While 99.9% of the marketing world has been content to keep using the standard means of measuring the performance of an online ad–the click-through-rate–Facebook is telling them to drop it. Drop it like it’s hot.
Reach and Frequency
On Monday, Facebook’s Brad Smallwood suggested that for the longest time the market had no way to measure the effectiveness of television advertisements but eventually settled on two factors: reach and frequency. He suggested that is still the best way to determine the impact an ad,whether traditional or online, has on its audience.
Smallwood quoted several studies by Nielsen and Datalogix which conclusively found that 1) click-though-rates and and actual sales have hardly any correlation and 2) 99% of sales from an online branding campaign came from people who saw the ad but didn’t interact with it.
Smallwood also used Facebook’s version of their teacher’s pet, Tom Buday, the head of marketing at Nestle, to show how the reach and frequency approach will bolster effectiveness through campaigns on Facebook. (If you had ask me, Tom Buday sounds like he has a bit of brown on his nose…maybe from the Nestle chocolate??)
There was no mention of the effectiveness of pay-per-click advertising used in search engines.
So Which Measurement is Better?
In an article written by Mashable’s Todd Wasserman, Ford’s Scott Monty was quoted as saying “What’s the ROI of a TV commercial? What’s the ROI of a press release? What’s the ROI of putting your pants on every day? It’s hard to measure but there’s negative consequences for not doing it.”
Monty makes a good point. It isn’t necessarily that someone must interact with your online ad immediately to be considered a potential buyer. Most click-through-rates on online advertisements come in at .2-.3% nowadays anyhow (meaning 2 or 3 out of 1000 views will earn a click).
We will say, theoretically, you have started a company called Widgetrix. Widgetrix may not be likely to develop an extremely high click-through-rate, but it can pay for a lot of ad space on many different websites which are visited by their target market. If there are more impressions made on Widgetrix’s advertisements than by their competitor’s, there is a good chance that Widgetrix’s target market will choose to buy from them, regardless if they interacted with the ads.
Of course, neither of these measurement rates are entirely proven and are still subject to research and trial-and-error. It raises a lot of questions about how to connect with customers on Facebook and other social networks. Still, it is up to the marketer to decide what is too hot to drop.