In digital advertising, Canoe Ventures and other interactive cable ad dreamers can learn a lesson from a recent Facebook experiment that showed the value of having customers “like” you.
The conversion rate — the percentage of prospects who actually buy something — was six times greater among people who had signed up as “fans” of a company than among people who merely saw a Facebook ad for the same merchant. And the conversion rate was four times higher than for ordinary displays ads, according to a GigaOm analysis of the late summer test.
Even more significantly, company fans spent 30% more on their purchases than did customers who came to the site via other ads or search. And although only 14% of the fans saw a message on the day they made the purchase (airline tickets in the case of this experiment), they knew to go to the airline’s site thanks to their “friendship” with the advertiser.
Overall, the experiment showed that branded fan pages are among the best ways to advertise on Facebook. That’s a message Facebook will certainly be telling prospective advertisers, using real-world evidence from the recent test.
Those conversion and up-sale response rates are staggering. They offer a lesson in the new dynamics of digital commerce. They also demonstrate why Facebook is focusing so intently on new types of advertising — and why Madison Avenue is so immersed in these new ways to secure relationships with target customers. Facebook’s 2011 ad revenue is expected to hit $3.8 billion, which would be nearly 90% of its estimated $4.27 billion total revenue. Those numbers are more than double the 2010 figures.
Facebook’s advertising juggernaut is at the core of the social network’s mission to convince marketers to focus on “engagement,” not just click-through rates. If Facebook is successful — and I believe it will be — more marketers will rethink their approach to digital advertising. And with that, they will redirect their ad budgets towards media that can not only deliver the appropriate targeted audience, but also provide a platform for measurable response and actual transactions.
Given Facebook’s growing attention to streaming entertainment programs (such as its Warner Bros. deal), the advertising connection becomes even more impressive. As studios and producers explore new product-placement and consumer experiences, the opportunity to be a “fan” will open even greater - and more appealing - marketing options.
Advertisers have always been interesting in customer engagement. The Facebook approach not only fans that enthusiasm, but enables advertisers to make new friends and fans, a/k/a customers.
Gary Arlen is president of Arlen Communications LLC in Bethesda, Md., and a long-time interactive TV enthusiast. Reach him at GArlen@ArlenCom.com