Quarterly Internet advertising spend exceeded $10 billion dollars for the first time ever in Q4 2012, according to the IAB’s annual Internet Advertising Report, a study conducted by PricewaterhouseCoopers (PwC) and released earlier this year. The record-breaking ad spend was led largely by increased search and display advertising in the retail, financial services, telecom, travel, and automotive verticals.
If history is any indicator, Q4 2013 is almost certainly going to be another record-breaking quarter for online advertising budgets, especially for those of direct response marketers. Should my prediction prove true, it will be aided by a seismic shift that occurred in the direct response marketing landscape over the course of 2013. I’m speaking, of course, about the advent of the Facebook Exchange (FBX) real-time bidding platform.
With this in mind, we wanted to take a look at how Kenshoo Social advertisers have been fairing with their FBX retargeting campaigns in the first half of 2013 to better understand the opportunity FBX represents for direct response marketers as we move into the 2013 holiday retail season.
What we found may be surprising but, at the end of the day, is really fairly simple: FBX units deliver strong results on par with search and other direct response channels.
Let’s back up and discuss how we arrived to this end.
We looked at a sample of FBX campaigns including billions of impressions, clicks and conversions running during the first half of 2013. We limited the sample to major advertisers actively running search advertising, standard Facebook ads, and FBX campaigns. We also focused on marketers using multi-touch attribution to credit revenue and conversion value to each touch-point in the customer journey rather than simply applying full credit to the ad that generated the last click.
It’s important to note that using multi-touch, multi-channel attribution is critical in order to understand the true value of FBX (and any channel, really) given the significant percentage of conversions that include multiple touch-points from search engine text and Product Listing Ads (PLA), as well as traditional Facebook and FBX ads.
Multi-touch attribution ensures that touch-points at the end of the purchase path or that “close the sale” are not given undue credit. This can obscure the evaluation of FBX performance because conversion paths frequently start with other channels like search or standard Facebook ads and are completed through a click on an FBX ad. On this note, you may have seen Kenshoo’s recent study which showed Facebook ads are undervalued up to 30 percent when not using multi-touch attribution models. The takeaway is that looking at channels such as FBX in a silo is not providing the full picture.
Over the course of H1 2013, Kenshoo Social clients generated significant positive results on FBX, achieving an average ROI that rivaled that of their search engine campaigns. In fact, in a quarterly analysis of Facebook advertising trends, we found that overall Facebook ad performance was strong.
In our FBX Analysis, we found some particularly striking differences in performance by ad creative type.
FBX ads can be constructed with static images and copy or can be created dynamically using product feeds. Implementing real-time, dynamic ad creative enables marketers to customize their ads based on the specific products that the consumer researched, thereby making a more highly targeted and relevant ad.
While static creative performed well and generated good ROI, dynamic creative performed significantly better across all key performance indicators (KPIs).
Dynamic Versus Static Creative:
- Click Through Rate (CTR): 1.9 X higher
- Conversion Rate (CVR): 2.0 X higher
- Cost Per Click (CPC): 16% lower
- Cost Per Acquisition (CPA): 52% lower
- Return on Investment (ROI): 1.8X higher ($8.10 versus $4.50)
Based on the positive results that direct response advertisers are generating with FBX, we expect that volume and spend will continue to increase as advertisers become more familiar with this channel, especially as we move into the holiday retail season.
While the performance is clearly there, some hurdles to widespread adoption remain.
We need to move away from thinking of Facebook as simply a brand awareness and engagement channel and accept the reality that Facebook is equally suited to achieving direct response goals.
We also need to break down the silos within our organizations, budgets, and plans that prevent us from optimizing for maximum performance across channels. Search, social and FBX are inextricably linked in the customer journey and to plan and optimize them separately will generally result in poorer performance.
I’ll leave you with one final thought: If you’re a direct response or search marketer and you’re not already on FBX, run a test budget immediately. The holiday season is just around the corner and you don’t want to miss out on the FBX opportunity in Q4. You owe it to your bottom line (and your bonus)!
View the full FBX Analysis infographic here.