Facebook CPC advertising, which started to gain traction with advertisers last year, resembles the
early days of paid search marketing. Launching a campaign is done in a do-it-yourself interface, and that interface is where bidding is established, payment is done by credit card, ads are created and messages targeted. Also akin to paid search circa 2001 is that the execution of a campaign is mostly a manual process (as of yet there is no API).
As we saw with search, there is no doubt that Facebook’s features and tools will become more sophisticated and radically improve over time. Facebook would surely like to monetize its 450 million users, and we know there are enhancements to the program already in the works. With the attractive CPC pricing model, Facebook and would-be Facebook advertisers are lined up and waiting to sync up with APIs or at minimum, get easy access to reporting and some kind of bid management tool.
Looking into the future, could Facebook CPC ads ever become a force to be reckoned with in the media mix, matching or even exceeding paid search as a proportion of total online spend?
If you are a direct response advertiser, the answer is no. The reason is because Facebook users are not there with an intent to purchase. It is the element of intent to purchase that has made paid search effective for ecommerce.
Direct response marketing relies on a combination of intent plus interest or demographic targeting in order to be successful. It’s easy to explain this dynamic as it applies to direct mail list selection. A toy cataloger’s best lists are probably other toy catalogers. The fact that names on a mailing list have purchased toys through the mail in the past is the implied intent to purchase. Further, if the list of prior toy buyers makes recency available, it is the most recent buyers who will usually do the best (called “hotline buyers”).
What probably would not work, though, is a list of people who are known to have children within an age range that is appropriate for the toy cataloger’s merchandise. Just because a person has a child does not mean they buy their toys through catalogs. While this person may hit the exact target the toy cataloger is looking for, the intent to purchase is not there. If I were a direct mail list planner, I would not select this list.
Lack of known purchasing intent is the reason Facebook CPC ads won’t outperform paid search cpc ads for direct response offers anytime soon. Even if Facebook could target a person with a nine year old boy, serving a toy ad on Facebook would not be as effective as it would be on a search engine served to someone who keyed in “toys online for a nine year old boy.” The latter is more likely to result in a sale.
In terms of what would work well with Facebook CPC ads today is using it to build up fan bases, brand advertising, and possibly direct response offers in very niche categories.
Google has made significant strides in improving their content offering over time, which, like Facebook CPC ads, may be perfectly targeted but are lacking intent to purchase. Facebook should be carefully evaluating the tools Google now offers to leverage content and apply similar principles as they evolve their CPC product. Comparatively, contextual search is probably the most similar model out there to Facebook CPC ads, and everyday contextual search performs a little better for direct response offers.
Suzy Sandberg is President of PM Digital.