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Jul 19, 2012
Feb 13, 2012
Facebook Sponsored Stories: Unavoidable For Brands?
Chris Crum | Staff Writer
You can still do everything you can to capitalize on the free marketing
Facebook is going public soon. You already knew that I'm sure. You probably also know that Facebook makes most of its money from ads. Not all of it, but a very significant portion. If the company's relationship with Zynga ever sours, it may have to rely on ad revenue even more.
There is still plenty of room for Facebook to grow ad revenue, even if there's less room for it to grow users. For example, they don't even have mobile ads yet, though that is expected to come soon. That should be another huge source.
Recently, Facebook began showing Sponsored Stories in the news feed. These are posts that are arleady out there on Facebook, which brands can decide to promote for increased visibility among the people connected to that post, whether it be from a friend or from a Page they "like".
What do you think about this type of advertising?
Let us know in the comments.
The Wall Street Journal ran an interesting piece about how brands are essentially being forced to pay for advertising on Facebook to reach users, simply because the visibility of free Page posts has declined so much. There is so much content flooding users' News Feeds, and of course Facebook controls what users are seeing via their algorithm, based on what the company calls "EdgeRank." More on EdgeRank here.
You can still do everything you can to capitalize on the free marketing
Facebook is going public soon. You already knew that I'm sure. You probably also know that Facebook makes most of its money from ads. Not all of it, but a very significant portion. If the company's relationship with Zynga ever sours, it may have to rely on ad revenue even more.
There is still plenty of room for Facebook to grow ad revenue, even if there's less room for it to grow users. For example, they don't even have mobile ads yet, though that is expected to come soon. That should be another huge source.
Recently, Facebook began showing Sponsored Stories in the news feed. These are posts that are arleady out there on Facebook, which brands can decide to promote for increased visibility among the people connected to that post, whether it be from a friend or from a Page they "like".
What do you think about this type of advertising?
Let us know in the comments.
The Wall Street Journal ran an interesting piece about how brands are essentially being forced to pay for advertising on Facebook to reach users, simply because the visibility of free Page posts has declined so much. There is so much content flooding users' News Feeds, and of course Facebook controls what users are seeing via their algorithm, based on what the company calls "EdgeRank." More on EdgeRank here.
What Facebook IPO Means for Users and Marketers - Chris Treadaway Chimes In
| The Journal cites a study from BlitzLocal, saying that between June 1 and Dec. 31 of 2011, unpaid displays of marketing posts to users decreased 33% among the firm's over 300 clients. "Content that used to live for a day may now live minutes in a user's News Feed," CEO Dennis Yu is quoted as saying. The piece looks at retailer Gordman's specifically, as a company which has felt the need to turn to sponsored stories just to gain some visibility. The company reportedly found that sponsored stories increased the number of users who saw a post by over 100,000. Basically, what this all means is that if you don't pay Facebook for ads, you're left to the mercy of their algorithm for visibility, and who knows just how Facebook is tweaking that? Does it remind you of the search marketing game? There is one key difference, however. Facebook does allow users to adjust the way they view their News Feed, so you can see stories by time, rather than what Facebook's algorithm handpicks for you to see. This is the way many users do view their news feed. I have no idea what the numbers look like in terms of how how many people do this, and how often, but I'm guessing many, many people don't bother. That's likely where those extra 100,000 users come in. Whether or not advertisers choose to pay for sponsored stories, brands are still going to want to take full advantage of the free marketing benefits of the world's largest social network. To do that, you have to consider that EdgeRank algorithm, and of course engage on Facebook. Sundeep Kapur, a guest author on BlitzLocal's blog, said in a recent post: Successful brands need to focus on increasing interaction effectiveness with their consumer base. You do this by increasing the frequency of exposure, paying close attention to what is being discussed, and focused advertising. Interactions with consumers will occur as you post and more than 70% of the interaction occurs within the first hour. So keep up your efforts on posting more often and monitoring right after you post versus posting and "going to bed." Also, a post with a "question" tends to drive increased interaction. Don't forget that advertising does work. Your engagement rate can go up by 21% to 43% by knowing what to say, when to say, and of course how you say things on Facebook. In a separate post, the firm, after conducting research on both large and small brands, also suggested: Some valuable tips. At least only one of these (sponsored stories) is something you have to actually pay Facebook for. Unfortunately, that might be the one that helps you drive visibility more than anything. That is, unfortunately for businesses with tight marketing budgets. Fortunately for Facebook, as it aims to boost revenue as a public company. I wouldn't be surprised to see it become even harder for brands to get their messages through without sponsored stories. What do you think? |
| For ad details and prices... mailto:susan@ientry.com |
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Let's give this article a proper dissection:
1. The article states, "At a time when much online advertising is being sold for 60 cents per thousand impressions (CPMs), Yelp is charging some local advertisers $600 per 1,000 impressions. That's not a typo. Yelp is charging small businesses 1,000-times the standard online CPM rates for local ads that appear on Yelp.".
