December 11, 2014

Chat with Facebook

Facebook execs Jin Choi & Erin Hunter (photo: Thomas Rohnke)
The condemned live longer: Facebook execs Choi and Hunter look fit and healthy (photo: Thomas Rohnke)
It's not every day that you have guests from California, when one works in Frankfurt. They certainly don't come for the sun, the laid-back people or the slow, courteous drivers. And somehow the River Main does not compare with the Big Sur.

When these long-haul travellers are from Facebook, one is a little puzzled. What could Erin Hunter and Jin Choi, with the zippy job titles Global Head FMCG & CPG Strategy viz. Industry Leader FMCG & Retail D-A-CH, possibly want from a German B2B newspaper?

The purpose of their visit could hardly be to make the social media giant better known. After all, its 1.3bn active users continue to network relentlessly and to inform their online "friends" across the planet about their favourite pop star or sausage.

At any rate, the talk with the slick delegation from Silicon Valley got off to a good start. Our sister rag "Horizont" had just interviewed Saatchi & Saatchi CEO Kevin Roberts. His controversial statement, "Facebook won't exist in three years' time", was blazoned for all to see on the big electronic screen in the entrance hall of our publishing company.

Presumably the high-tech duo "popped in" to update our fmcg advertising customers on the social network's rapidly developing set of commercial marketing tools. When what is now Facebook Inc. successfully IPO-ed on Wall Street in May 2012, it was also an act of faith. Investors clearly believed that the company founded by T-shirted entrepreneur Mark Zuckerberg in 2004 would be able to leverage its huge user base and transform its business model from owned-earned to paid content.

Today about 90 per cent of the global internet company's revenues (2013: $7.9bn) come from advertising, so it continues to build relevant technology. This includes the constant upgrading of the video ads offer in user News Feeds.

Despite predictions to the contrary, Facebook has flourished on the back of mobile advertising. More than 1bn people, i.e. well over 70 per cent of users, now view Facebook on mobile devices. Further access to the digital world is provided by WhatsApp, the instant messaging service for smartphones acquired for the princely sum of $19bn in February this year.

The next extension of advertising potential will be via Instagram which has belonged to the Facebook family since April 2012. Ads are already played on the mobile photo-sharing, video-sharing and social networking service in the US. They are currently being tested in a number of other countries, but not yet in Germany.

"Online democracy for all"  

Ms Hunter, Mr Choi, the CEO of Saatchi & Saatchi claims that Facebook won't be around in three years' time. Have you come to Frankfurt looking for a job?
Erin Hunter: Everyone is entitled to have their own opinions. I understand that people want to be provocative, but it doesn’t mean that time will prove them right!

At any rate, despite Kevin Roberts, you are still evolving your portfolio of services for brand marketers. For instance, you quietly added an auto-play function to your standard video ad product in Germany on October 15. But why keep it so secret?
A key part of our success is to constantly enhance the user and marketer experience. This includes making sight, sound and motion available to our advertising clients. As part of this process we introduced an auto-play video on the US market in September last year.

When people scroll over a video ad in their News Feeds, the video begins to play automatically without sound, but people can click it to listen, if they want. It was only logical to extend this service to the German market

What if a user doesn’t want your new service?
Facebook always make sure that the user experience comes first. So if users don't want to use the new auto-play, they can opt-out; also video ads with auto-play only start in Wi-Fi mode. Therefore, we ensure that ads don't consume any data plan of our users.

So what's in it for your brand advertisers?
Jin Choi: Formerly, users needed to click on video products in order to play them. Whether brands obtained good view rates, or not, depended on the video thumbnail and the copy. Therefore you needed really engaged people who actively clicked your spot. So the old "click-to-play" set-up was not predictable as regards reach and frequency.

But auto-play starts the moment the video appears on the screen, which means that the video will definitely be played. This is where it begins to become interesting from an FMCG marketer's point of view, where you need high volumes and broad distribution, because reach is in millions rather than in thousands.

Auto-play videos also help marketers to make meaningful media planning & buying strategies because they get predictable reach and frequency, which are the two driving parameters for media planning in brand communication. Marketers can see precisely who received their message within an initial target group and also ascertain reach.

Last but not least, they can plan how many times each person within a target group sees their brand message, so that they can ensure a real business and marketing impact.

Hunter: Auto-play gives marketers the opportunity to address those consumers who would like to see their message, but who do not normally click. Industry research by Nielsen and others has shown that there is no correlation between clicking the video play button and actual business outcome.

Some people will click and some won’t. But that doesn't mean your video hasn't made an impression on the person who chooses not to click.

