Facebook is trying to convince advertisers not to abandon ship.
The social media giant, battling a string of bad economic news ever since its lackluster initial public offering in May, explains that "clicks" aren't the best way to measure advertising effectiveness.
According to a new study commissioned by Facebook, less than 1 percent of sales resulting from online advertising started with a customer who clicked on an ad they saw on a website.
"We ended up in this world where the click is king," said Brad Smallwood, Facebook's head of measurement and insights.
Smallwood explained that while clicks may work well for companies that rely on immediate online sales, they don't reflect the kind of awareness that a brand management campaign is designed to build.
Facebook claims they can now give advertisers a more useful metric, one that shows the number of in-store sales generated by an online ad view. The impact of viewing an ad builds up over time in a way that is difficult to measure.
A user viewing ads for a particular soft drink probably won't click an ad to buy a case online, but exposure to those ads may influence a future buying decision.
Still, advertisers have expressed concerns that not enough Facebook users are clicking on their ads. General Motors, the car company, pulled all its online advertising from Facebook just days before the IPO.
"Advertisers have been increasingly vocal about concerns regarding effectiveness of Facebook," said Brian Wieser, an analyst for Pivotal Research Group.
These doubts have been affecting Facebook's monetary health. Its stock price is down 43 percent since the initial public offering.
Chief operating officer for Facebook, Sheryl Sandberg, has attempted to allay fears of failure. She insists Facebook ads are "incredibly effective," and cites 60 studies Facebook has conducted in the last year. Of them, 70 percent showed a return on investment from spending on Facebook ads of 300 percent, while 49 percent showed an ROI of 500 percent.
Related Stories
Social Media Passwords Safe: California Bans Employer Snooping In Email and Facebook Accounts
Top 50 Startups to Watch 2012: WSJ's Next Big Thing List
© 2017 Jobs & Hire All rights reserved. Do not reproduce without permission.
