Facebook is expanding its latest effort to attract advertisers: A better way to track how an ad on the site influences a customer's purchase in the real world.
A year ago, the company unveiled a tool that helped advertisers determine whether someone who bought a product had been shown an ad on Facebook beforehand. The company on Tuesday said it is making the tool available to more advertisers around the globe, and automating many of its functions.
The idea is simple: There are customers who are influenced by an ad but wait to purchase a product later on. So Facebook built a tool to measure it by comparing databases of people who purchased products with those who did or didn't see an ad on Facebook.
The tool is just the latest effort by the world's largest social network to change how advertisers look at the effectiveness of its service and, ultimately, justify charging higher fees for online ads. Facebook is attempting to draw a more direct line between its ads and when a consumer buys a product, even if the person doesn't necessarily click on the link.
Brad Smallwood, who runs marketing science and measurement at Facebook, said his goal is to help advertisers track how ads influence behavior over time.
"It's not a Facebook challenge, it's an industry challenge," he said.
Much of the way advertising works on the Internet is that advertisers pay money either if someone sees an ad, clicks on an ad, or if they purchase a product after clicking on an ad.
The problem for Facebook is advertisers typically pay more when a customer clicks. Facebook made 64 cents every time a user clicked on an ad at the end of last year, according to a survey by advertising automation software maker Nanigans. By comparison, it took about 145 people who see but don't click on an ad to make that same 64 cents.
The Internet is expected to have accounted for about 25 percent of global advertising last year, according to industry researcher eMarketer, even though US adults spend nearly half their day on Internet-connected devices.
The way Facebook's tool works is that advertisers send it a database of customers who bought something. That information is randomized and compared to a list of users who did or did not see an ad. The result is data that could show advertising on Facebook helped encourage users to buy a product.
"There is a common refrain in the industry that dollars follow where people are spending their time," said Andrew Lipsman, vice president of marketing and insights at industry researcher ComScore. Ultimately, he added, advertisers want to shift dollars toward ads that are most successful.
Facebook isn't the only company attempting to connect advertising in the digital and real worlds. Others, including market researchers and Internet behemoths alike, have built services hoping to track similar behavior
There are limitations to this type of effort. The biggest hurdle is retailers, whose databases of customers rely on convincing them to offer personal information, like an email address, in the first place. As a result, these databases aren't comprehensive.
Also, there's a danger advertisers could rely too heavily on the data Facebook is offering. Focusing too much on an ad that generates a sale, as opposed to an ad that helps to do something like promote a brand, could be self-defeating.
Consider grocery stores. When the scanner was introduced to store checkout counters 30 years ago, owners learned how well promotions increased sales. So, they focused on them, ComScore's Lipsman said. Today, the industry relies heavily on promotions to draw customers into the store, hurting margins.
For now, Facebook said it's content if advertisers change the way they see its business. The information coming from Facebook's tool, Smallwood said, "will be a better assessment of what's working and what's not." "