Studies such as comScore's 'Natural-Born Clickers' show that something like 8 per cent of people account for 85 per cent of the clicks on the web. They also reveal that some of those 8 per cent have pretty undesirable demographics from a marketer's perspective, i.e., lower-income households, elderly people living alone etc.

Will brands still need media agencies in the type of brave new Real-Time Advertising world you are describing?

That's a good question for the brand manufacturer! Obviously the eco-system is changing, but no one here is calling the demise of media agencies; and whether companies outsource, or not, is purely their own business decision.

Choi: The more information you have and the more precisely you can steer your campaign, the more brainpower you need to leverage it. We are not experts in making chocolate or detergents, but in translating advertising & marketing messages for a platform.

Media agencies are experts in bundling such messages together in one story across various platforms and in distributing them in such a way that they will be most effective for all parties.

Why do you also have so-called Preferred Marketing Developers (PMDs)?

Hunter: We want to make things as easy as possible for all concerned in the increasingly complex digital world of advertising. PMDs are a set of partners, including media agencies and service providers, who are explicitly trained in our technologies and in the objectives of the clients. They help customers to scale with us more easily by providing technologies etc.

Erin Hunter, Facebook Global Head of FMCG Strategy (photo: Thomas Rohnke)
Erin Hunter: "Facebook knows that my passion is motorcycling" (photo: Thomas Rohnke)

One of these new technologies is provided by your Atlas subsidiary, which identifies end-user devices and tracks their online habits. Are you trying to rival Google?

We bought this Seattle-based company around a year ago, but it works autonomously because clients can book inventory from various different publishers. Atlas is an ad-serving platform that can now benefit from Facebook identities, which are real human ones and not bought via cookies etc. Marketers can follow these identities around the globe, across the web, and across devices.

So Atlas is similar to Google's DoubleClick; but, as Atlas brings the power of real people to ad serving and measurement, it is a more sophisticated ad-serving system.

What do you mean by Facebook identities?

Take how I use Facebook, for example. Mere demographics would confirm that I am female and aged 18 to 49. Some brand marketers might therefore think me an attractive target because they would assume that I have two kids at home, that I am the cook in my household, and that I do the main grocery shopping.

In fact, none of this is true. My husband is the chef and does the primary grocery shopping, and our grown-up kids no longer live at home.

By contrast, Facebook knows a lot more about me. It knows, for instance, that my passion is motorcycling, which is not something you would necessarily expect when targeting the average female aged 18 to 49.

This type of information regarding my lifestyle and personal interests is what Facebook understands as my true identity, and this is what can be leveraged via Facebook and therefore the Atlas platform.

Facebook has offered video ads in its News Feed since 2011. Why did you introduce 'Premium Video Ads' as a further service product in Germany this March?

Premium Video allows our clients to carrousel multiple video creatives in the News Feed and thus to tell a story. Brands love it. Coca-Cola in the US, for instance, did some amazing video work with their Super Bowl commercial. Thanks to the incredible targeting capability of our platform, they were really able to leverage the video to extend their reach.

With respect, words like 'incredible' sound more like US marketing jargon to European ears than something measureable…

Obviously there are some metrics that are confidential to our clients, which I can't reveal here. But all the Key Performance Indicators (KPI) important to consumer goods manufacturers and retail brands, such as reach, frequency, page impressions, brand equity etc., have increased significantly.

Enhanced KPIs for clients also mean higher sales for Facebook. How can advertisers check the real number of video clicks when you invoice them?

We want to be accountable because we do not want to win business without earning it, and we actually encourage our partners to measure their campaigns. This is especially the case with big FMCG companies because the whole of their 175-year-old industry is founded on being able to measure outcomes.

Obviously, each market segment has different third-party research providers, such as Nielsen, comScore, Kantar and GfK, who can provide clients with feedback on reach, frequency, sales, brand equity, awareness etc.

However, we would not encourage a brand marketer to measure clicks. Nielsen has proved time and time again, as has comScore in its recent studies entitled "Wither the Clicks?" and 'Natural-Born Clickers', that there is no correlation between clicks and business outcome. Instead we would encourage our brand clients to measure real KPIs such as reach and frequency.

What happens when users click a video away in irritation? Is that also counted as a click and duly billed to the advertiser?

Choi: You don't have to click the video away in the News Feed, and on mobile devices you simply scroll it away with your thumb in just a moment. We start counting views after the video has played for at least three seconds, which, by the way, is an industry standard.

Jin Choi, Facebook Industry Leader Brand Strategies (photo: Thomas Rohnke)
Jin Choi: "To be honest, I find the whole Cost per Thousand discussion boring!" (photo: Thomas Rohnke)

Aren't TV spots more effective than videos?

