Facebook to Help Brands Track Ad-Driven Sales

Conversion measurement tool smartens ad buys as well

The old knock against Facebook ads claimed the social network didn’t want brands to drive users off of Facebook because advertisers that kept users inside of Facebook paid lower rates. That doesn’t really fly for marketers like retailers who directly attribute a campaign’s success to sales or new customer sign-ups—especially during the shopping-crazed holiday season.

During this year’s season of giving, Facebook will be rolling out a conversion measurement tool specifically engineered for direct-response marketers that will not only show companies how their Facebook ads drove actions on their own sites but also use that conversion data to inform future ad buys. Reuters first reported the news this morning. Facebook’s product manager for Insights David Baser said the company has been testing the tool since late August and will launch it officially later this month.

“Marketers have been asking for this system for a long time from us. We know it’s incredibly important to marketers that they be able to measure the effectiveness of their ads, and the holidays are a great opportunity for direct-response marketers to drive sales and really see the effectiveness of [their ad campaigns],” Baser said.

Here’s how the self-serve tool works. Marketers add a piece of code from Facebook to whichever site pages they want to measure conversions on, be it a checkout page or an email newsletter sign-up page. When users click on a Facebook ad that leads them to that page, Facebook will see that the page loaded and count it as a conversion in the marketer’s Ads Manager dashboard.

The real key is that the tool can unlock the full path to conversion from a Facebook ad. For example, a retailer could run a Facebook ad promoting a shoe product. That ad could link to the shoe’s product page on the retailer’s site. Retailer adds the conversion code to that page, Facebook counts the conversion, easy. But what the retailer really wants is for the user to put the shoe in their online shopping cart and then check out. So long as the retailer adds the Facebook code to those pages as well, Facebook will be able to see that those pages loaded and count each step to conversion.

Facebook has designed the tool to improve ad buys as well as product sales (among other conversion objectives marketers could drive). Direct-response marketers may aim for conversions, but they’re usually stuck measuring clicks. So when they try to refine their ad buys, they usually based that optimization on who clicked on their ads, which is a broader set of folks than those that click and convert. Facebook did expand the actions advertisers could optimize for back in the spring, but those were all Facebook-oriented. Now Facebook is really expanding things.

Because Facebook can get an aggregated picture of the types of users that buy a product or sign up for an email newsletter after clicking on ad—including gender, age, interests and connection to brand’s Facebook Page—the company can run an advertiser’s ads to those types of users most likely to convert, Baser said.

But advertisers won’t pay for these ads based on the number of clicks they generate. Rather these operate on Facebook’s optimized CPM (cost per thousand impressions) basis, which means Facebook crunches the types of users most likely to fulfill an advertiser’s objective. Whether or not those users actually click on the ad is another matter. That could concern performance-minded advertisers, but in testing the conversion-oriented OCPM ads, Facebook saw the campaigns averaged a 40 percent lower cost-per-action than the exact same ads run on a cost-per-click basis. That means a brand like social shopping site Fab.com—which saw 39 percent drop in cost-per-action—was getting more value than paying for clicks.

“Anytime you’re reducing costs and increasing ROI, that’s the end goal for us and marketers,” Baser said.