An Ivy League School talks absolute nonsense.
Until now, advertisers on Facebook have only been able to bid on campaigns on either a CPC or CPM basis. While this has been an effective way for businesses and brands to bid for ads, there is no guarantee that clicks and impressions actually lead to conversions. To capture more performance marketing spend, Facebook is introducing a new option to bid on a cost-per-action (CPA) basis.
CPA bidding is available today on a global basis through Facebook Ads’ API, and according to Marketing Land will soon be available in the Power Editor and Ads Manager. Currently, marketers are able to do CPA bidding on three types of ads or actions:
- Page Likes
- Offer Claims
- Link Opens/Clicks (specific click-throughs [e.g., to a product profile page] the marketer wants)
This new option to bid on a CPA basis will operate as a maximum bid, but as with all CPA bidding, advertisers may actually pay less than their max bids. Facebook says this benefits marketers by offering more “predictability” in their ad spending. This option is also better than bidding with CPM or CPC, as bidding with CPA guarantees lead generation and facilitates conversions. By paying for an actual action – such as an offer claim, rather than just a click on the offer – advertisers are assured that there is actual value in their campaigns. Despite all the hype of social advertising benefiting “brand awareness,” the bottom line of any campaign should be to produce a positive ROI. With this new CPA option, advertisers on Facebook can now actually see – and only pay for – ads that perform well and lead to a positive ROI.
Of course, if you’re still convinced that CPC and CPM bidding is better for your brand, don’t worry – Facebook isn’t replacing these options with CPA. Advertisers will still be able to choose these options when creating campaigns.
Mark Zuckerberg has prioritized increasing Facebook’s ad revenue. Reuters
MENLO PARK, Calif.— Mark Zuckerberg needed help. Facebook Inc. FB +0.38% ‘s initial public offering in May 2012 had been a mess. And after turning a website born in his college dorm room into a company valued at $100 billion, the young chief executive was under pressure to prove he could sell lots of ads on smartphones.
Facebook has seen its shares rise and revenue from mobile ads jump up. How did CEO Mark Zuckerberg turn the company around after its ill-starred IPO? Evelyn Rusli joins digits. Photo: AP.
So he went for a long walk a few weeks later through the center of Facebook’s corporate campus here with Andrew “Boz” Bosworth, a top engineer at Facebook and friend who once was Mr. Zuckerberg’s teaching assistant at Harvard University.
“Wouldn’t it be fun to build a billion-dollar business in six months?” Mr. Zuckerberg asked. He wanted Mr. Bosworth to help lead the company’s shaky mobile-ad business, then bringing in almost nothing. Another part of the job: figure out all the ways Facebook could make money.
Ads didn’t sound like fun to Mr. Bosworth, but his boss persisted. Soon, the engineer was filling in the blanks of a spreadsheet that grew to about 80 pages long. The entries became the manifesto of an in-house project that Mr. Zuckerberg called “Prioritization.”
Interviews for this article with the CEO, Facebook directors and executives, and dozens of other engineers, friends and former employees laid out how Mr. Zuckerberg’s growing attention to the bottom line was part of a sea change by the often-stubborn, idealistic 29-year-old chief executive once called “toddler CEO” in Silicon Valley. Taking Facebook public and reshaping it around mobile phones forced him to grow up.
“It’s a story of a vertical learning curve,” says venture capitalist Marc Andreessen, a Facebook director and longtime adviser to Mr. Zuckerberg.
Mr. Zuckerberg still wears jeans and a T-shirt to work, drives a black, stick-shift Volkswagen GTI and keeps the temperature in his glass meeting room, known as the “aquarium,” near 68 degrees to keep everyone alert. As a holiday gift, friends of Mr. Zuckerberg got socks decorated with the image of Beast, his white, woolly Hungarian shepherd.
