In its second-largest acquisition, Amazon buys the company for $970 million.
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Facebook ads play a very different role than ads on Google, says Greg Bettinelli, senior vice president of marketing at HauteLook, an online private sale apparel retailer that was acquired this year by multichannel retailer Nordstrom Inc. Consumers search on Google when they are seeking to buy something, and so it makes sense to serve up a "Kate Spade Handbags" ad when a consumer searches for "Kate Spade Green Purse." But Facebook ads are more about sparking consumer interest in products they may not know they want. "People aren't looking for something specific on Facebook," Bettinelli says. "That means you have to find a way to be relevant to them."
For HauteLook that means serving up attention-getting content in the ad, such as inviting consumers to a private sale on brands they Like that takes place only on Facebook.
Thus, when the retailer works with the social commerce technology company 8thBridge Inc. (formerly known as Alvenda) to host an Urban Decay sale on Facebook that is only open to consumers who follow HauteLook, the retailer can target women in a specific age range who Like specific cosmetic or beauty brands. The retailer also targets consumers who Like its competitors, such as Gilt Groupe Inc.
"If I know that a consumer Likes our competitors, she probably should Like us too," says Bettinelli. "And the same thing is true if we know that they Like the brands we sell."
The key is finding creative ways to make a message resonate. "You have to give them a reason that you're relevant to them," says Bettinelli. Take HauteLook's Diane von Furstenberg sale, which was advertised via Marketplace ads. Roughly 40% of the retailer's sales were from consumers who hadn't previously Liked the retailer, many of whom learned of the sale from those Marketplace ads.
Ads, like everything else on the social network, should be tailored to the customer, says Tom Arrix, Facebook's vice president of U.S. sales. "The individual person should be at the center of a marketer's plan," he says.
That's the idea behind Sponsored Stories. The offering, which launched in January, is a targeted ad service that puts company logos alongside content from consumer comments that relate to the company. The consumer's friends then see that ad as they move around Facebook.
Consumers can click on the ads to visit advertisers' Facebook pages. A consumer must have had a direct interaction with the brand through a Facebook channel, such as clicking that he Liked a post, in order for his information to be picked up as a Sponsored Story. A Facebook user that casually mentions a company or product in a post will not be mentioned in a Sponsored Story.
Using the ads to generate consumers Liking its brand has worked for 1-800-Flowers.com Inc., which runs both Marketplace and Sponsored Stories campaigns. During a three-week span in which it ran Marketplace ads and Sponsored Stories that highlighted a consumer's friend who Liked 1-800-Flowers, the retailer more than doubled its Like base to more than 120,000 consumers.
When a consumer views the Sponsored Stories ad he can click that he Likes the ad directly from his news feed. That minimizes the steps a shopper has to take to Like the brand, says Chris McCann, 1-800-Flowers president. "In the world of e-commerce, and especially the world of social commerce, the fewer steps the better," he says.
The personal nature of Sponsored Stories is key to their effectiveness, says McCann. "They show you your friends engaging you, not the brand reaching out to you, and that draws your attention and gives the ad an intrinsic level of trust," he says. That may explain why the retailer's Sponsored Stories produced double the click-through rate of its normal Facebook ads, he says.
Facebook's ability to leverage a consumer's network of connections is one reason marketers like McDonald's are turning to the social network to promote new products and—in the case of the fast food giant—even hire staff. Indeed, for online retailers, it's hard to imagine another vehicle that will provide them with as much detailed information about so many shoppers.