This simply doesn't make sense to anyone who has experience in online advertising. Sixty cent CPM's are NOT the standard online rates for local ads. That is a rock bottom rate that large ad sellers charge for non-targeted inventory. To get placement on a premium site that is geo targeted with a very specific industry niche, advertisers will pay substantially more, even a $600 CPM. Sometimes much less, but certainly not a measly 60 cents!
2. The article states, "Now consider the types of local Yelp ads that small businesses buy: In this scenario, the ad goes to the advertiser's Yelp review page. That's a page where users are free to leave any kind of review for the business, including ones that trash it. That ad runs about a $600 CPM."
What about TripAdvisor or Urbanspoon? The concept of reviewing restaurants or other businesses does not make paying for a premium placement a bad decision. Obviously, a business should make sure they are providing a great service and excellent product before advertising. However, it is pretty naive to believe that it's somehow stupid to pay top dollar for a highly targeted ad spot on Yelp simply out of fear that someone could "trash" your business. As businesses in the service industry know, review sites and apps like Yelp can drive significant new business for free and it seems to me that paying for that top placement might even drive more business.
3. The article states, "It's common for more targeted inventory, such as the type that Yelp provides, to command higher CPMs. But triple-digit CPMs are extremely unusual."
At least the article finally acknowledges that targeted ads are worth more than untargeted ads. However, the assumption that it is "extremely unusual" to charge over $100 CPM's and therefore makes Yelp a rip off is inaccurate. Ad spots are priced based on demand for those spots by advertisers and obviously Yelp has more demand than they can deliver for many of those top spots on review pages. There is good reason for this - businesses want to be the dominant brand in their service category in their locality. To many businesses, that is worth paying a premium and they don't consider themselves "ripped off". If you own Rory Lake's Karaoke Dreams in Chicago, you want to be the featured listing for "Nightlife in Chicago". Rory is not making that decision because of a high or low CPM, he is spending cash with Yelp because he wants to be the dominant brand in the nightlife category. He wants everybody that uses Yelp to at least consider stopping by Rory Lake's Karaoke Dreams. All advertising isn't about the cost, sometimes it's simply about the exposure, despite the price.
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4. The article states, "At the high end, it's a $600 CPM. At the low end, that's a still eye-popping $367 CPM - more than 10-times the rate of a Super Bowl ad."
Is the writer suggesting that no ad should cost more on a CPM basis than Super Bowl ads? Super Bowl ads are by their very nature only loosely targeted, skewing somewhat more male and youthful, but not much more targeted than that. After all, Super Bowl 2012 set a record as the most-watched television show in U.S. history because almost everybody from young kids to Grandma watched it. Again, targeting increases the value for advertisers and thus increases the cost. Yelp is not only targeting by business type, it is also targeting by geo location. This adds significant value over a Super Bowl ad on a CPM basis. Not to mention that with a Super Bowl ad, a business that spends $3.5 million for a 30 second spot deserves a little CPM discount.
5. The article states, "To make matters worse, Yelp requires a 12-month commitment for these rates. Even if Yelp doesn't deliver your business a single customer, you're on the hook for $3,600."
Paying $3,600 to be the top position on a popular site and app like Yelp for your business category and in your locality is a deal if your business needs branding. It's about being in the right spot at the right time in order to attract customers. As with all advertising, the hope is for all new customers to become regular customers, thus paying for the cost of your Yelp ad. If you're a donut shop, would you want your competitor's shop to be at the top of Yelp or would you consider paying to make sure you are? Additionally, advertisers on Yelp are reaching potential customers that have only one reason to use yelp; to purchase a product from them or their competitor. With that in mind, a $3,600 fee to reach real potential customers rather than just Facebook clickers can be a great deal.
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6. The article states, "For comparison, Facebook only requires that you set your budget to $1 a day and does not have a commitment. A business could try it for a week, see if it performs and then decide."
It is very misleading to say Facebook only requires $1 a day, since if that's your budget you will not even get one single impression of your ad run on Facebook. To be fair, Facebook is a cheaper alternative for advertisers. However, to be fair to Yelp, it is not even remotely comparative. Facebook clicks range from around 50 cents to $3, but the targeting and volume of clicks would not match Yelp's in my experience. Facebook allows targeting by location and interest. However, the interest is based on people's selection in their profile or what they have "liked." It's not all that scientific because if I "liked" a restaurant on Facebook, it does not mean I would click a different restaurant's ad in the future. That's why Facebook ads are not great for micro targeting and Yelp ads most certainly are!