Yet Mr. Zuckerberg has learned to embrace—or at least accept—the reality that he now is in charge of what might be bluntly described as the most visible advertising business in the world. It is a big leap for the college dropout who wrote in a letter to potential investors just before the initial public offering: “Facebook was not originally created to be a company.”
He embraced the idea in 2012 of selling more ads in Facebook’s prized “news feed,” the center of the screen where the social-networking site’s 1.2 billion members spend most of their time. The news feed is a constantly updated list of stories from people and pages followed by a Facebook user.
The intensified focus on advertising, long shunned as less important than the photos and status updates posted by users, generated a surge in new revenue from corporate giants such as McDonald’s Corp. and Wal-Mart Stores Inc. WMT -0.79% Analysts expect Facebook to announce later this month that its revenue jumped more than 40% in 2013 compared with a year earlier. About $3 billion of the company’s revenue—or more than one-third of the overall total—likely came from mobile advertising.
Facebook shares jumped 105% last year, compared with the technology-heavy Nasdaq Composite’s rise of 38%. On August 2, the stock climbed back above its IPO price of $38, erasing a $50 billion slide in stock-market value. Facebook closed Friday at $54.56 a share.
Still four months away from his thirtieth birthday, Mr. Zuckerberg is worth about $20 billion. Last month, he pocketed about $1 billion in his first stock sale since Facebook went public, and separately he donated about $1 billion in stock to the Silicon Valley Community Foundation.
Mr. Zuckerberg bristles at the view of some people close to him that he has changed as a CEO. His primary mission still is to connect the world digitally with Facebook. “It drives me crazy when people write stuff and assert that we’re doing something because the goal is to make a lot of money,” he says.
Even in his most self-reflective moments, what Mr. Zuckerberg sees is a series of logical moves and adaptations that are part of what he calls a “continuous trajectory.” In an interview, he paused abruptly after saying the words “business review.”
“Uh, I’ve never used that term before,” he said with a smile.
Despite all the improvements, Mr. Zuckerberg must show that Facebook can out-innovate a steady stream of upstarts. Investors were rattled in October when Facebook reported a decline in use among young teenagers, some of whom are migrating to newer mobile-phone apps such as Snapchat. Snapchat messages automatically disappear in 10 seconds or less.
Last fall, Mr. Zuckerberg approached Snapchat with a takeover offer for more than $3 billion. Snapchat’s 23-year-old chief executive said no. Facebook previously tried to create a similar app called Poke, with Mr. Zuckerberg even contributing some computer code, but the project flopped.
A secret project called Firefly included a “social” phone that was to be created with HTC Ltd. of Taiwan—but was killed by Mr. Zuckerberg in mid-2012 because of glitches, according to people who worked on the project. An app for Google Inc. GOOG +0.21% ‘s Android operating-system mobile phones, known as Home, has failed to gain momentum since last spring’s debut, despite a big publicity push by Facebook. And a smartphone released by HTC and based largely on Firefly’s design has been a dud.
Just a few years ago, Mr. Zuckerberg paid little attention to many of the numbers that are obsessions to shareholders. In 2010, he said there was “no point right now in having a massive profit.” He boasted that the ad business “factors in, like, not at all” to decisions about Facebook’s operating platform and user services. His No. 1 goal: increase the company’s total membership to one billion users.
“If you brought up revenue in an argument with Zuck, you would lose automatically,” says one former senior employee. He recalls being chided for mentioning revenue while discussing a new product. Mr. Zuckerberg says such comments are a reminder that Facebook was designed to care more about its mission than money.
At the time, most Facebook users looked at the site on a desktop computer. Ads usually were banished to the right-side gutter of the screen, the Facebook equivalent of Siberia.
By the end of 2011, though, the surging popularity of smartphones was causing Facebook users to spend less time on computers. “The IPO process surfaced how fast the mobile shift was happening,” says Facebook director Peter Thiel, a founder of PayPal and one of Facebook’s earliest investors. Executives worried that Facebook was falling behind at an alarming rate.
