In the June 12, 2012 New York Times article titled "Facebook Tries to Prove Ads Work," Tanzina Vega writes:
After taking a beating during its initial public offering over questions about whether its ad-focused business model is solid enough for the company to succeed on a $100 billion scale, Facebook is in a hurry to offer up new data to prove that its ads do, in fact, work.
The research, conducted by comScore, is meant to show advertisers that the social media platform can have a direct influence on product sales.
Two of the companies highlighted in the research are Target and Starbucks. According to the data, four weeks after seeing a Starbucks ad on Facebook, people who were fans of the brand, and those who were friends of those fans, increased the frequency of their purchases by 38 percent, while Target fans and their friends increased their purchases by 21 percent.
Previously on May 29, I had proposed a scheme to test whether Facebook users would pay 3¢ a day for a subscription.
A number of readers commented that everything on the Internet is free and the only possible business model for Facebook is advertising.
Ad Measurement Systems
In my private archive, I have a number of news stories describing how general agencies measure the success of advertising. A sampling:
"The 'Paid Organification of Facebook: Why Facebook's Plan Isn't About Display Ads"
The future of Facebook marketing isn't about display ads. It's about visibility and reach. There has been so much pre/post IPO chatter about the flawed Facebook display advertising model. It's been mentioned that nobody clicks on ads and that ads have been ineffective. Frankly, these folks have it wrong. Facebook is undergoing an organification movement that fellow marketer Marty Weitraub has been preaching for years now. Facebook ad units that everyone screams and yells about are fading away; paid interactions, increased reach and word of mouth advertising are coming to the forefront. —Greg Finn, MarketingLand.com, June 4, 2012
"Is the Ad a Success? The Brain Waves Tell All"
NEVER mind brainstorms. These days, Madison Avenue is all about brain waves. That may be overstated, but it is no exaggeration that agencies and advertisers are growing more interested in neuroscience in their never-ending efforts to improve effectiveness.
The ardor of the ad business to adopt the technical tools of biometrics—measuring brain waves, galvanic skin response, eye movements, pulse rates and the like—is increasing as consumer spending, the engine of the American economy, slows. —Stuart Elliott, The New York Times, Mar. 31, 2008
"Bar Patrons' Ad Recall (Surprisingly) Good"
Here's one thing you might not expect to accompany a hangover: ad recall. A recent Arbitron study of bars and nightclubs found the average brand recall was 43% for an ad on the Ecast platform, an out-of-home ad-serving network available on 10,000 digital jukeboxes across the country.
Bars and nightclubs are among the top venues out-of-home marketers consider "captive environments." —Andrew Hampp, AdAge.com, Aug. 8, 2007
"A Magazine Promises Ads Will Register"
The Week magazine is making a new guarantee to advertisers: that its readers will remember an ad in its pages more than ads in most competitive magazines. —Stephanie Clifford, The New York Times, Nov. 9, 2009
For me, this is all somewhat wifty—too many matrices, formulae and theoretical assumptions.
How to Prove That Facebook Is a Viable Advertising Medium
The one thing direct marketers are really good at is measuring ROI of a single ad or a full campaign, right down to a gnat's eyebrow.
The way to judge the success of an ad is simple:
- Make an offer.
- Count the responses and the revenue generated.
- Subtract the cost of the promotion.
- Subtract the cost of goods sold.
- This is your gross profit or loss.
The Scheme for Facebook
Facebook is relying on comScore and its proprietary alchemy to measure the success of Starbucks' ads on Facebook. What follows is how a direct marketer would take on the challenge of Starbucks advertising.
1. Facebook's Responsibility
This is an investment by Facebook to prove its advertising works. Facebook approaches Starbucks with a partnership offer that is too good to turn down—an agreed-upon amount of free advertising.
If legal, Facebook surfs its content for keywords and phrases "Starbucks" and "thumbs ups." Then it tells Starbucks how many placements it will give for discount coupon promotions in those pages that represent the amount of money Facebook would normally charge Starbucks. As a test, these Starbucks efforts should also be placed where Starbucks is not mentioned in order to see if any response comes from cold prospects.
2. Starbucks' Responsibility
Starbucks creates discount coupons with terrific offers and sets up a system that alerts its outlets worldwide about the details of the promotion, the dates and samples of the coupons. There cannot be any surprises.
