Why Facebook Ads Are Undervalued By 800%

Grant Muckle of I Spy Labs says that advertisers shouldn't look for instant conversions on Facebook ads, but instead think of them as the first step in a series of things that will lead to an eventual sale.

Facebook advertising is even more powerful than previously thought.

Advertising efficacy is usually assessed using the “last click,” meaning that the point of interaction right before the conversion is considered. But this methodology has become outmoded in the context of Facebook advertising because people simply aren’t in a buying mindset when playing around on the social network, making it highly unlikely that a brand advertising on the site will get an immediate conversion.

Most Facebook ad clicks lead to a conversion at a later time and through a different channel. But last click analysis would have inaccurately attributed these conversions to last channel in the purchase path.

Quite often this shows search as the beneficiary because when people are ready to buy something online, what lazier way is there to navigate to your chosen brand website than by quickly searching for the site?

My experience of analyzing advertisers’ Facebook advertising conversions shows that between five and eight times as many sales from Facebook happen on a first click basis rather than last click.

Last click valuation refers to focusing on the advertising channel that a customer most recently interacted with before converting to a sale. Let’s instead consider Facebook to be the first click in a sequence of interactions that ultimately leads to a conversion on any channel.

For higher consideration purchases, where the length of time to conversion can be several days or weeks, this type of analysis is particularly important.

A typical example is the travel industry where we are seeing more than 30 percent of conversions take longer than seven days from the first visit to final conversion. This has a big impact on measurement.

The result for travel is that awareness-creating forms of advertising such as Facebook are often either the first click in this process or an assisting click. In the samples we analyzed Facebook was the first click in the transaction over three-and-a-half times more than when it was the last click. This ratio increases up to six for assists.

When compared to other channels this is one of the highest ratios — showing the power of Facebook’s influence on other channels. The main beneficiary is paid search where more than 40 percent of transactions converted on price per click, where Facebook was an assisting click.

Another interesting statistic we uncovered was that the average order value increased with the longer paths to conversion. This makes sense since the bigger the purchase, the more
thought goes into it. This adds another dimension to the importance of accurate tracking and attribution, particularly if last click (as a method) is undervaluing the order values as well as the transactions.

Grant Muckle is the managing director of I Spy Labs.