Internal data showed that many users were so frustrated by Facebook’s mobile software that they would quit the app and use their tedious mobile Web browsers to reach the social-networking site instead.
The smartphone shift also was a problem for Facebook’s ad business. There was no easy way for the company to relegate ads to the side of small screens, and Facebook had no mobile ads to sell anyway. Meanwhile, efforts to sell older types of ads on desktop computers were starting to lose their punch as more users embraced mobile devices.
“We pulled the lever, but this time, it didn’t work,” recalls one senior employee about 2012’s first quarter.
Just before Facebook went public in May 2012, Mr. Zuckerberg walked into the “aquarium” and did something that surprised everyone.
A group of Facebook engineers presented the latest mock-ups of ads for Facebook’s iPad app. The ads were marooned on a separate screen—and to the right of the news feed.
The CEO quietly studied them. “Why don’t we just explore ads in news feed?” he said, according to people at the meeting. Mr. Zuckerberg indicated that he would be open to the possibility of more types of ads there, including ones not tied to “likes.”
“Oh, my gosh, he’s actually open to it,” one executive present at the meeting remembers thinking. No one in the room asked Mr. Zuckerberg why. They were too worried he would change his mind.
“It’s not like I just decided to get more involved in ads,” he says now. “I needed to because basically the ad product had to be more integrated.” He adds: “And that created all these hard decisions that we needed to do well.”
Mr. Zuckerberg’s willingness to upend even what some people close to him describe as sacrosanct beliefs took on more urgency after Facebook’s bungled IPO, which subtracted more than 25% from the share price in its first 10 days of trading.
In public, he tried to play down the importance of the stock price. Mr. Thiel now says the CEO was more worried than he let on, citing the risk that Facebook employees who owned stock might get discouraged and quit. “I care about this because I want to retain my people,” Mr. Zuckerberg told senior executives in a private meeting.
Facebook’s first earnings report, which hit analysts’ targets but disappointed investors who wanted even more, sent the stock into another tailspin. The mood of some employees darkened.
A worried Mr. Zuckerberg asked Facebook executive Mike Schroepfer, one of his most trusted lieutenants, to interview engineers about morale. They were frustrated about the plummeting stock price and worried that top management couldn’t relate to their financial stress because those executives owned so many Facebook shares that they were rich despite the stock’s slide.
Mr. Schroepfer, usually an unemotional software engineer, choked up when he presented the results to a room full of engineers. “I know you are fathers, parents. I am, too, and I know that you have to think about putting your kids through school,” he said, according to someone at the meeting.
Mr. Bosworth, the Facebook engineer who agreed to help Mr. Zuckerberg hunt for new revenue, worked on his spreadsheet for about 1½ months, quizzing scores of employees. Around the same time, Mr. Zuckerberg began assigning revenue targets to certain product teams. Previously, he resisted the idea because he worried managers would become too fixated on money.
Over the next several months, Mr. Zuckerberg also grew to fully embrace putting “nonsocial” ads, or those that aren’t tied to a user’s “likes” or other signals, in the news feed. The shift came after Chris Cox, Facebook’s vice president of product, showed the CEO internal data that suggested his previous resistance to nonsocial ads was hurting Facebook’s business.
Tests by the company showed that adding nonsocial ads improved the overall quality of Facebook’s advertising for users. “At the time, it kind of struck me as a crazy idea,” Mr. Zuckerberg says, since those ads veered away from Facebook’s traditional word-of-mouth-based pitches.
The CEO even compromised on a subject where he had rarely budged before: user experience.
Mr. Zuckerberg told Mr. Cox that some decline in usage would be an acceptable trade-off for higher ad sales, as long as Facebook made improvements elsewhere that more than offset the decline. The first test showed that more ads reduced user activity by 2%, below a target of a low single-digit percentage, while overall “engagement” rose by a much bigger percentage. Engagement is a broad gauge of user activity.