7. The article states, "I cannot think of any scenarios where I would advise businesses to advertise on Yelp at these rates."
I can think of a very good reason ... branding. As a business owner I want my business to be the most noticed in my category and location. I don't want my competitors to be. I understand as a business owner that many businesses also want to be at the top of Yelp categories, so I am willing to pay a premium for my business to be there instead of theirs.
8. The article states, "For online advertising, I strongly recommend against commitments and impression-based advertising."
Actually, many businesses desire to effectively reach their targeted potential customers and that Facebook and Google are not always the best way to do this. Really, should all online advertising be cost per click? Advertisers, such as WebProNews or Yelp value their audiences and have limited space in which to allow businesses to also reach their valued audiences. Those targeted audiences are worth way more than 60 cents per thousand impressions or a few cents a click. For a sponsor to lock up ad space for them to reach their potential customers and potentially keep their competitors out of that space requires a "commitment" with the publisher and is worth paying a premium CPM. Just ask the advertisers on Yelp, WebProNews or even VentureBeat.
The article mentioned Super Bowl advertising earlier ... exactly how many people clicked those CPM ads?
This simply doesn't make sense to anyone who has experience in online advertising. Sixty cent CPM's are NOT the standard online rates for local ads. That is a rock bottom rate that large ad sellers charge for non-targeted inventory. To get placement on a premium site that is geo targeted with a very specific industry niche, advertisers will pay substantially more, even a $600 CPM. Sometimes much less, but certainly not a measly 60 cents!
2. The article states, "Now consider the types of local Yelp ads that small businesses buy: In this scenario, the ad goes to the advertiser's Yelp review page. That's a page where users are free to leave any kind of review for the business, including ones that trash it. That ad runs about a $600 CPM."
What about TripAdvisor or Urbanspoon? The concept of reviewing restaurants or other businesses does not make paying for a premium placement a bad decision. Obviously, a business should make sure they are providing a great service and excellent product before advertising. However, it is pretty naive to believe that it's somehow stupid to pay top dollar for a highly targeted ad spot on Yelp simply out of fear that someone could "trash" your business. As businesses in the service industry know, review sites and apps like Yelp can drive significant new business for free and it seems to me that paying for that top placement might even drive more business.
3. The article states, "It's common for more targeted inventory, such as the type that Yelp provides, to command higher CPMs. But triple-digit CPMs are extremely unusual."
At least the article finally acknowledges that targeted ads are worth more than untargeted ads. However, the assumption that it is "extremely unusual" to charge over $100 CPM's and therefore makes Yelp a rip off is inaccurate. Ad spots are priced based on demand for those spots by advertisers and obviously Yelp has more demand than they can deliver for many of those top spots on review pages. There is good reason for this - businesses want to be the dominant brand in their service category in their locality. To many businesses, that is worth paying a premium and they don't consider themselves "ripped off". If you own Rory Lake's Karaoke Dreams in Chicago, you want to be the featured listing for "Nightlife in Chicago". Rory is not making that decision because of a high or low CPM, he is spending cash with Yelp because he wants to be the dominant brand in the nightlife category. He wants everybody that uses Yelp to at least consider stopping by Rory Lake's Karaoke Dreams. All advertising isn't about the cost, sometimes it's simply about the exposure, despite the price.
4. The article states, "At the high end, it's a $600 CPM. At the low end, that's a still eye-popping $367 CPM - more than 10-times the rate of a Super Bowl ad."
Is the writer suggesting that no ad should cost more on a CPM basis than Super Bowl ads? Super Bowl ads are by their very nature only loosely targeted, skewing somewhat more male and youthful, but not much more targeted than that. After all, Super Bowl 2012 set a record as the most-watched television show in U.S. history because almost everybody from young kids to Grandma watched it. Again, targeting increases the value for advertisers and thus increases the cost. Yelp is not only targeting by business type, it is also targeting by geo location. This adds significant value over a Super Bowl ad on a CPM basis. Not to mention that with a Super Bowl ad, a business that spends $3.5 million for a 30 second spot deserves a little CPM discount.
5. The article states, "To make matters worse, Yelp requires a 12-month commitment for these rates. Even if Yelp doesn't deliver your business a single customer, you're on the hook for $3,600."
