November 20, 2012, 1:19 PM

Facebook aims to show retailers that its ads work

A tool will track purchases made by consumers who view ads on Facebook.

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In order to generate more revenue through advertising, Facebook Inc. must show retailers and other advertisers that ads on the social network work. To that end, Facebook plans to roll out a new tool by the end the month that enables marketers to track purchases made by consumers who have viewed ads on Facebook.

The new tool, which is being tested by retailers such as flash-sale merchant Fab.com, is built for marketers using direct response ads—ads aimed at driving sales, rather than those focused on brand building.

The tool enables marketers using Facebook’s self-service ad creation tools—which typically appeal to smaller advertisers—to create code that, when added to any page on their web sites, can measure conversions. Those web pages can include checkout, registration or donation pages.

When one of those pages loads after a consumer has clicked on the ad, the code snippet alerts Facebook. The conversion is then tallied in the social network’s ads manager dashboard. All the shared information remains anonymous, Facebook says.

Marketers can then use that information to better target ads if they use Facebook’s automated ad placement tool, the social network says. The ad placement tool lets an advertiser prioritize his marketing goals, such as driving Likes of his page. The tool automatically delivers ads against those goals in what Facebook says is the most effective way possible by leveraging the social network’s various ad formats. “This allows advertisers to maximize the value they get from their budgets,” says Facebook.

Fab, No. 449 in the Internet Retailer Top 500 Guide, found that using Facebook’s new tracking tool in concert with the social network’s automated ad placement instrument helped it reduce its cost per new customer acquisition by 39%. Facebook defines a conversion as a consumer completing the ad’s desired action, such as signing up for a Fab.com account.

The new tool represents the latest move by the social network to get friendlier with e-retailers. Since the social network’s April hiring of eBay Inc. executive Nicolas Franchet to head up its e-commerce global vertical marketing team, Facebook has introduced a slew of new advertising units, measurement tools and Facebook Gifts, which enables U.S. shoppers to buy  presents for friends on Facebook. The social network also has tested Collections, which offers a new way for retailers to present their products to Facebook users.

In related news, the social network last week added a number of new retailers to Gifts, while also rolling out the feature to more consumers. The program builds on Facebook’s longstanding practice of highlighting consumers’ friends’ birthdays, anniversaries and other notable personal dates in the top-right corner of the home page under the heading “Birthdays and life events.” Under a note that tells a consumer that his friend “John Smith is 31 today” he sees a message that says “Give him a gift.” Consumers also see a “Give him a gift” message when they view the pages of their friends who are having a birthday.

When a consumer clicks on that link he can select a product to buy for the friend. Consumers can either select the exact style or product, or opt to let the friend choose. He can then write the friend and note and share the gift—either publicly on his friend’s wall or via a private Facebook message. The consumer giving the gift can either pay immediately or when the gift is shipped.

When a shopper receives a gift, it appears on the page as an image of a wrapped gift. When clicked, the gift unwraps and he can select the color, style or other options, as well as enter his shipping address. If he doesn’t like the item, he can swap it for a different item available in Gifts, without his friend knowing.

Digital products, such as gift cards, are sent immediately. Physical products are packed in a Facebook bag and sent by the manufacturer to the recipient within a few days, says Facebook.

Among the new retailers in Facebook’s Gifts program are Gap Inc. Direct, No. 22 in the Top 500 Guide, Fab, and Brookstone Inc., No. 180. The social network also began enabling shoppers to give subscriptions to online video service Hulu Plus, as well as streaming music services such as Pandora and Rdio.

 

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