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Researcher Wieser Says Marketers Still Learning Facebook Advertising

Pivotal Research Group senior research analyst Brian Wieser
says Facebook continues to be a mostly experimental ad vehicle for marketers,
who will continue to test assorted ways of using it "over many marketing cycles
to learn about what works best for a given brand."

Wieser says that since most marketers only began paying "significant
attention" to Facebook in the last two or three years, it's going to take time
for them to feel comfortable with it. And adding to marketers' slow acceptance
and understanding of the platform has been Facebook's propensity to "iterate
its ad products on an ongoing basis."

He likens advertisers using Facebook at this point with
software engineers who experiment and "hack away" at software coding problems. But
Wieser believes marketers will eventually find the right way to use Facebook as
an effective ad medium if they continue hacking away. He adds that to help the
process along, Facebook needs to "continue to sustain users' interest and
evolve its advertising products in favorable new ways."

In a recent report he issued about Facebook following his
attendance at a conference that focused on the social network, Wieser says
marketers are only now becoming aware of the importance of EdgeRank, the
Facebook algorithm that decides which stories appear in each user's newsfeed.

The first thing seen when a user logs into Facebook is the
newsfeed. The algorithm lists some stories and hides others. Wieser says the
EdgeRank system can be skewed by advertisers who pay more to get their stories
ranked and listed.

In his report on the conference, Wieser writes:

"This algorithm generally determines how consumers will
see-or not see-the posts a brand publishes to its fans. By now, many investors
will be aware that the average post reaches approximately 16% of the fans of a
brand, person or page. However, we were unaware that EdgeRank skews its
distribution such that the pages or brands with the most fans have the lowest
free reach. The most popular sites may only reach 4% of fans for free,
according to one presentation.

"This data point illustrates that any marketer who wants to
capitalize on all of its fans' interest will need to pay significantly more
than they may otherwise expect, and they need to do so using the company's new
Reach Generator product. To that very point, an illustration was provided
whereby a large brand successfully deployed a highly engaging campaign-as
measured by the percentage of exposed individuals who ‘liked' the brand after exposure.
However, the campaign was only exposed to a few thousand consumers because of
the absence of paid advertising on Facebook. Given the limits imposed by
EdgeRank, paid advertising becomes increasingly important to all mass appeal
brands who are present on the site."

Wieser says there were case studies presented at the
conference showing that Facebook can be more efficient than Google in driving
goals based around cost-per-lead, cost-per-click, lead generation conversion
and e-commerce sales.

"Our takeaway was that marketers require ongoing
experimentation to learn what works best," Wieser says. "Factors requiring
testing can include improving audience segmentation, creative message content
and landing page design, all in context of live marketing campaigns to support
broad objectives."

Wieser says marketers shouldn't rule out using Facebook for
e-commerce. "We've spoken to marketers in the past who have taken it as a
truism that e-commerce doesn't and won't work on Facebook, based on the premise
that consumers are on Facebook to be social, not to shop," Wieser says. But he adds
that at the conference, there were "a significant number of successful social
commerce examples provided by small businesses."

Wieser continues to believe that mobile consumption of
Facebook is not having a negative effect on Facebook's ad revenue growth rates
and he adds that perception was reinforced at the conference by CEOs from two
agencies that specialize in Facebook advertising.

One question that could cause limits on Facebook revenue
growth is whether or not consumers trust Facebook to guard their privacy when
they have to provide credit card information. But he says consumers might be
willing to place their trust in other payment services that use the platform
and then remit a share of the payment back to Facebook itself.

In another privacy area, one speaker at the conference, Wieser
says, suggested that Facebook may have to start building in protocols to
confirm with consumers if they want to be associated with a brand in Sponsored

Among the criticisms of Facebook at the conference, Wieser
says, were some people who questioned the accuracy of self-generated
metrics Facebook provides to marketers. Others, he says, questioned the
validity of third party research Facebook releases to prove its advertising is
effective, especially given that Facebook pays the third party researchers for
performing the research.