Hot Potato Advertising
Coupons are what legendary direct marketer Walter Weintz called hot potatoes. It was Weintz who sent out tens of millions of live U.S. pennies showing through the outside window of a Reader's Digest subscription offer. These were "hot potatoes"—objects of such obvious perceived value that they were too hot to throw away, so the envelopes were opened. Same thing with discount coupons.
In a 2010 column, "Hot Potato Advertising" was the following takeaway:
When you run a hot potato ad, it's imperative that everyone in your internal fulfillment operation and external distribution chain be alerted in advance. Example: During the first week of May 2009, Oprah Winfrey announced on her TV show that viewers could download coupons for free chicken from KFC. Outlets across the country were not alerted and unable to handle the rush. The result was a PR catastrophe for KFC that also made Oprah look like a bumbler.
Starbucks must run barcodes on their coupons, so they can be traced city-by-city, country-by-country.
A system must be put in place where Starbucks outlets record the bar codes—and the revenue—and return the information to HQ on a daily basis.
Suggested Offers on the Coupons
Because coffee drinkers and Starbucks are all over the world, these discount coupons cannot be in dollars. A Facebooker in San Francisco may have friends in France, Switzerland and Kenya—all of whom operate under different currencies. (Click on the media player at upper right to see my rough copy and designs.)
• Test No. 1: BUY ONE AND GET ONE FREE!
This applies to any product—brewed coffee, ground coffee, beans, food or mugs. You buy one and you get a second something for the same price (or less) Free.
• Test No. 2: BUY ONE AND GET TWO FREE!
These are powerful messages in any country and work in any currency.
(Note: The buy-one-get-one-free offer is equal to 50 percent off or half price, but far stronger. You cannot visualize half-off or 50 percent off. You can see two lattes in your mind's eye and sniff them in your mind's nose. Further, if the offer is a straight 50 percent off, Starbucks gets half price. Buy one at full price and get a second one free offer brings in twice as much revenue.)
• The Coupons: They must be dated (for example, offer expires July 31, 2012).
How Should Facebook Be Paid: Cash or Pay-Per-Click?
If the scheme works and generates cash for Starbucks, Facebook has to come up with a payment policy. I vote for cash.
Pay-per-click (PPC) is dependent upon response. Alas, the ad world is filled with arty creatives, who are into "branding," "brand recognition," "recall" and kumbaya feelgood blog blather. They have never made an offer or asked for an order in their lives.
No offer, no response. No response, no clicks. No clicks no pay.
Go for cost-per-thousand. (Or in the case of Facebook, cost-per-million.)
The Future of Facebook
• If the scheme is successful, Facebook’s ad sales people can tout to advertisers what may be the most far reaching and powerful digital discount- and cents-off coupon distribution medium the world has ever seen—one that works for soft goods, hard goods, electronics, travel, books and magazines, over-the-counter and prescription drugs, automobiles, specialty foods, groceries, flowers, toys and games, real estate, financial services—you name it.
• The universe: 900 million (so far) Facebookers—one out of every eight people in the world with demographics and psychographics to die for. These folks can read, have electricity, own computers and have access to the Internet, which means—ipso facto—that they have discretionary funds to spend.
• Facebook also becomes the word’s premier viral marketing forum. Each Facebook user has an average of 120 friends, so that every coupon ad has the potential of being seen—and acted on—by 120 additional people.
• Marketers will be able to generate boatloads of cash worldwide literally overnight.
• However, it is imperative that advertisers use hard core direct marketers and not airy-fairy general agencies whose specialty is creating brand recognition, recall and buzz.
If this scheme bombs, Mark Zuckerberg will have to punt.
Takeaways to Consider
- "When in doubt, do the obvious."
- "The offer should be so attractive that only a lunatic would say no."
- "It must be a bargain in one form or another."
- If you don't include an offer—a good reason to respond—you'll get no response. No response means no ROI.
- Creators of ads in which ROI cannot be precisely measured are wasting money and are traitors to their stockholders
- With no response mechanism you'll have no idea whether anybody even saw your ad let alone read it.
- If you want response action, think "hot potato."
- The only ones that hate coupons—and measuring ROI—are general agencies, because they don't want proof of how much money was wasted by their inept people who didn't follow the rules of sane, profitable marketing.
- When you run a hot potato ad, it's imperative that everyone in your internal fulfillment operation and external distribution chain be alerted in advance. Example: During the first week of May 2009, Oprah Winfrey announced on her TV show that viewers could download coupons for free chicken from KFC. Outlets across the country were not alerted and unable to handle the rush. The result was a PR catastrophe for KFC that also made Oprah look like a bumbler.