? Or how linking Social Media to other content streams can increase customer loyalty, awareness of products etc.?

over 5 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Jenny,

I don't think anyone is disputing that Facebook can play an important role in PR campaigns, customer loyalty, etc. when used strategically, but at the end of the day, businesses need to quantify the exercise.

With a qualitative analysis based solely on generalizations and assumptions (eg. "Facebook is great for PR" or "Facebook boosts customer loyalty"), businesses have no way of determining how much they should spend on Facebook fan acquisition.

A company that is spending $1.07 to acquire a Facebook fan but has a crappy Facebook Page may effectively be throwing money down the drain. A company that is spending $1.07 to acquire a Facebook fan and is successfully leveraging its Facebook Page to drive meaningful gains in KPIs may be getting a bargain, and could even be encouraged to spend more if the return on each fan acquired is significantly higher.

over 5 years ago

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Dennis Yu

Patricia,

I'd have to agree with you. $1.07 per fan may be a high or low figure depending on the quality of that fan, evidenced by who they are, their propensity to influence others, how often the return, and their direct commerce value (when they buy).

What we've done across all these campaigns varies-- some brands just want more fans, others are mature and want commerce, and there are some that drive completely off-site (generating no fans at all).

Dennis

over 5 years ago

Simon Gornick

Simon Gornick, Owner at Moovd LLC

Remember, this company - based on advertising - is currently valued at a level equivalent to the market capitalization of Ford Motors. FB advertising is overvalued, overrated, and way, overpriced. When you add in the 3% figure you quoted, one has to wonder when sanity will rear it's head.

over 5 years ago

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Silver.Ag

I wonder when the companies start to calculate with real ROI for these campaigns. Fans and Likes have no real value. Only real customers and sales can be calculated as "true conversion".

"Conversions" like fans and likes are just excuses for poor agency and media performance

over 5 years ago

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Daniel Yen

From a lead acquisition and lead management perspective, it makes sense to me spend a buck to engage with a fan who is "like"-ly to be re-exposed to my brand/product. Good for future potential conversion opportunities. If you think of leads generated through other marketing channels that do not result into a seamless re-exposure and re-engagement opportunity, a dollar or so could work out to be a bargain. Social Networks Fan Pages for example may provide a platform for engaging and building relationshipship with consumers in a seamless, softer sell environment. Would be great to examine benchmarking against other lead generation channels channels including offline ones.

over 5 years ago

Peter Gould

Peter Gould, Senior PPC Analyst at Epiphany

I have to agree with some of the points raised above. If $1.07 is the average CPA for acquiring a Facebook fan, then it's very difficult to assess whether this is a high or low figure. Whilst it's hard to assess, there are a couple of factors within the brands control to try and improve the ROI of these types of campaigns.

Firstly, the type of users you are sending through to page from a Facebook advertising campaign will have a big impact. Write your ad copy in a way that entices them in, or gives them an incentive to 'like' (i.e. Like us now for exclusive special offers!). Secondly, and probably most importantly, choose your demographics wisely. If you're a coffee chain based solely in London, it makes a lot more sense to target only users in London who say they like coffee, rather than all users in the UK, or even just all users in London. The above two strategies make it far more likely that the clicks on your ads will lead to likes on your page.

However, as others have mentioned, sending people through to your page or even gaining likes are pretty much worthless if you don't have a social strategy in place to try and engage with these users once they're yours. Ensure you're providing them engaging or exclusive content and offers that they won't find elsewhere. Don't act like a corporate spammy robot, but like real people, prepared to offer advice and answer questions if they're asked. If you do this, you stand the chance of building long-term relationships and brand awareness that can be much more effectively turned into revenue over a longer period of time.

As someone who works in paid search, this type of approach is different to what I'm used to. I'm used to be able to track a click all the way through to sale and even see the exact revenue it generated. A Facebook 'like' PPC campaign may not return a sale that day, or even that week, but over a period of months, the return could be far greater than the one-off sale you could've acquired by sending traffic straight to the client's website.

Could is the key word here, as measuring the exact performance is difficult. When we discover a way of measuring the exact ROI these types of campaigns generate, only then will we know if $1.07 per like is an appealing figure.

over 5 years ago

Angus Jenkins

Angus Jenkins, Ecommerce Consultant at Personal

Seems to me that the point of marketing is to occupy the most appropriate space within which likely consumers can engage with a brand (... and consequently go on to purchase from it) - be that a supermarket shelf-edge, city centre hoarding, or FB fan page. The new FB ASOS page is an interesting case in point - they don't only expect to make sales directly from FB, they're looking to ensure that they become THE conversation about fashion within the FB community.

over 5 years ago

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