What you don't get when you book a TV spot in Germany is guaranteed delivery on Gross Rating Points (GRP), which is the core KPI for campaign measurement in terms of advertising pressure. And, you cannot be 100 per cent sure who really saw your TV ad and how many times.

If you buy a premium video product on Facebook, you get guaranteed GRP delivery for a very specific target group. Impact and performance are simply far higher.

TV spots allow brands to advertise within a guaranteed context, unlike pre-roll video platforms such as YouTube. Can Facebook ensure that its video ads will always be shown in the right contextual environment?

Hunter: Brands advertise on, for instance, a children's TV network as a surrogate in order to reach a particular audience, which they believe is in their market. We take this targeting to a higher level, which is to the person. So we don't need the surrogate of a particular TV channel.

My News Feed is very personalised to Erin Hunter, therefore the context is automatically going to be mine. Facebook is probably one of the safest advertising environments on offer because the user has curated it for his or herself.

How much cheaper are Premium Video Ads than TV spots?

Choi: We are very competitive in terms of pricing, but, to be honest, I find the whole Cost per Thousand (CPT) discussion boring! I'm much more interested in Return on Investment at the point of activity. Advertisers experience considerable stray loss when they try to target customers on classic advertising networks and channels.

I find it striking that TV still charges for the 14- to 49-year-old target group. So an advertiser wanting to sell a product to a subgroup of women between 25 and 49 still has to pay the CPT for all males and females between 14 and 49.

Compare this sledgehammer approach with the way we enable marketers to specifically address each and every target group. This has been confirmed by GfK media efficiency panels: Our average return on media invested in 2013 was around 1.14 for all campaigns where Facebook had been part of the media mix, against only 0.28 with TV.

There is a clear user trend towards mobile devices. But how can you get your video ads onto such small screens?

Your question refers to the old days when mobile phones were not smartphones and when screens were small and picture resolution was bad. But now technology has advanced and bandwidths improved so that whole brand worlds can be seen and heard in an inspiring way on mobile devices.

More important still, media consumption behaviour has changed. In only a few years the global time spent watching online videos on mobile devices has grown from only 3 per cent to 22 per cent today. We have always worked on the principle 'people first' in accordance with our mission to make the world "more open and connected".

The usage figures therefore speak for themselves: Around 1bn videos are viewed on Facebook every day, and 65 per cent of these are viewed on a mobile devices.

German suppliers are typically medium-sized. Aren't your services more for larger companies than for smaller ones?

Hunter: We have more than 1.2 million advertisers, so it is not always possible to provide everybody with a 1:1 service. What we call SMBs (small & medium businesses) are only a small component of the global FMCG business. According to Advertising Age, big FMCG groups represent 43 of the world's Top 100 advertisers.

That said, our mantra is to be open to all types of business. So we try to provide SMBs with the necessary tools, products and services for them to act without individual hand-holding.

Facebook changed its algorithms at the beginning of this year. Brand advertisers such as Nestlé say this has decreased organic reach and made you more expensive. Can you still guarantee the same business impact?

Hunter: The continued growth of Facebook and platforms similar to ours means that there is increasing competition for a limited amount of real estate on the News Feed. We therefore constantly improve our algorithms for the benefit of both users and marketers.

Choi: Only one year ago, each person on Facebook could potentially see 1,500 stories a day when they opened their News Feed.

Today, this amount can be many times higher. So the amount of content is constantly growing while the average person is still only able to see around 180 stories a day. Improved algorithms increase the long-term benefit for our advertising partners because they keep marketing messages relevant.

But don't fmcg clients have a right to demand an advantageous placing in the News Feed for their ads, regardless of how big overall traffic becomes?

Choi: I understand the emotional reaction of some partners related to the organic reach, but not from a business point of view. If I want to achieve a planable marketing footprint, I must have clear parameters. Organic reach as a business KPI is not planable.

Marketers should strive for a steered number of contacts and reach; otherwise they are following a random process or pursuing an unpredictable strategy.

That's why we introduced sophisticated campaign planning tools like for example the Reach & Frequency-Tool.

Hunter: Around 300 stories a day are shown in the News Feed of the average Facebook user who hardly looks at half of these. The criteria for relevance, whether defined as content quality or contact frequency, have to apply to everybody equally.

This fundamental principle of global online democracy must apply to all, regardless of whether they are companies, media celebrities, or personal friends.

Lebensmittel Zeitung print and digital (photo: LZ)
Our German B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: 'Spannende Webgeschichten' by international editor Mike Dawson & marketing editor Jörg Konrad on page 35 of Lebensmittel Zeitung, no. 50, 12.12.2014

German Retail Blog

Sign up for your FREE newsletter now!

Comments for this article are closed.

This is an English-language blog, please write all comments in English!
Thank you.