Facebook's New Pitch to Advertisers

Facebook is now able to connect the dots between users on its network and their purchasing habits, and is using that data to pitch advertisers.

To be sure, Facebook is not identifying users by name to advertisers. Instead, it is matching up its own data with that of partner Datalogix in a double-blind fashion. That is, although Facebook can ID a user and then find a match via Datalogix, specific information about the user is not shared with advertisers.

Brad Smallwood, head of measurement and insights at Facebook, presented some preliminary findings at the Advertising Research Foundation's Re:think conference in New York on Wednesday. Measuring 22 recent Facebook campaigns against data from 70 million consumers, Facebook found that just advertising on Facebook provided a 22% lift in ROI.

While such a claim might be dismissed as self-promotion, Smallwood's real message to advertisers was that now that Facebook has access to purchasing data, advertisers can now tailor their campaigns to hardcore buyers, occasional buyers and even to consumers who buy competing products.

"As we dig further and further into the data, we're able to get a segment-level understanding of what's working," Smallwood said. "So understanding for heavy product purchasers that you should have a different frequency [of advertising messages for] the low product purchasers."

When asked whether that means that marketers should target more advertising to low product purchasers, Smallwood said it depends. "There's going to be people that I think there's a high probability I can convert them so maybe I deliver them a lot of frequency," he said. "Then there are people with a low probability and I'll deliver them very few messages or possibly zero messages."

Other candidates for a high frequency of ad messages are heavy buyers of the advertisers' product or heavy purchasers of products within the category, particularly of a rival brand's. In such cases, Smallwood says advertisers may want to run campaigns with the intention of getting such consumers to switch.

The pitch about segmentation represents and evolution for Facebook. During the IAB Mixx conference last October, Smallwood made the case for reach and frequency on the platform rather than the industry's standard metric — click-through rates. Marketers, who have accepted the maxim that about half their ad spend is wasted on non-receptive consumers, will likely be receptive to Facebook's segmentation message, though Google is preaching the same gospel. As Andy Markowitz, director of global digital strategy at GE also noted during the ARF event: "There is waste in TV, there’s waste in digital. I think we’ve all seen the movie, Minority Report, and when we get there, great."