Why Facebook is yet to crack ROI with its latest measurement tool

Proving return on investment has long cast a shadow over Facebook, as marketers strive to tie their ever-increasing social media spend to solid commercial goals.

Facebook: launches new ROI tool
Facebook: launches new ROI tool

The issue reached crisis point in May, when General Motors pulled its media spend from the site. post-IPO, Facebook is more reliant on its brand partners than ever, and has taken steps to allay their concerns. This week it is launching what it says is a "highly requested" tool, which it insists will deliver proof of ROI.

The tool, aimed at direct response marketers, tracks a user's off-Facebook activity after they are served, or click on, one of the client's ads (see At a Glance, below).

David Baser, product manager at Facebook in the US, and leader of the development work, insists this tool should go some way to solving the problems of direct-response marketers.

He claims that trial partners' cost-per-acquisition (CPA) level has dropped, on average, by 40%. According to Jason Goldberg, chief executive of designer online retailer Fab.com, the trial proved highly effective for his business, and complimented its focus on "acquiring lifetime customers, not just transactions". He says that Fab.com's CPA was cut by 39%.

Peter Duffy, marketing director of easyJet, believes the free tool should make things easier for marketers.

He says, "This ROI tool is long overdue. Facebook can be an effective platform for reaching and engaging a target audience, but it has so far been difficult to provide a concrete answer to the old question, 'what is the value of a fan?'."

Duffy argues that the types of tracking-functionality tools currently available through third-party suppliers require deep knowledge of how they work and time for set-up and reporting, as well as other costs.

He says, "Facebook's feature of auto-optimising (the ad campaigns) based on specific criteria, will help to deliver the best possible results, particularly within Facebook, where audience response evolves at a fast pace."

Game-changing moment

However, Angus Wood, director of paid-social at digital agency iProspect, suggests this is not a game-changing moment" for Facebook, because there are already tools that track success for big-brand advertisers.

Wood says, "We all need to cool our heels. We've always been able to track the direct ROI driving off Facebook anyway. This is Facebook creating a tool that mimics the functionality of DoubleClick, MediaMind and third-party ad servers."

He claims that this initiative by Facebook is mostly about making a play for direct-response revenues. This would give it a greater share of online budget – a huge proportion of which goes to Google search, according to Wood.

Toby Gunton, chief digital officer at WCRS, points out that the tool could be a response to the Google Analytics attribution-modelling product being made available for free earlier this month.

"[Facebook's] ROI tool may not be Google Analytics, but it's a really important part of the jigsaw," he says. "Facebook media as a measurable direct-response media puts them up against (Google's) AdWords."

Gunton predicts that Facebook will offer something different from Google, however.

"'With AdWords, you are reacting to someone searching, whereas on Facebook, you serve ads based on people's interests."

There is a clear "win" in terms of the tool's simplicity appealing to small businesses.

Facebook seems equipped to generate more revenue per user across masses of small companies, as Google has done.

Wood says, "There is a lot to be said for the long tail of advertisers, Facebook already allows small businesses to do some pretty cool stuff for free – the post-IPO Facebook sees a revenue opportunity here."

So, has Facebook finally cracked ROI?

Baser says, "We are moving in the right direction and providing compelling data, but I would not make the bold statement that we have solved the ROI question."

At a Glance

  • Advertisers embed a piece of code on their sites which tracks users' activity once they have seen or clicked on an ad on Facebook.
  • The business can select a conversion to measure, for example making a subsequent purchase or registration.
  •  Businesses receive real-time feedback on how the ad is performing, with the option to automatically optimise to the most effective format.
  • The tool is available to Ad Manager users.

Brand View

Josiah Amartey (right), senior online marketing manager, Virgin Media

ROI tool is news for SMEs, but not big brands.

For Virgin Media, and blue-chip advertisers, this is not a game-changer – you can do this with existing ad-serving technology. For the way we work with Facebook, the auto-optimisation feature won't add value.

Facebook is trying to buy credit for the brand click – usually the Google click is what is attributed to driving traffic to a site. To be fair, the industry has struggled with attribution, not just on Facebook, but display ads in general. This (will benefit) small to medium-sized advertisers.