From Keyword Targeting to People Targeting: Talking Performance Advertising with Facebook's Tim Kendall

On Facebook, marketers have a variety of options when it comes to reaching Facebook’s 150 million active users. Advertisers can engage Facebook users through Facebook advertising solutions, applications on the Facebook Platform (either through Platform ad networks or rep firms or going direct), or guerilla-style activism.

In terms of Facebook’s own advertising solutions, while much attention has been paid to branded “engagement” campaigns that have been run in recent months, another important and growing part of Facebook’s advertising business is its performance ad system. Although performance advertising may not sound as sexy as sacrificing your friends for a hamburger, “tens of thousands” of advertisers are using Facebook’s performance ad system according to the company. Facebook’s self service tools allow advertisers to run campaigns on a CPC or CPM basis, and advertisers can drive traffic to either their own site or a Facebook Page.

In order to gain a deeper understanding of how Facebook sees its performance advertising business, we sat down with Tim Kendall, Facebook’s Director of Monetization and performance advertising head. Below, Tim shares his thoughts with us on Facebook’s positioning of performance ads in the marketplace, how performance advertisers are succeeding using Facebook’s solutions, and what messages about Facebook’s performance advertising opportunity are resonating with agencies today.

IF: Thanks for your time today Tim. Looking at your overall strategy, how does performance advertising fit into what you’re doing today?

TK: We like to think about it this way. If you think about the classic marketing funnel that’s very big at the top and very small at the bottom – where at the top you’re planting the notion of a brand in the consumer’s head, and at the bottom you’re delivering to a consumer who explicitly wants something, such as paid search – what’s happening at the bottom of that funnel is what we call demand fulfillment.  The guy at the top of the funnel may not even be thinking about photography if he’s on Yahoo Sports and sees a Canon banner ad. We believe that we play in the funnel above that threshold.

We don’t have people that come to the site to buy a digital camera, but we have a lot of users on the site who spend a lot of time on the site, and we think there’s a big opportunity for brand marketers to get broad reach and tell their story to those customers at the very top of the funnel. We can show an ad to people who have expressed an interest in photography. The next step down the funnel is where we see our performance marketing solution – toward the middle/bottom part of funnel.  We think there is a huge opportunity in latent demand right above the bottom part of the funnel.

What would you say are your core differentiators in that area?

Three reasons: 1) We have amazing reach, and we’re growing by a lot every day. The people who have the widest reach win the brand game. 2) We have a lot of information about you the user, because you’ve declared it to us so you can share it with your friends. We can look at your profile fields to determine your interests, and we can look at your status updates and know what your interests are today. 3) We know who you know. This is where we’re just starting to come out with a couple sets of offerings. The Social Ad offering takes into account the notion of who you’re friends with.

We think about both brand and performance together (but we have many marketers who come to us for one or the other). We think marketers increasingly want an end to end solution where you can first help them build their brand with large numbers of consumers, and then convert them into buyers. In terms of internal priorities, we view performance as equal to brand.

In the performance area, our core differentiators are: 1) We have a lot of information about users, so we can provide powerful targeting to advertisers so that they can efficiently allocate spend, and 2) We have market based pricing – it’s an auction, so advertisers don’t overpay. Also, “who users know” (Facebook’s Social Ads product) is something that some performance advertisers are leveraging, but it hasn’t become central yet.

How much lift do you see in click through rates when advertisers employ Social Ads?

On a click through rate basis, we see over 100% improvement when an impression is a Social Ad. For example, a local restaurant could do a happy hour ad and connect it to an event, so that when you RSVP, your friends get Social Ads. People come to Facebook to learn about their friends, so if you can make the advertising about their friends, it’s more effective. In addition, it may get seen by their friends in their News Feed as pure organic content – Facebook has decided that something like this is often relevant enough to not display like an ad.

Wherever we have greater density of information about users, we tend to be able to provide more relevant ads. Entertainment is a category that works well because those are the types of niche interests that users are willing to share on their profile. Categories that match up well with music, movies, books, hobbies tend to do well.  We can also target users based on what pages they’re affiliated with, which broadens the number of users we can target.  We are actually seeing success in every major category.

However, success tends to be more determined by the degree to which the advertiser understands how the system works and how targeting works differently than in other systems.  It’s a people targeting system, not a keyword targeting system.  On Google, I would select things like a specific camera brand or name to target. On Facebook, it would be more like interest or hobby keywords.

Paid search had the same challenge in the beginning.  We do have a lot of SEM agencies that are working with us and are seeing success, but we are still early on. There will be the constant process of educating agencies, the local market, and the international markets – where the objectives of advertisers are different.

So what are your current priorities for improving the performance ad platform in 2009?

I can talk in general terms. Generally, we’re trying to make it easier for advertisers to order ads and allocate their spend and get higher ROI.  But we spend just as much time thinking about how we can make ads more relevant for the user.  There will be more features and functionality that help with both of those. We want to figure out in a very transparent and privacy compliant way how to make ads more relevant.

Using the graph is something we want to do more in 2009, while respecting privacy as well. When your friends click on an ad, we view it as a reasonable inference that that would be valuable and fair to share with your friends. We’ve done pretty well with privacy on this because we stick to what the user provides to us.

In many ways we view Social Ads as less surreptitious than many types of behavioral targeting technologies. We also already provide “thumbs up/thumbs down” ad feedback so that users can tune what they see.

Can you share any stats around the size of the business last year?

We can say that we have tens of thousands of monthly active advertisers in the system. We are very pleased with revenue growth.

Finally – when you talk about latent demand and demand generation with agencies, what do you find most effective in helping them appreciate the opportunity?

Yes, again we think that there’s a tremendous opportunity in the latent demand realm where there’s a lot of open space on the internet to create value. No one has really figured out how to effectively generate demand and effectively measure that.

How do you make that sound compelling to agencies?  At the end of the day, an agency’s job is to find more customers for its clients. Going back to the camera example, there are so many cameras that are sold in a month. A fair amount of those are done through search. However, there are also a lot of people every month for whom it doesn’t occur to them to buy a camera off the bat, but they may buy a camera if you put the right ad in front of them at the right time.

We tell agencies they may have great SEM programs going on, but there’s a whole other set of customers that they can gain access to that would be accretive to their current channels. If you’re a 49ers fan, there’s a chance you’ll actively search for tickets, and there’s another chance you won’t. Because we know you’re a fan, we can put 49ers tickets ads on your profile. Had you not seen that ad, you might be in that set of people that never would have done a search or would have sought that product in an active way.

Thanks for your time Tim.

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