Facebook’s sales gain of 53% to $1.81 billion in the second quarter was the company’s largest jump ever. In July, a beaming Mr. Zuckerberg addressed most of the company’s more than 5,000 employees. “We did a good job,” he said. “We’re figuring this out.” A few days later, Facebook shares drifted above their IPO price.
Mr. Zuckerberg now meets often with Facebook’s biggest advertising clients, often spending hours with them. He has told customers to message him with ideas, which he will consider incorporating into product decisions.
At a visit last summer to the headquarters of Facebook ad client McDonald’s in Oak Brook, Ill., he learned how to cook an egg-white breakfast sandwich and asked the head of french fry taste tests why one batch he tasted looked a few shades lighter than fries served in McDonald’s restaurants.
Her answer: French fries sold at McDonald’s are cooked in oil that has been through multiple fry cycles. Mr. Zuckerberg said: “You have the greatest job ever.” His own Facebook page has long been peppered with McDonald’s and Chicken McNuggets references.
This year, Mr. Zuckerberg will have to wrestle with how to avoid turning off some Facebook users with too many ads, as some critics have warned. Some investors are antsy for Facebook to wow users with something new.
Mr. Zuckerberg says he is aware of the risks, but notes that user activity still is rising. The company does more than 35,000 surveys a day to monitor user sentiment, and the “driving force behind everything is that we’re trying to build the best experience for mobile,” he says.
Some of the changes at Facebook remind him of walkways at his old high school, Phillips Exeter Academy in New Hampshire. As a student, he was befuddled by a meandering path to the campus cafe. The route seemed strange, so Mr. Zuckerberg did some research.
The answer? “Instead of choosing the path up front, they kind of waited and saw where people walked and put a path where people walked,” he says.
—Reed Albergotti contributed to this article.
Write to Evelyn M. Rusli at email@example.com
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With every algorithm update, Google is making SEO more and more complex. The company has expressed its desire to improve the quality of their search results, filtering out spammers and content of lower relevance — but how that ‘relevance’ is determined is becoming increasingly difficult to understand to a definitive degree. The elements that are regularly highlighted by Google are ‘quality content’ and ‘genuine engagement’.
The issue with quality content is that it’s less scientific. Less certainty in the process means more research, more work and, ultimately, more investment to ensure best results for your online presence. This can be a frightening prospect for companies — you can’t just go to Google Adwords and ensure all the relevant search terms are included on your webpage, you need people to be actually reading your content to up that relevance rating. Real people and real engagement.
The one metric that is totally clear is the need for social engagement. How many ‘Likes’, ‘re-Tweets’, webpage links — these elements are being weighted more heavily by search engines. The social media aspect, which used to only form a part of the SEO puzzle, is becoming more influential. The idealistic result of this is that users get a better quality experience all round, but the underlying motivator is that, over time, organic results will be diluted to the point that brands will have to pay to get best ROI. The only way to combat this is to create great, sharable, engaging content and become an active participant on social platforms. But what’s the best way do you do it? How do you know that the content you’re investing in will give your company the best results? Here are a couple of points to keep in mind:
- Quality content is what your clients want to read, not what you want to tell them. You can’t just load up your company website with a heap of updates on what the company’s doing, how you’re helping clients, etc. These are all sales pitches and, in the majority, these won’t be widely read. You’re caught up in the corporate culture and the internal wins and losses, so the temptation is to write about them, show the people how good the company is, sell them on that culture that you, yourself are invested in, but you need to take a step back and think about what the clients want to know. What are the articles you’re reading each day? What is of interest to you, as an industry expert? What are the things clients need your services for? If you are not an industry expert, not following all the relevant influencers in your field, then you need to be and you need to be viewing their insights from the client’s point of view. Inform clients of industry trends and updates, write about positive stories in which your brand has had an influence, but always be wary of the sales angle. Social media is about building relationships, rather than booking sales. The more you’re able to establish the first, the easier the second will become.
