Online Marketing: Advertising on Facebook – What & How

By - Posted under: Online Marketing, Social Media on January 15, 2012

Update 1: With Facebook filing for IPO, the latest numbers have just came in. We have updated this post to provide the most accurate numbers. (February 2nd, 2012)

With 800 825 millions registered user worldwide, Facebook is providing a great platform for online marketing and a huge user base to advertisers and companies alike to reach out to their potential customers. Furthermore, with average time spent per user on Facebook is on the rise, Facebook seems like another logical choice for online advertising. But what is Facebook advertisement and how to use it?



What Is It About?

On your Facebook page, the sidebar on the far right has lots of information, such as Real Time updates on what your friends/connections are doing, People You Might Know, and at the bottom will be Advertisement under the Sponsored section, as illustrated below.

Facebook advertisement

Some use the advertising space on Facebook to promote a deal (cheap flight, mobile deal, promotion), products (new phone, laptop) and Facebook page. How it works is that it targets users with “interest” and “keywords”. For example, if a person has “travel” as the interest and sometimes posted some pictures from his traveling experience, then the chances of him seeing advertisement relating to travel will be higher.

Currently Facebook is offering two choices for advertisers to advertisement: Pay per Impression (CPM) and Pay per click (CPC). Both choices provide the options of directing the users to a Facebook page or external URL.

Pay per Impression (CPM) – As the name indicated, pay per impression, or CPM, is you pay Facebook a sum on how many times it is shown to users and the price is normally by per thousand.

Pay per click (CPC) – Pay per click (CPC) is the rate how much you are paying when the users are clicking on your advertisement to see more.



How Does It Work?

How does Facebook advertising work?

Bidding. That’s how it works.

Advertising on Facebook is almost the same as advertising on Google (we wrote and explained how Google AdWord works here). Think of it like an auction, and the Facebook advertisement space (as shown above on the sidebar of user page) is up for advertisers to bid.

For example: You are in traveling business and you want to promote a special deal on Facebook. Currently there are few more travel agencies promoting as well, so the average bid price is USD1.00 for CPM (that’s USD 1.00 for 1,000 impressions). If you bid USD 1.10, you will get the priority and your advertisement will be displayed more often to the target market. Then you set the total budget that you are willing to spend. If you are willing to spend a total of USD110 for your campaign, your advertisement will end after your advertisement made 100,000 impressions.

It works the same for CPC; set the target market (gender, age group, demographic, etc), then the price that you are willing to pay per click, and finally your total budget. Once your budget runs out the campaign will stop.

Facebook provides a campaign report during the advertisement campaign with details such as your bidding price, advertisement type (CPM or CPC), total impression, CTR (click through rate) and total spent. Please note that the price your set is the highest price you are willing to pay. The actual cost is different daily and you can actually see the average cost for CPC or CPM in the report, as shown in the picture below.


Facebook advertisement campaign report

[NOTE: CTR is calculated by total click over total impression. From the report above, the total impression is 71,376 and total click is 72. So the CTR is 0.101% (72/71,376).]



CPM or CPC?

In general, we found that using CPC will yield higher impression because in order for Facebook to earn the advertising money, they will display your advertisement more often to increase the click from users. But we cannot say that CPC is the only way to go as there were cases where CPM yielded better results (higher CTR) than CPC for the same duration of the campaign.

If you are advertising on Facebook for the first time, we recommend that you do a test run on both campaign, and then tweak the parameters, redefine the target market, the message of the advertisement, and once that is done, you will have a refined formula for that advertisement campaign. Then based on the report from Facebook, you will know if CPC or CPM is more suitable for that campaign.

What is more important is the advertisement itself. If you have an attractive and catchy advertisement and with the right message, it is more effective than advertisement that people won’t even notice. If it is done carefully, both CPM and CPC can be effective and yield the same result.



Conclusion

There is no true formula that fits all. First, you will need to know your requirements, such as demographic, gender, age group, and etc. Then it is important for you to define your goal, like what you want to make out from advertising on Facebook such as creating awareness, earn revenue from selling the products and/or services or promotion. After that, you will need to draft a detail plan with a clear budget in mind and then plan on maximizing your investment. Finally, decide on the price that you want to bid. In order to maximize your advertisement on Facebook, it is important not to overbid.

Most importantly, your message (picture and text) must be carefully crafted and planned because a good advertisement will attract more attention, thus creating more clicks from Facebook to your landing page (either Facebook page or your website). Converting the visitors to become a customer is more important than just advertising on Facebook, so the landing page of your website (the specific URL you provide in the advertisement) must be carefully planned with the correct layout and right information.

Facebook provides an attractive platform for advertisers to reach their potential customers, but if the whole campaign is not carefully plan out, the result will not be as desired. Furthermore, Facebook has a total of 800 825 million registered users and 350 425 millions, or 43.75% 51.51%, of these users are using mobile devices and Facebook mobile apps (Facebook app for iPhone, iPad, android phones or android tablet. Source of statistic from Facebook here) and Facebook advertisement doesn’t show in mobile app. Of course, some of these users using mobile apps will still use their laptop or desktop to go to Facebook website, but we cannot ignore the fact that some of these users will not see the advertisement.

Thus it is important to rethink your strategies to further your reach instead of solely relying on Facebook for your online advertisement and online marketing campaign.

If you have a question or need help with Online Marketing, Online Advertising or just want to chat, do drop us a call or email us.

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