Portfolio-Level Optimization: the Next Step in Social’s Ad Evolution

Even as successful as social ads have been, to get the most, marketers need to optimize their portfolio of campaigns to their key performance indicator goal within a budget.

Social ad spend is on the rise, driven by successful performance, including positively impacting paid search campaigns when paired. Even as successful as social ads have been, to get the most, marketers need to optimize their portfolio of campaigns to their key performance indicator goal within a budget.

To ease what could be a cumbersome, manual, incomplete process (depending on the size of the campaign portfolio), marketers can now leverage automatic, cross-campaign optimization tools to handle this quickly across all campaigns and improve results.

Social advertising has grown because it works

Just how much has social ad spend jumped? Facebook reported in its Q1 earnings that revenue from advertising was $3.32 billion, a 46 percent increase from the same quarter last year, while Kenshoo clients increased social ad spend 33 percent year-over-year (YoY) in Q4 2014. A quick look at social ad performance from the highly competitive holiday shopping season explains why marketers have flocked to social:

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Changes in the Facebook landscape, such as the migration of ads from the right hand side to News Feed, and greater mobile adoption enabled retailers to capitalize on higher value inventory in 2014 compared to 2013. Accordingly, retailers eliminated wasteful impressions and generated healthy YoY growth in clicks and revenue, thus driving click-through rate (CTR) to an all-time high.

Although competition for ad views was high, retailers delivering highly targeted messages with an eye on maximizing bids and budgets managed to keep overall costs down and engagement and revenue up.

Put simply: social marketing remained an efficient channel, with CPC down YoY at $0.35. CTR continued rising as retailers segmented their audiences to reach the most profitable customers, contributing to a $2.58 return on ad spend.

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Not only are social ads effective on their own, but according to a separate Kenshoo study, they also positively impact paid search campaigns when the two are paired:

  • On average, the paid search and paid social programs saw $2.19 in combined incremental returns for every $1.00 spent on Facebook ads
  • When Facebook ads were utilized, the paid search campaign generated an average lift of 18 percent in Average Order Value and a 13 percent lift in Conversion Rate compared to the pre-test period in which Facebook ads were not in place
  • The rate of clicks on the website’s Store Locator following a paid search click increased for the test period by 79 percent on average over the pre-test; this signals a greater intent to visit a physical store among customers exposed to Facebook advertising

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There’s still room for efficiencies

Social advertising works, but like any other emerging channel, there’s still room for marketers to discover and optimize campaigns toward greater efficiencies. The first step for this optimization begins before any campaign, when marketers set goals and forecast expected results to measure against.

Goal setting establishes the results a marketing team hopes to achieve with its dollars across all campaigns, making it the most important exercise for budget planning. Establishing unique goals each budgeting cycle helps prevent marketers from falling into a trap of complacency (“We did X last year, so let’s just do X again”) while optimizing towards growth. Effective marketers continuously raise the bar of success and wisely utilize and fine tune the budget – the most valuable resource at their disposal – to help tip the balance between a good or bad year.

Forecasting involves predicting how various opportunities will help achieve goals to ensure good decision making and enables marketers to explain their final course of action to their marketing team or the executive team. Marketers should combine recent historical data and expertise to define the data set to be used for forecasting; year-over-year data usually works well, but sometimes what happened a year or two ago may be too outdated.

Of course, goal setting and forecasting makeup just the first step; marketers should continuously monitor campaigns against goals and forecasts to ensure they perform as expected and adjust them if they don’t, which can be a mammoth task for campaign portfolios. Enter automatic optimization tools, which have just become available, to deliver faster, better, more complete results.

Leveraging the power of technology

Automatic optimization tools leverage technology to look holistically across campaigns to achieve program goals; it’s like getting an aerial view of campaigns to see the whole portfolio at once. Machine learning can process more data points and audiences than people and dynamically adjust marketing investments and budgets within a social portfolio to optimize towards defined return on investment (ROI), cost per acquisition (CPA), and other goals and KPIs.

The algorithms used by automatic optimization tools calculate the likelihood of future conversions; suppress ads with no chance of hitting KPI goals; and set budgets as a constraint to increase or decrease spend across the entire portfolio.

As an example, Targeted Victory recently used Kenshoo’s Social Portfolio Optimization to reduce acquisition costs, with the final CPA landing at half of the set goal:

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Regardless of which technology provider marketers use, automatic optimization tools offer the next evolution for social advertising by squeezing more out of growing social ad spend and making already impressive performance that much better.

Steven Hartman is vp of marketing for Kenshoo and has more than 20 years of product and brand marketing experience in digital media. He can be reached at steven.hartman@kenshoo.com.

Top image courtesy of Shutterstock.