- Content that gets highly shared is content with heart. Real stories, real storytelling, actually getting to the humanity of something, rather than corporate messaging. All businesses affect the lives of real people, many in very positive ways, and these stories are gold. They are not only great to tell, but they show the genuine passion of your brand. If you can express that passion in an engaging way, you can create strong, shareable stories that will help expand the reach of your business, which has benefits across all aspects. Take time to think about different angles to your corporate stories, try and find the heart and humanity in what you do as a company and where your brand is able to help. And again, make it story first, corporate messaging second. You don’t need to sell to your clients straight up, you’re working to establish a connection, to communicate on a deeper level.
- Take time to engage in your online community. It’s one thing to use Twitter to respond to client concerns and queries, but you shouldn’t stop there. Look to have a presence on all social media platforms and in their respective communities, become part of them, participate where you can. You’ll often see a company representative drop into a conversation on Twitter or Facebook with no real introduction, saying ‘give me a call at *** and we can help you out’. This is not real engagement. You’re likely to build better customer relationships if you talk to people on a human level, offer advice and links to online articles (not necessarily your own company content) and show them that you’re the expert in your field. The opportunity to convert these contacts into clients will come, you don’t need to rush it. By being present and being a trusted part of the conversation, you will establish better relationships for ongoing business. And be honest and positive, at all times. Going online and trashing your opposition, using a half-truth to initiate a business conversation — these tactics do not benefit the establishment of ongoing partnerships.
As with anything, the approach you take will vary dependent on the industry, but the way to solidify your online presence, making your company more resilient to SEO algorithmic changes and enabling you to make best use of social media, is through the creation of engaging content and the establishment of trusted networks. It takes time and investment, but it will pay off, over and over again.
It’s interesting reading the many discussions on what Facebook will be in 2014. The social network has become an integral part of people’s lives, personal and business, and the latest changes to its NewsFeed, filter algorithms and advertising models have many nervous about what to expect. It’s hard to say whether the changes will have a positive or negative effect on the user experience – which is what the company is touting as the main focus of their changes – though it is clear that Facebook is riding a very fine line between necessary profit growth and ongoing user demand. Here are a few of the major changes and their potential impacts:
1. The addition of play-now video ads in your NewsFeed. This one is being flagged as a major concern from regular, non-business users. The addition of play-now video ads has already begun, with a number of users now seeing these come up. You scroll past them and they mute out and you can go on with what you’re doing, but the potential annoyance factor is high. Annoying enough to turn users away from Facebook? Not likely, but definitely one which would seem to have more impact on the user experience than benefit. This addition opens up a whole new revenue stream for Facebook, so it makes perfect sense that they would be going down this path, but it could be the beginning of the end, depending on how it’s adopted. Possibly.
2. Changes to the NewsFeed algorithms to improve ‘quality’ of user experience. This has been an extremely contentious issue, though one not all regular users are fully aware of. Facebook’sEdgeRank algorithm weights the relevance of all updates that appear in people’s NewsFeeds. This may mean that status update you just posted will not be seen by all your friends, which somewhat goes against the ethos of Facebook in the first place (though the impacts of updates from ‘Friends’ is relatively minimal). Facebook has expressed its intention to create an online newspaper type feel to the site, with the content tailored to you, but a part of that is the addition of, effectively, an editorial process and the rules governing what appears and what does not are tricky. The underlying motivation is that Facebook wants to push businesses towards paying to reach their followers and fans by diluting their ability to connect to those who’ve ‘Liked’ their brand-page organically. This is likely to become more prevalent in 2014, which will drive more businesses to funnel users towards their own websites and away from Facebook. The impact of this is impossible to determine, but it really highlights that fine line Facebook is tip-toeing.
