By Ted Dhanik
As advertisers flock to Facebook, the cost of ad space is skyrocketing. No doubt, brands have gained from paid advertising strategies on Facebook, but the mass migration to the social network is opening opportunities everywhere else. Today, I would argue that marketers who become too dependent on Facebook are risking sustainable ROI, sacrificing incremental reach and limiting their targeting capabilities.
Over the past few weeks, the media has been abuzz with Facebook’s impressive Q4 results. The social network posted a 63% increase in revenue, eightfold increase in profit and impressive gains in share price since earnings came out on January 29. Mobile advertising revenue surged ahead of other sources, and 77% of Facebook’s 1.2 billion monthly active users were logging in from mobile devices.
While a Q4 study by Adobe Systems found that Facebook’s ad click-through rate (CTR) is up 365 percent year over year, the cost per thousand impressions (CPMs) also increased 437 percent. Direct response strategies and lead generation are succeeding on Facebook, but competition to reach the same users is driving up the price.
Limited by Facebook’s pricing mechanism and advertising algorithm, advertisers are stuck paying a lot more on Facebook that they would off Facebook. And constrained by Facebook’s targeting tools, advertisers cannot leverage third-party or behavioral targetingdata that offers more depth, precision and incremental reach.
Thanks to the mass migration to Facebook, some of the best advertising opportunities now call for diversification away from Facebook. Here are the strategic openings, and how advertiser can take advantage of them:
1. Real-Time Bidding (RTB) on a Demand-Side Platform (DSP): Inadvertently, Facebook has helped balance out the digital landscape, giving advertisers unprecedented access to premium inventory. Ad space that was once high priced and hard to evaluate is now accessible and easy to appraise through real-time bidding (RTB) on a demand-side platform (DSP). The best rely on billions if not trillions of historical data points to predict the ROI of each buy. By using a DSP, you can also ensure that your display strategies target a different audience from your Facebook ads.
2. New Types of Units: Facebook’s ‘sponsored stories’ have been appealing to advertisers who want to blend in. However, you can take native advertising strategies to top media outlets that now publish sponsored content, including blog posts, infographics, videos and native links. Advertisers are also finding success with data-driven, dynamic ads that automatically change their content based on everything from user data to the weather.
3. In-Stream Linear Video: Pre-roll video advertisements, usually referred to as in-stream linear video, have become popular in RTB thanks to their incremental reach and high levels of engagement. Click-through rates reach 5% to 10% on in-stream ads that are entertaining and properly targeted—a huge improvement over Facebook ads. Unlike Facebook, where the new auto-play video ads are being met with mixed reception, in-stream video ads only target people who expect to see a video.
4. Data Products: Facebook greatest limit is its targeting capabilities. By diversifying, advertisers can leverage non-cookie targeting products and offline data like direct mail, census data and transaction rails. This allows advertisers to target down to the size of someone’s house, the number of cars a person owns and their education level. A transaction rail from a brick-and-mortar retail store can be used to target with extraordinary precision. If you sell drill bits, wouldn’t you want to target someone who has just bought a drill? Facebook can’t do that.
5. State of Mind: On Facebook, it’s extremely hard to understand a user’s state of mind. Is she logging in to check the time and location for an event? Is he browsing around, filling time? Is she on just to instant message with friends? The trouble with Facebook is that you don’t know what type of advertising content a person is ready to consume, even if you do target the right audience. In more specialized ad spaces where one type of content prevails, you can coordinate content with the user’s attention span and state of mind.
No doubt, the opportunities on Facebook are appealing, but here’s the reality — any advertiser who becomes over-dependent one ad space is limiting incremental access to consumers — in this case, the billions of people who are not on Facebook. Budgets have habit of shifting when something new and shiny appears. As SnapChat and WhatsApp dial in an advertising model, advertisers will climb aboard with the same fervor. Smart marketers will take advantage of new inventory without putting all their eggs in one basket.
When you blending RTB/DSP, new ads units and data products, you can be confident that you’re not cannibalizing your Facebook ads. The goal of diversifying is to reach an incremental audience, control your costs and produce sustainable ROI. Facebook could be part of the equation, but it’s not the all-in-one answer.