Facebook seeks to prove ROI

03 October 2012

NEW YORK: Facebook, the social network, is seeking to prove the connection between ads run on its pages and purchases made in stores by more effectively leveraging user data.  

The company is currently working alongside Datalogix, an organisation tracking online and offline consumer data, in a bid to achieve this goal.

Such an effort builds on the firm's roll out of ad services based on users' web browsing habits for its own platform and third party sites. Information like email addresses and phone numbers added to profiles is also being used to precisely target Facebook ads.

Gokul Rajaram, Facebook's product director, ads, told the Wall Street Journal: "We have been working to make it easier for marketers to reach the right people at the right time and place." He added that this has been done "in a way that respects user privacy."

"Advertisers have been increasingly vocal about concerns regarding effectiveness of Facebook," Brian Wieser, an analyst at the Pivotal Research Group, said.

Joey Tyson, a privacy engineer at Facebook, revealed the social network targets ads by comparing "hashes" – bits of text, like an email address – provided by clients, such as retailers, to determine which users have given this information to both corporations.

This data is encoded so precise details are not shown. "Since Facebook and the store use the same method to create each hash, we can compare the store's hashes to hashes of addresses in our records and show the ad to any group of users that match," said Tyson.

Of the recent tools developed specifically for marketers, Facebook's attempt to demonstrate the payback from ads via its tie-up with Datalogix is likely to prompt the most attention.

In a similar fashion to ads, Facebook matches its "hashes" with those provided by Datalogix covering in-store purchases, then delivering aggregate reports focusing on "large groups" rather than individuals.

A test sample of 50 campaigns run on Facebook showed that 70% of clients yielded a return on investment of at least $3 for every $1 spent.

Brad Smallwood, Facebook's director of monetisation analytics, said 99% of sales come from people who do not directly interact with ads. Clickthrough rates are thus not able to find the "sweetspot".

"Using the Datalogix tool, we'll [be] able to understand what that sweetspot is," he added.

Data sourced from Wall Street Journal/Business Insider; additional content by Warc staff