• by Justin Merickel , March 17, 2011

Some view the Facebook ads marketplace as biddable, and therefore label it a lower-funnel opportunity like search (i.e., direct marketing). Some have argued that Facebook ads are not directly tied to consumer intent, use images, and should be characterized as upper-funnel (i.e., brand marketing). I'm here to argue that because of the new form factor of social media, Facebook ads can't and shouldn't be characterized as upper or lower-funnel.

Let's start by examining the upper-funnel potential of FB marketplace ads. The Facebook ad is a small, static image with limited text. The small stature of the creative unit is reason enough to doubt its potential to alter materially brand awareness, brand perception, or purchase intent.

Yet there is evidence of substantial impact from seeing ads that reference friends who like that ad/product/service, or seeing an ad that is a direct endorsement by a friend via sponsored stories. Facebook touts a study that the ads drive a 4x lift in purchase intent. Clearly, there is some potential for Facebook ads to address upper-funnel metrics.

Now let's take a look at the lower-funnel potential. The text-heavy, CPC-biddable, keyword-targetable Facebook ads remind us of search. But the signal from Facebook's keyword targeting -- primarily leveraging the data from users' profile, such as geography and likes -- is not nearly as powerful an indication of interest as the clear intent of a search query.

The result of the variance between Facebook's affinity targeting and search's intent targeting is that Facebook ads tend not to perform like search. (CTRs and conversion rates tend to be lower.) However, if optimized across targets, bids and creative, the ads can perform like search and deliver strong lower-funnel/direct marketing performance.

While there is value in both upper- and lower-funnel metrics with Facebook, the larger value is in what happens socially as a result of a successfully placed ad. Using a recent buzzword, it is the "social amplification" rather than just the ad itself that creates the most value.

The average Facebook user -- of which there are more than 600 million -- has 140 friends. When a brand is "Liked" by a Facebook user, the action of "Liking" that brand is broadcast to all friends in their newsfeed. If that "Like" is "Shared" (a feature that is now merged with the "Like" button), the action is broadcast to all friends' newsfeed in the form of a story. Therefore, the mere action of "liking" both on and off Facebook is very valuable. But that is just the tip of Like-iceberg, or as I like to call it the Likeberg.

Facebook allows all fans and connections of fans to be targeted directly with marketplace ads. When possible, Facebook adds details about friends who "Like" the brand to ads delivered to connections. Adding the brand "Like" to the ad unit itself adds a powerful recommendation element to the ad.

Facebook's Sponsored Story Ads take this a step further using the copy of the individual's "Like" as the ad itself. Sponsored Stories are essentially a turnkey way to broadcast recommendations with the control residing with the recommended (brand) vs. the recommeder (user). Clearly, "Likes" are the fuel for Facebook ad campaigns.

We're just beginning to descend into the core of the Like-berg. All "Likes" give brands the ability to publish to the newsfeed of fans. Think of newsfeed publishing as a sort of opt-in email list that has arguably has more buy-in and greater visibility than email, especially with certain populations such as the youth category. Brands can offer coupons, promotions, or offers as well as leverage FB elements like polls and apps to drive engagement. The key to extracting value from news feed publishing is getting the right value-mix to customers.

Each consumer who becomes a fan provides a rich set of data to analyze. This data-set becomes all the more rich as they engage with applications. This data can both inform targeting and tie directly into Facebook ad optimization.

Obtaining "Likes" probably sounds pretty good to most marketers. Unfortunately, we can't put an actual value on social amplification. Yet. There are companies like ChompOn that have quantified the value of a "Share" in terms of daily deals. Also, Context Optional has rich data that quantifies the virality of application engagement driven by Facebook ads (ranging from 3-12X). But attempting to value likes on comparative metrics to existing valuations seems a little useless. The bottom line is that the value of a like could be nothing if a brand doesn't extract value, or invaluable if used to its full extent.

I would be remiss not to mention one last "Like" wrinkle. To have your news feed posts show up to your fans, they have to regularly engage with some element of your experience: polls, apps, offers, product likes, etc. A good way to drive this re-engagement is with Facebook marketplace ads -- a brilliant revenue move by Facebook.

To bring this full circle, the full value of Facebook advertising is much larger than the immediate impact of the ad. To not consider the social impact of marketing on Facebook is to miss the forest for the trees. And in my experience, marketers are much more interested in growing a forest of revenue opportunities than cultivating a single sprig of sales.