The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
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Facebook generated $1.329 billion in advertising revenue in the fourth quarter of 2012, a nearly 41% jump from the same period in 2011, but despite that growth, many marketers remain skeptical about the value of ads on the social network—only 29% of advertisers say social media advertising is effective and produces a measurable return on investment, according to a January report from The Nielsen Co. and its subsidiary Vizu. Facebook is trying to ease that uncertainty, in part by its announcement late last year that it would offer measurement tools meant to show marketers that their ad dollars are well spent on the social network.
The new tools enable marketers using Facebook's self-service ad creation service to create code that measures conversions that occur outside of Facebook that have been influenced by an ad seen or clicked on the social network. Retailers add the code to web site pages associated with their marketing goal, such as registration or checkout. That code alerts Facebook when a consumer loads the page in question at some point after viewing or clicking on the ad in the social network.
Facebook combines that action with the mountain of data it has about its users so marketers can better target consumers likely to respond to their advertisement. Flash-sale e-retailer Fab.com says using the tool helped it decrease its new customer acquisition cost by 39%. Facebook defines a conversion as a consumer completing the ad's desired action, such as signing up for a Fab.com account.
Measuring the power of the social marketing dollar promises to become more important to retailers this year. The Nielsen/Vizu report, based on a survey of more than 500 U.S. digital marketing and media professionals, found that 64% of respondents plan to increase their spending on social marketing this year—but that many marketers have yet to find effective ways to measure how social marketing sparks sales and lifts brands.
Beyond social media, some retailers are figuring out how to gain longer views of their customers—and constantly testing what might work. Build.com Inc., for instance, uses Adobe System Inc.'s SiteCatalyst tool—part of the Adobe Marketing Cloud platform—to collect and analyze data that divide shoppers into high- and low-value segments, among other groups, for ad targeting.
That enables the web-only home improvement retailer, for instance, to figure out how site visitors behave and purchase over two- to four-month periods. That information can then show the retailer that some expensive ad campaigns targeted at frequent customers might generate a loss in the short term but significant lifetime sales, says Brandon Proctor, the retailer's vice president of marketing.
Digital marketing firm Kenshoo Ltd. similarly aims to give retailers a wider view of their online marketing efforts with SmartPath, a tool it launched in mid-February. Via web cookies and mathematical models, the tool gives e-retailers a view of how a consumer comes to make an online purchase instead of, say, giving full credit to the last online action—or click—made by the consumer before buying.
Take the word "aquarium"—seemingly a natural term for a pet supplies e-retailer, but one also used by consumers when searching online for attractions, such as the Shedd Aquarium in Chicago, making its use potentially less attractive for retailers and marketers. "On the other hand, you may discover that the word 'aquarium' started people on the path to buy one," says Gordon Magee, Internet marketing and media manager for pet supplies e-retailer Drs. Foster & Smith, which was one of the retailers that tested SmartPath. That's where a tool such as SmartPath may help, as it can identify the multiple clicks that lead to a sale, and help the retailer assign a percentage value to each (out of 100%, which would represent the sale), he says. While similar tools from other vendors also provide data about a consumer's path to purchase, they tend to focus more on the first and last clicks, not on the clicks that can come in between, he says.
That means the retailer can, for example, spot a keyword that might not perform well in a paid search campaign, but yet helps set a consumer upon a path that might result in a purchase via an e-mail marketing message. With other tools, that e-mail message might get all or most of the credit for the purchase, Magee says. "Successfully optimizing for a consumer's true path to conversion is one of the holy grails sought after in online marketing," Magee says.
That's what all online marketers crave. And these new tools are helping them get a fuller view of the impact of marketing investments, even as online marketing options proliferate.