Facebook attempts to "educate" brands

NEW YORK: Facebook, the social network, is seeking to "educate the market" about the potential payback its advertising services deliver, in a bid to attract greater spending from major brand owners.

In its first reporting quarter since becoming a public company, Facebook generated revenues of $1.2bn, a 32% lift year on year. Adspend climbed by 28% to $992m, with volumes up by 18% and prices by 9%.

However, while almost all of the organisations featured in the Global Ad Age 100, a listing of the world's biggest advertisers, buy Facebook ads each month, the majority have not yet invested heavily.

"Most only allocate a small size of their budget to Facebook, even though their customers spend large amounts of time using our service," said Sheryl Sandberg, Facebook's COO. "This imbalance represents a substantial opportunity for us if we can educate the market about the ROI our ads deliver."

As examples of just this kind of payback, she quoted the case of Electronic Arts, which spent $2.8m on Facebook to promote its game Battlefield 3, and yielded $12.1m-worth of sales.

Barclaycard, the financial services brand, also stated its Facebook ads provided a 40% higher conversion rate than any other online format, with a cost per acquisition level some 48% lower than elsewhere.

One specific area the firm hopes will drive growth is "social ads" linking paid-for messages with the fact that a users' friends "like" a brand or have interacted with it in a similar way.

"Fewer than half of our ads are social," Sandberg said. "We know  ... ads that are social have higher engagement rates from users, much higher ROI for advertisers. So driving that percentage up is also, is really important to us."

A key example of Facebook's success here are the Sponsored Stories appearing in users' News Feeds, a format yielding over $1m a day by the end of June, around half of which went to mobile.

Growth in Facebook's monthly mobile user numbers rose by 67% to 543m year on year. The fact it has only one form of advertising for this channel was a major reason the expansion in ads served failed to keep up with total user growth of 29% to 955m.

"Sponsored Stories in News Feed are the cornerstone of our mobile monetisation strategy," said Sandberg. "We're seeing strong interest, particularly from our clients, who know mobile is critical to reaching new customers, especially in emerging markets."

Among Facebook's other recent initiatives are testing a real-time ad exchange. It is also seeking to make it easier for the 7m small businesses regularly using its site to buy advertising, Sandberg added.

"Local business advertising is considered by many to be the Holy Grail of internet advertising since the market opportunity is so great. This is proving difficult ... because small business owners often lack the time or ability to adopt new technology. Facebook is uniquely accessible to them," she said.

Data sourced from Seeking Alpha; additional content by Warc staff, 30 July 2012

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