SAN FRANCISCO: Facebook Inc wants more credit for making online cash registers ring. Facebook will begin rolling out on Friday a new tool which will allow online retailers to track purchases by members of the social network who have viewed their ads.
The tool is the latest of the new advertising features Facebook is offering to convince marketers that steering advertising dollars to the company will deliver a payoff.
Facebook, with roughly 1 billion users, has faced a tough reception on Wall Street amid concerns about its slowing revenue growth.
“Measuring ad effectiveness and outcomes is absolutely crucial to all types of businesses and marketers,” said David Baser, a product manager for Facebook's ads business who said the “conversion measurement” tool has been a top customer request for a long time.
The sales information that advertisers receive is anonymous, said Baser. “You would see the number of people who bought shoes,” he said, using the example of an online shoe retailer. But marketers would not be able to get information that could identify the people, he added.
The conversion tool is specifically designed for so-called direct response marketers, such as online retailers and travel websites that advertise with the goal of drumming up immediate sales rather than for longer-term brand-building.
Such advertisers have long flocked to Google Inc's Web search engine, which can deliver ads to consumers at the exact moment they're looking for information on a particular product.
But some analysts say there is room for Facebook to make inroads if it can demonstrate results.
“The path to purchase” is not as direct on Facebook as it is on Google's search engine, said Debra Aho Williamson, an analyst with research firm eMarketer. But she said that providing information about customer sales conversion should help Facebook make a stronger case to online retailers.
“It lets marketers track the impact of a Facebook ad hours or days or even a week beyond when someone might have viewed the ad,” said Williamson. “That allows marketers to understand the impact of the Facebook ad on the ultimate purchase.” Marketers will also have the option to aim their ads at segments of Facebook's audience with similar attributes to consumers that have responded well to a particular ad in the past, Baser said.
Online retailer Fab.com, which has tested Facebook's new service, was able to reduce its cost per new customer acquisition by 39 percent when it served ads to consumers deemed most likely to convert, Facebook said. Facebook defines a conversion as anything from a completed sale, to a consumer taking another desired action on a website, such as registering for a newsletter.
Shares of Facebook, which were priced at $38 a share in its May initial public offering, closed Thursday's regular session at $22.17. In recent months, Facebook has introduced a variety of new advertising capabilities and moved to broaden its appeal to various groups of advertisers.
Chief Operating Officer Sheryl Sandberg said in October that Facebook saw multi-billion revenue opportunities in each of four groups of advertisers: brand marketers, local businesses, app developers and direct response marketers. Facebook does not disclose how much of its ad revenue, which totaled $1.09 billion in the third quarter, comes from each type of advertiser.
Pivotal Research Group analyst Brian Wieser estimates that brand marketers and local businesses account for the bulk of Facebook's current advertising revenue.
Earlier this year, Facebook introduced a similar conversion measurement service for big brand advertisers, such as auto manufacturers, partnering with data mining firm Datalogix to help connect the dots between consumer spending at brick-and-mortar and Facebook ads. And Facebook has rolled out new marketing tools for local businesses such as restaurants and coffee shops, including a revamped online coupon service and simplified advertising capabilities known as promoted posts.
The new conversion measurement tool is launching in testing mode, but will be fully available by the end of the month, Facebook said.