• by Paul Pellman , July 17, 2012

In the week leading up to the Facebook IPO, news broke that General Motors was pulling $10 million in display advertising from the world’s largest social network due to poor performance. But after digging into the story a little deeper, one thing became clear: There seemed to be an issue with how GM was measuring its display advertising campaign performance.

Several news articles reported that GM was relying on click-through rates (CTRs) or last click to measure display campaign performance on Facebook. While the CTR is a great indicator of paid search performance, the online marketing industry has long known it’s an unreliable and ineffective way to measure the true impact of display. To get a clearer picture of why this is the case, let’s compare the different roles search and display play in the marketing mix, and the ways people interact with the two ad formats.

Paid search is known to affect conversions or sales near the bottom of the marketing funnel, where people are more likely to take an action, such as clicking on an ad to buy a product. That’s why the CTR is a reliable indicator of paid search campaign performance. Display’s primary role, however, is to generate awareness and consideration at the top of the funnel, where immediate actions (like clicking or buying) generally do not occur as often. As a result, one would expect few clicks to occur on display campaigns even if they have the desired impact on overall campaign performance.

That begs the question: How do you figure out the effect display has on campaigns or other channels? Several studies have looked into this closely, including one conducted by Yahoo. Time and time again, research has shown that display advertising provides tremendous lift (anywhere from 20% to 40%) to paid search and organic search.

So, if display is highly effective in helping to drive conversions but the CTR is an inaccurate to way to measure its overall effect, what can marketers do to determine the specific influence their investments in Facebook display advertising are having on their businesses?

First, collect the right impression data. Rather than focusing on CTRs, pay attention to more reliable display performance indicators, such as raw impression data.  Facebook has taken steps to help brands more easily gather this kind of information by allowing advertisers to use select third-party ad tags that collect and track detailed, raw impression-level data from Facebook display campaigns, which can be used to understand how such campaigns fit into the overall marketing mix.

Once brands have the right impression data on hand from their Facebook display campaigns, they need to figure out how campaigns drive or influence conversions. The best way to do this is with a data-driven attribution analysis. Attribution is a sophisticated algorithmic-based solution that simultaneously and holistically analyzes detailed ad campaign data from all types of channels, including search, display, e-mail and even offline marketing initiatives. Attribution then objectively assigns the proper credit that each channel and creative is due in driving conversions for the campaign.

Whether you’re running campaigns on Facebook, Twitter, Google or any other platform, it’s important to use the right methodology and tools to measure campaign performance. Doing so will help you make smarter decisions on where to invest your marketing dollars in the future to achieve your brand’s goals.