On a unit economics basis, the performance of Facebook ads is worst-in-class. Email generates 11% CTR and 4% conversion rates.
This data validates the intuition that Facebook isn’t the best demand fulfillment tool. It’s not a great place for performance marketers.
But, it might be a great place for brand marketers. Like the billboard at a baseball stadium or the homepage takeover on YouTube, advertisements on Facebook can reach millions of users. And because of the sharing mechanics on Facebook, these ads can inform millions more very quickly. Just look at the marketing effectiveness of Zynga’s efforts on the Facebook feed. Each pink duck shared is an advertisement.
Where Google is one of the best demand fulfillment tools in history, Facebook may become the biggest demand generation, or branding tools, in history. Branding advertisements, used to educate a target segment about a new product or feature, are used extensively offline. Most of the $70B TV ad market is demand generation. Much has been made of the slow transition of these dollars online because it still hasn’t happened.
Facebook occupies 10% of all time on the web. Commanding all this attention may make Facebook the place for advertisers to engage with their users, educate them about new products, in a more measurable way than the television or radio.
In the short-term, Google may yet reap the benefit of large amounts on branding dollars on Facebook because attribution – determining which ad campaigns led to which sales – is an unresolved problem. And ads on Facebook may drive yet more purchases on Google. Until, of course, Facebook leverages their search to compete for both kinds of ad dollars: performance and brand.