Paying $3,600 to be the top position on a popular site and app like Yelp for your business category and in your locality is a deal if your business needs branding. It's about being in the right spot at the right time in order to attract customers. As with all advertising, the hope is for all new customers to become regular customers, thus paying for the cost of your Yelp ad. If you're a donut shop, would you want your competitor's shop to be at the top of Yelp or would you consider paying to make sure you are? Additionally, advertisers on Yelp are reaching potential customers that have only one reason to use yelp; to purchase a product from them or their competitor. With that in mind, a $3,600 fee to reach real potential customers rather than just Facebook clickers can be a great deal.
6. The article states, "For comparison, Facebook only requires that you set your budget to $1 a day and does not have a commitment. A business could try it for a week, see if it performs and then decide."
It is very misleading to say Facebook only requires $1 a day, since if that's your budget you will not even get one single impression of your ad run on Facebook. To be fair, Facebook is a cheaper alternative for advertisers. However, to be fair to Yelp, it is not even remotely comparative. Facebook clicks range from around 50 cents to $3, but the targeting and volume of clicks would not match Yelp's in my experience. Facebook allows targeting by location and interest. However, the interest is based on people's selection in their profile or what they have "liked." It's not all that scientific because if I "liked" a restaurant on Facebook, it does not mean I would click a different restaurant's ad in the future. That's why Facebook ads are not great for micro targeting and Yelp ads most certainly are!
7. The article states, "I cannot think of any scenarios where I would advise businesses to advertise on Yelp at these rates."
I can think of a very good reason ... branding. As a business owner I want my business to be the most noticed in my category and location. I don't want my competitors to be. I understand as a business owner that many businesses also want to be at the top of Yelp categories, so I am willing to pay a premium for my business to be there instead of theirs.
8. The article states, "For online advertising, I strongly recommend against commitments and impression-based advertising."
Actually, many businesses desire to effectively reach their targeted potential customers and that Facebook and Google are not always the best way to do this. Really, should all online advertising be cost per click? Advertisers, such as WebProNews or Yelp value their audiences and have limited space in which to allow businesses to also reach their valued audiences. Those targeted audiences are worth way more than 60 cents per thousand impressions or a few cents a click. For a sponsor to lock up ad space for them to reach their potential customers and potentially keep their competitors out of that space requires a "commitment" with the publisher and is worth paying a premium CPM. Just ask the advertisers on Yelp, WebProNews or even VentureBeat.
The article mentioned Super Bowl advertising earlier ... exactly how many people clicked those CPM ads?
Online Advertising is More Than Just Clicks!
Yelp is NOT a Rip Off to Advertisers!
I noticed a VentureBeat article that makes me shake my head in amazement at the apparent lack of understanding of online advertising. The sensationalistic headline, "Yelp advertising is a rip-off for small advertisers" reveals a simplistic viewpoint on the value of targeted online advertising. Yelp is not ripping off small business advertisers, but in fact is providing a platform that businesses are benefiting from whether they are paying Yelp for prominent placement or not.
However, my article is not really as much about Yelp as it is about defending online advertising, which the article in question attacks with a vengeance. In essence, the article paints a picture of online advertising where all ads should be sold for 60 cent CPMs regardless of whether they are geo and industry targeted or provide branding with prominent placement. Don't charge too much or you might be accused of being a "rip off"!
Additionally, the article attacks the very core of online advertising by stating, ""For online advertising, I strongly recommend against commitments and impression-based advertising." In short, the article advocates that all advertising be priced like Google Adwords and Facebook ads or similar. As marketers know, online advertising is more than just clicks. It's about reaching your potential customers and pay per click (PPC) advertising isn't the only way to go about that.
I noticed a VentureBeat article that makes me shake my head in amazement at the apparent lack of understanding of online advertising. The sensationalistic headline, "Yelp advertising is a rip-off for small advertisers" reveals a simplistic viewpoint on the value of targeted online advertising. Yelp is not ripping off small business advertisers, but in fact is providing a platform that businesses are benefiting from whether they are paying Yelp for prominent placement or not.
However, my article is not really as much about Yelp as it is about defending online advertising, which the article in question attacks with a vengeance. In essence, the article paints a picture of online advertising where all ads should be sold for 60 cent CPMs regardless of whether they are geo and industry targeted or provide branding with prominent placement. Don't charge too much or you might be accused of being a "rip off"!
Additionally, the article attacks the very core of online advertising by stating, ""For online advertising, I strongly recommend against commitments and impression-based advertising." In short, the article advocates that all advertising be priced like Google Adwords and Facebook ads or similar. As marketers know, online advertising is more than just clicks. It's about reaching your potential customers and pay per click (PPC) advertising isn't the only way to go about that.
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