With Facebook’s recent IPO announcement, it seems like a good time to address Facebook advertising and how to leverage the second most-visited site on the web. Like Google’s IPO, Facebook’s comes at a time when the company is flush with cash. Also like Google, Facebook has built their revenue empire on one simple solution: highly targeted advertising. This post will help marketers understand the main principals of Facebook advertising and how to benefit from the network’s model and tremendous reach.

Advertising Model

In the ad “marketplace,” Facebook offers two standard ways to pay for advertising: Cost per Click (CPC) and Cost per Thousand (CPM). It seems like a no-brainer to only pay for clicks–at ZOG, this is our preferred way to place and manage advertising for our clients. Like Google, performance can influence your CPC–we’ll touch on this in the next section.

Advertising Targeting and Performance

Combine the vast audience on Facebook (845 million and growing) with their massive amount of user data, and you’ve got a tremendously large and demographic- and psychographic-rich pool of prospective customers to reach. When you are placing ads on Facebook, you’ll notice that as you get more specific with your targeting, your CPC will begin to increase. Depending on your marketing goals, this is typically a good thing–you’ll want to find a balance between your budget for Facebook advertising, your desired reach and the audience you believe will most likely take interest your products. Also, while you may be paying more per click to have enhanced targeting, you’ll likely be rewarded; the higher your click-through rate, the less you’ll end up spending over time. Better targeting equals better performance. Now the next step is to begin testing.

Testing–Call to Action and Destination Pages

Like virtually all forms of advertising, it’s critical to have a testing scenario in place. This begins with your Facebook ads. Start by splitting your creative for each campaign. This split should be a test of a different image and/or different call to action in the ad copy. Next, do it again. And again. And again. With each best-performing ad, you should create a new ad to test against it. The biggest mistake marketers make is that they settle on a top performing ad and do not continue to test.

Destination Pages
There is a general philosophy that ads on Facebook should drive users to a brand’s Facebook page. At ZOG, we support this notion. Since Facebook moved away from its mark-up language, you have the ability to create virtually any type of landing page you want on Facebook. By doing this, you can have a highly targeted page and keep users on the site they want to stay on. Now comes the tough part: if you’re trying to drive transactions, marketers should treat Facebook as a unique place to purchase. This is an opportunity to incentivize your fans for their loyalty–offer flash sales and discounts your fans can only get on Facebook.

It’s Important to Remember…
While Facebook offers a massive reach and some of the best targeting available, it’s not a search engine. Users on Facebook are not seeking your products to research or purchase–they’re on Facebook to be social. Because of this, you should tailor your marketing messaging and call to action to something that will ultimately benefit Facebook users. Instead of driving for a call to action to purchase (to prospective fans, for instance), drive prospects to a form where they can sign up for a discount, or offer a special discount for “Liking” you on Facebook. The direct response you’re looking for will need to come from the community you build and the rewards you provide Facebook fans for their loyalty.

Tips, Tricks and Takeaways for Facebook Ads

1. For targeting new fans with Facebook ads, we’ve noticed that images of people tend to perform the best. When remarketing to existing fans, use something familiar, like your logo or a product image. This will resonate with your fan base, and they will be more likely to notice and take the action you want them to. Keep in mind the size of the ad image and scale your graphic appropriately; there isn’t much real estate, so the image should be focused on one single person or product.

2. Facebook ads perform at about half the click-through rate of standard display ads (Facebook: .05%, typical display: .10%). Don’t let this detract from investing in Facebook, however. The value of acquiring a fan on Facebook far outweighs a click–instead of focusing only on clicks and click-through rate, look at a cost per acquisition model for your Facebook ads. With each new fan acquired, you build a remarketing base and can see exponential growth from your fans sharing your content and promotions with their connections.

3. Facebook requires that you make users aware of who is marketing to them by forcing the title of your Facebook ads to be either your Facebook page title or event title. For businesses that are thinking of creating a new Facebook page, this is an important consideration. You’ll want to not only think of your page, but also future advertisements that may carry this same name/title.

Consider Advertising Now

Facebook saw a 42% increase in ads delivered in 2011 over 2010, despite an 18% increase in cost of ads in 2011. As this trend continues, more of your brand’s competitors may become advertisers on Facebook, so now is the time to start analyzing whether Facebook advertising is something your organization should invest in.

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