3. The focus on targeted advertising. As with the changes to the NewsFeed, Facebook is hoping more users will interact more with ads to give them more data on what they want, enabling them to improve their individual experience by ensuring the ads they see are of relevance to them. The problem is, most regular users don’t see Facebook as an advertising medium – they want to connect with their friends, not be confronted with sales pitches. Advertising is a necessary part of the business, and as Facebook grows, so does the impetus for increased revenue generation. The underlying idea of targeted ads makes sense, that Facebook wants to ensure they’re not spamming users with stuff their not interested in, but the practical roll-out of this model is problematic. The other potential impact is for small businesses – Facebook has announced that it will focus on small business advertising to capitalise on the millions of small business pages it’s currently hosting – which they, of course, need to do, but as they push towards a paid advertising model, how will those small businesses compete against bigger players for space? And if all of them want to pay for targeted ads, will there be enough room for users to share content with their friends?
No doubt Facebook has some of the answers to these questions, while others will be causing the executives headaches every day. It would seem way too early to be predicting the demise of the largest social network in the world, but some have suggested the writing is on the wall. While the changes will introduce a raft of new challenges for business, they also bring new opportunities which, if utilised well, will remain a key part of any brand strategy. But they also highlight the need to remain active on other social networks and monitor the progress of user migrations, staying in touch with more audience share whilst also leveraging against potential fall-out from ongoing Facebook updates.
Facebook is being sued by two users for intercepting the “content of the users’ communications,” including private messages, with the intent to “mine user data and profit from those data by sharing them with third parties—namely, advertisers, marketers, and other data aggregators.” The plaintiffs argue in a December 30 class action complaint that Facebook’s use of the word “private” in relation to its messaging system is misleading, given the way the company treats the info contained within those messages.
Many of the allegations in this case are based on research done in 2012 by the Wall Street Journal for a series of articles about digital privacy. Facebook is far from the first company to use private messages to mint money. Gmail continues to be dinged for creating text ads based off of the content of e-mails ten years after the ads were first introduced. (And Gmail has been sued for that, too.)
Facebook goes to lengths to clearly distinguish its messaging feature as “private,” even calling it “unprecedented” in terms of the privacy controls, the filing alleges. “Facebook never intended to provide this level of confidentiality. Instead, Facebook mines any and all transmissions… in order to gather any and all morsels of information it can about its users.”
Facebook’s privacy policies have been going through data aggregation creep for the last few years. The site was discovered to be handing over user data to advertisers in 2010, including names and user IDs.
The plaintiffs describe how Facebook effectively “clicks” on links within Facebook messages, an activity that it doesn’t explicitly disclose to users. The lawsuit claims Facebook crawls the linked page to see if it contains one of Facebook’s “Like” buttons. If so, Facebook registers that private-message link as a “Like” on the relevant site’s Facebook page—a strange example of turning a private communication public. The lawsuit also claims that Facebook “uses a combination of software and human screening to comb through private messages” to mine for user data for broader uses, including selling to third parties.
The plaintiffs do cite the section of Facebook’s data use policy where the company explains what information it “receives” about a user as they interact with the site, including sending and receiving messages, searching, or clicking on things. But they argue that Facebook’s data use policy doesn’t make clear that Facebook “scans, mines, and manipulates the content of its users’ private messages… in direct conflict with the assurances it provides to its users regarding the privacy and control they should expect.” Likewise, the data use policy does not make clear that “Facebook will register the fact that a URL is communicated privately… as a ‘Like’ for a particular web page,” reads the filing.
For Facebook’s alleged transgressions, the plaintiffs are seeking more than $100 for each day of violation or $10,000 per class member of the lawsuit, as well as statutory damages of either $5,000 per class member or three times the amount of actual damages, whichever is greater.
The lawsuit is based on an older anti-wiretapping law, the Electronic Communications Privacy Act of 1986, as well as California state laws. Civil lawsuits over privacy issues have proliferated in recent years. Many of those lawsuits have settled, but it’s not clear whether pre-Internet privacy laws would be successful at trial in barring the data gathering of modern companies.