Sponsored Stories Can Scale Up Facebook Campaigns

Here's an analysis of Facebook's new sponsored story advertisements by Dr. Siddharth Shah, senior director of business analytics at Efficient Frontier.

Our purchase decisions are strongly influenced by what our friends like and recommend.

The influence that friends have on our purchase decisions is one of the primary attraction points for Facebook’s sponsored story ads — ads that derive content directly from friends’ interactions with a brand’s Facebook presence (page, app, place, domain).

Facebook’s new sponsored story advertisements promise enhanced influence via the explicit endorsement of friends. But do they deliver? As we analyzed preliminary advertiser data from sponsored story ads, we felt validated by some of the results but were surprised by some others.

Sponsored Story Ads Versus Conventional Object Ads

When we looked at the sponsored story and object ad data for a set of our clients over a period of four weeks, we found that Sponsored Story ads had a 39 percent lower click-through rate) than object ads. At first glance, this is counterintuitive (and surprising).

We expected users to respond with greater propensity to ads for brands that their friends liked. Hence, intuitively CTRs should be higher for sponsored story ads and not lower. A deeper look at the data unveiled the reasons for lower CTRs.

When we looked at unique CTRs, the sponsored story CTRs were 3.4 times that of object ads. In other words, CTRs on sponsored stories appear lower because the same users have been ad served many more times in the time period. This is further validated when we look at the average impressions per user. The sponsored story ads were ad served more than 10 times that of their object ad counterparts.

Finally, and most importantly, we were able to drive a 22 percent lower cost per acquisition on sponsored story ads versus object ads in this time period.

Sponsored Story Versus Object Ads: Key Metric Share

How much incremental volume can advertisers drive from sponsored story ads economically? As we optimized Facebook campaigns of our clients on both ad formats, we found that we could drive about 33 percent of conversions from sponsored story ads spending 28 percent of our total budget. What’s more, the impression share and click share were 49 percent and 25 percent respectively. Thus sponsored story ads are an economical way to gain impression share while at the same time an easy way for advertisers to scale their conversion volume by about 30 percent.

Should you advertise in the sponsored story format?

We are optimistic about sponsored story ads. Our enthusiasm is echoed by Facebook, which recently unveiled three additional sponsored story formats, bringing the total to seven. Advertisers would be well advised to try sponsored story ads to leverage its three key benefits:

  1. It’s an economical way to scale Facebook campaigns.
  2. It’s an easy way of gaining impressions on the Facebook platform.
  3. It’s a great way to leverage the explicit endorsement of a like.

Dr. Siddharth Shah is senior director of business analytics at Efficient Frontier.

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