July 23, 2012

A Facebook Story

NPR has a podcast called Planet Money.

Recently they did a show about Facebook. If you have 20 minutes I suggest you listen to it here. The show aired a few days after the Facebook IPO.

They did an interesting experiment. They took a small, popular pizza place in New Orleans called Pizza Delicious that was looking to expand, and paired them with a social media marketing expert in San Francisco who advises large companies on Facebook strategy. Together, they created a Facebook ad campaign for Pizza Delicious, and tracked the results.

Here are the highlights:

The NPR and pizza people thought that the target for the Facebook campaign should be people on Facebook who say they like pizza.

The social media expert disagreed. He said that Pizza Delicious had 2,000 fans on its Facebook page, and the target for the campaign should be the friends of Pizza Delicious' fans. This is very common Facebook ad strategy. In this case, 74% of people in New Orleans (224,000 people) were friends of someone who was a fan of Pizza Delicious.

The pizza owners explained to the social media expert that Pizza Delicious' customers tended to have ties to the Northeast where, presumably, people appreciate good pizza. The consultant then recommended that they further narrow the target by cross-tabbing friends of Pizza Delicious with people who live in New Orleans but are fans of Northeast cultural entities e.g., The NY Knicks; NY Rangers; Carmelo Anthony; NY Times, Notorious B.I.G., New Jersey Nets, bagels, etc.

They came up with about 15,000 people who lived within 10 miles of New Orleans, were friends of the pizza place's fans, and had some cultural connection to the New York area.

According to the NPR reporter, she felt the targeting was "perfect...We were golden. This could not miss."

They placed the ad. Soon after the ad began appearing on Facebook the NPR reporters started receiving calls from the pizza owners. Not a single person had clicked on the ad. Not one.

The next thing they did was toss out the advice of the social media expert, and developed their own strategy and started running new ads. These ads "killed" -- twice as many responses as normal. Because Facebook puts more weight behind ads that get good response rates, the ads ran a lot. In fact, they appeared over 700,000 times.

One result was that they quickly added 10% more fans to their Facebook page. However, as the owner says, "through a long night of asking every single customer where they found out about Pizza Delicious, none of them said they found out about us through the Facebook ad. Zero people."

As the NPR reporters said, it's way too early to say if this Facebook campaign will be successful. Also, I am not a big fan of using anecdotes as representative of anything other than the case in point.

On the plus side, those 700,000 ad appearances cost the pizza guys a grand total of $240. and they got a $10 donation from someone who wanted to help them expand.

According to a valuation expert from the Tuck School of Business at Dartmouth, in order for Facebook to justify its IPO price, ten years from now they will have to attract 10% of all the ad dollars spent on the planet. Not just U.S. ad dollars, but all ad dollars -- Chinese, Brazilian, Ukrainian, and Tunisian. And not just 10% of online ad dollars, but all ad dollars -- TV, radio, print, outdoor, blimps, balloons, butt-danglers, hooter-wobblers...

Let's just say I'm skeptical.

Thanks to Jason Headley for the heads-up on this story.


FamousRob said...

That last stat is pretty mind boggling...

Chris Seiger said...

If I may paraphrase a certain Prince, "It's a giant wank."

sallan3 said...

There is a deeper issue here - a "marketing expert" not listening to their client. Look, I realize we are generally only as good as our clients allow us to be. and, that we often have to use our knowledge to "guide" our clients to a better place. But sometimes - a client actually knows their customers better than we do. In this case, the facebook "guru" over thought the situation. A pizza place in Nawlins is interested in one type of customer - someone who loves a good pizza. If someone actually went to the trouble to put "pizza" in their likes section on Facebook they they must REALLY like pizza. As far as recall - that is always the bane of advertising. People remember the last thing they heard or read. They may hear a radio campaign but see a coupon in the mail and attribute the recognition to the mailer. I'd be curious to know if the pizza place depended solely on Facebook for their marketing or just used it as a part of an overall strategy.

Tedel said...

How I love this blog...

The Honourable Husband said...

As you've pointed out: a medium where we share personal, private matters about ourselves is NOT a suitable medium for advertising.  

How popular was that phone service, launched a few years ago,  which would interrupt your phone conversation with an ad in exchange for free calls? 

What about an electronic ad that appeares on your plate during dinner parties?  Would you click on it?   

How about a suitcase that's free, but which shows an ad to all and sundry as it circulates on the baggage carousel?

Facebook's problem is a fundamental one.  It's commercializing something highly personal—like friendship. 

God said...

this is a post of pure beauty..

Pauline Randall said...

I think that Facebook will have trouble keeping its dominant position in the market as a social network in ten years time never mind also cleaning up on 10% of all advertising spent. All they are doing is keep adding ways that you can pay and not delivering  much for it. At one time I would recommend Facebook for specific, targeted advertising but now I'll look at other options for clients before that.