Why the Future of Facebook is Bright (part 1)

an interview with
Lucy Jacobs Chief Operating Officer, Spruce Media

On February 11th, I will be leading a panel discussion at MediaPost’s Social Media Insider Summit called “So Your Facebook Developer Isn’t “Strategic”. Does It Matter?”  The controversy, if there is one, began a few months ago when Facebook elevated a dozen of the hundreds of Preferred Marketing Developers (PMDs) to that status of Strategic PMDs.  These folks are being granted insider access to all things Facebook leaving clients to ponder if their non-SMPD agency can remain current and still deliver the goods they need.

To get myself up to speed on this issue, I reached out to my fellow panelists including Lucy Jacobs, COO of Spruce Media, one of the freshly minted SMPDs and in the process realized our discussion was less about the role of SPMDs and more about the potential of Facebook.  As you will see in the interview, Ms. Jacobs is quite bullish on the future of Facebook as an effective and efficient advertising channel.  I suspect you will feel the same after reading her responses.

Drew: Can you provide a brief description of Spruce Media and how Facebook fits in?
Spruce Media provides a streamlined social media-marketing platform.  We optimize customer’s Facebook marketing through sophisticated ad creation, bid management, collaboration tools, page post analysis & amplification. Our platform is offered on self-serve basis or combined with a support team of dedicated account managers and media buyers.  Spruce Media integrates the management of organic, viral, and paid distribution on Facebook, which has never been done before across the social ecosystem.

Large budget advertisers have unique problems. In order to scale up spend; they need bulk ad management that goes beyond Facebook’s Power Editor. Large budgets also demand more sophisticated options than a standard Facebook business account, even if it’s bulk enabled. Finally, advertisers are always looking for intelligence that will give them an advantage over the built-in Facebook capabilities.

Drew: How is Facebook doing in the mobile arena?
Newsfeed mobile CPM is down 10% Q3 to Q4 due to increased inventory with iPhone 5, iOS 6 and Facebook’s ramp up of eligible devices and impressions.  Mobile Newsfeed and Desktop Newsfeed CTRs are up 34% and 49%, respectively from Q3 to Q4 2012.  The slight (10%) decrease from Q3 to Q4 in mobile Newsfeed CPM is more than made up for in increased value to advertisers by the significant rise in CTR and drop in Cost per Click.

The 33% drop in CPC from Q3 to Q4 further opens Facebook up to the $1.6+ Billion industry of mobile ad network advertisers.  The 34% increase in CTRs shows that Facebook has been able to improve the formatting and relevancy of ads delivered in their mobile applications confirming Facebook’s ability to focus on both user experience as well as revenue building product development.

The performance of mobile has plenty of room to grow, especially for price. As for user degradation as more mobile ads are populated, users are more tolerable for in-stream ads since they are either expected or wanted. Given the high engagement rates of mobile ads, it’s not an issue. Accidental clicks on FB are low from click back testing.

Drew:  Is Facebook Making Money on Mobile?
The monetization gap that closed on desktop Internet will ultimately close on mobile Internet too. While users were initially skeptical of Facebook’s mobile revenue opportunity, the company is now on track to generate 20% or more of advertising revenue from mobile in 4Q2012, up from just 3% in 2Q. The mobile Newsfeed ads pricing at a significant premium to Facebook’s platform average and believe that over time Newsfeed plus all mobile ad formats may comprise around 60% of total advertising revenue.

Drew: Are you bullish on the future of Facebook applications?  If so, why and how do you see them evolving?  
Yes, I am very bullish on Facebook applications. They are a logical next step in the evolution of the Facebook Marketing cycle into Amplification. Open Graph is proven to work well as well as new ad units such as mobile app installs.

Drew: Are you also bullish on the future of Facebook advertising?  
Yes I am very bullish on Facebook. Spending outlook for 2013 is positive:

  • Advertisers are actively discussing budgets for ’13 and so far the outlook is positive. Most of the brand advertisers expect to increase spending on FB in 2013.
  • The advertising activity appears to be sustainable as the objective is being transitioned from fan acquisitions to engagement and amplification. FB’s new targeting tool, Custom Audiences, is a game-changer since advertisers can match online identity with offline CRM and deliver relevant ads on an individual basis.

Drew: What are some key things to watch for in 2013?
Custom Audience – The game-changer in digital advertising. FB is the only platform that enables accurate individual targeting on a large scale, shifting FB advertising to a very sustainable business model of reach and frequency.

Ad network – This initiative will expand FB’s reach of ad impressions into third-party websites. The social network has a unique advantage since social identities can travel across devices from mobile to desktop. Existing PC cookies cannot be tracked in mobile currently. When users hop from a smartphone to a PC, the tracking gets disconnected.

Multi-touch attribution – This is a longer-term positive industry development for FB. The attribution model is starting to shift from last-click to multi-touch, recognizing the assist social media provides at the early part of the consumer-purchasing journey through awareness. By doing so, social media, especially FB, should get more media allocation in the future.

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