Facebook’s ad tools restore investor confidence

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Facebook’s ad tools restore investor confidence

In Israel, as worldwide, advertisers appreciate Facebook’s massive number of users.

24 September 13 14:30, Roy Goldenberg
 
 
In August, Facebook Inc. (Nasdaq: FB) marked an important milestone, at least as Wall Street sees it: after the plunge in the share price following the IPO in May 2012, Facebook chairman and CEO Mark Zuckerberg and the company’s employees worked hard to correct a mistaken impression. In August, the share price finally began to rally, and surpassed the IPO price, putting the company in a new place in the eyes of investors and analysts.

Facebook was able to restore investors and analysts’ confidence by diversifying and improving its advertising tools. The crash in the company’s share price in May 2012 caused its staff to seek out and find new advertising tools, which would create added value for advertisers on one hand, while boosting Facebook’s stock and revenue on the other.

The results can be seen in the field, according to a RBC Capital Markets survey in August of advertisers and ad agencies on behalf of “AdAge”. The survey found that 74% of respondents said their Facebook budgets now include outlays on Facebook ads, up from 54% in June 2012. The survey of 1,500 respondents found that half of them allot 1-10% of their digital advertising budgets to activity on Facebook, and that 14% of respondents allot 11-20% of their digital advertising budgets to it. However, 26.5% of respondents have no Facebook ad campaigns. Altogether, 73.5% of respondents advertise on the social network.

The future looks rosy, as the survey found that these budgets will grow. 95.7% of respondents said that they intended to use Facebook as an advertising and marketing channel over the coming year. 55.7% of respondents plan to increase their Facebook ad budgets (compared with 38.4% of respondents who intend to keep their Facebook ad budgets at the current level, and 6% who plan to reduce them).

Advertisers mainly used to believe in amassing likes. The survey found that attitudes are maturing: 48.4% of respondents say that the most important goal is to create brand awareness, following by referring traffic to the brand’s website (cited by 17.9% of respondents). Amassing likes is only in third place in importance, cited, by 10.1% of respondents. Three additional goals are to maintain relations with customers, obtain leads, and sell products.

The survey also examined advertisers’ satisfaction with their return on investment (ROI) from Facebook ads, and found that they obtain a higher ROI on Google (an ROI of 45.5% on Google compared with 32.4% on Facebook). Unexpectedly, LinkedIn was in the third place, with an ROI of 9.8%. For half of the advertisers, their Facebook ROI had not changed in the six preceding months, but 42.7% of respondents said that it had increased, including 6.1% who said that that it had strongly increased.

Investing in mobile ads

Mobile advertising has become Facebook’s spearhead. In the weeks preceding last year’s IPO, this was the social network’s Achilles’ heel. The fact that users were gradually switching to mobile, where Facebook had no advertising response, left it out of the digital limelight. By focusing on mobile ads, Facebook got back on its feet, creating momentum among advertisers. 41.4% of respondents said that ads on Facebook’s mobile app were quite important, and 33.1% said that they were very important. Only 25.5% of respondents said that mobile ads were unimportant.

Although advertisers grasp the importance of Facebook mobile ads, they still find it difficult to obtain substantial ROI from them. 38% of respondents said that their ROI from Facebook mobile and desktop ads were similar, while 35% said the ROI from mobile adds was higher than from desktop ads, and 27% said that ROI from desktop ads was higher.

Facebook ads in Israel

The situation in Israel is quite similar, and definitely indicates that the Facebook advertising market is maturing. “Two years ago, advertisers would put a little money in Facebook because they had to and because this was Facebook. Today, what their money is doing and how to properly manage it are much clearer to them,” says Maple CEO Eden Amirav. “It’s now easier to take NIS 40,000 and put it in Facebook and see 1,000 likes, 5,000 viewers of the picture, etc. It’s harder to translate the ROI in newspapers or television.”

Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) private marketing manager Ilan Segal says that the past year saw a serious boost in Facebook advertising. “We’ll end 2013 with 15-20% of our digital ads budget devoted to Facebook. This is all thanks to the addition of important and sophisticated tools that did not exist before, such as smarter targeting,” he says.

McCann Erickson Israel talks about a change in Israeli advertisers’ perception. “A year ago, only 60% of our clients were there. Today, everyone advertises on Facebook,” said McCann Erickson Israel Universal Search manager Ophir Cohen. He predicts that budgets will only increase. “Advertisers who have already tried it, will increase their budgets by at least 15%, and the others by far more.”

“Israeli advertisers have gradually realized that the reach on Facebook is substantial,” says Maor Chen, the CEO of digital ad agency Ecaliptoos. “If an ad during the ‘Big Brother’ final (on Channel 2) reached 1.5 million views, there are 2.4 million Israelis on Facebook every day. Advertisers have also realized that they are not just competing against other brands on Facebook, but also against a friend who posts a picture from his foreign trip or yesterday’s bachelor’s party. Whereas a user was once exposed to 200 posts from links, there are now more than 500 posts. This has created a major change in the local market: understanding that content does not just have to speak in the brand’s agenda, but also in a language that the user identifies with,” he says.

Tnuva Food Industries Ltd. understood the need to talk to the user, and one of the company’s most important advertising tools is mobile. “This is a very effective tool, and we see that for every shekel spent on mobile we get a more than threefold return in terms of engagement and users’ involvement, compared with desktop,” says Tnuva digital manager Ayala Tzoref. “This also makes mobile promotions very cheap compared with the payoff. This year, our mobile budget has already achieved a high double-digit share of our Facebook budget, and it will soon be 50-50.”

Amirav says that Facebook mobile app advertising has not yet demonstrated its uniqueness. “For Israeli advertisers, it’s a default option, ‘Put me on Facebook mobile too’, but I cannot say whether it’s better to put NIS 50,000 on mobile or on desktop, because I don’t know whether the likes coming from mobile will be better than those from desktop.”

Amirav does not yet see the substantial added value the Facebook mobile brings. “Most of the value still comes from increasing the likes on your page. The fact that the mobile user is more passive – reading, liking, and so on – does not bring much sophistication to this advertising tool,” he says. In fact, bringing likes is still the main goal of most of his clients on desktop too. “This is also defined in briefs, and is sometimes also the basis for pricing.”

In contrast, there are clients seeking other things. “For example, Channel 10 is promoting its new reality show, ‘The Village’. Here, the objective is just to create a new brand and create awareness about it, but the ideal is engagement through content. In contrast to advertisers on television, who only create awareness about an upcoming program, on Facebook it is possible to create audience involvement – posts and responses – even before the show goes on the air,” says Amirav.

The next step: video ads

Alongside mobile advertising, Facebook’s new video advertising should create an additional growth engine. These are ads that will be integrated with the user’s feed, and will run automatically soundlessly. The soundtrack automatically turns on when the mouse slides over the spot. Chen believes in Facebook’s new video ads. “This will allow advertisers to fight even harder for the user’s eye. I will have to create a clip that is visually very attractive so that the user will pass his mouse over it and listen,” he says. “It will take time for advertisers to jump on this and grasp it’s importance, but I believe that this will create more aggressive competition than what YouTube presents for television advertising budgets.”

Published by Globes [online], Israel business news – www.globes-online.com – on September 24, 2013

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