Welcome to the other side of the pillow! If you haven't read the first three pieces of this series, I strongly encourage you to stop now and catch up. While the business experience is much different from the user experience, it is important to understand the relationship between the user and the algorithm in order to fully appreciate how powerful the business side of Facebook really is. For those of you who have read Part I on the user...mentally prepare yourself for an entirely new way to view Facebook.
Part II-A: The Business
The art of marketing has changed so much over the years. Depending on how old you are, you'll recall many different ad placements in magazines, newspapers, billboards, on TV, on radio, etc. The effective variable that each of these platforms had in common is the need for the user to be physically exposed to that advertising medium. They either need to subscribe to that magazine/newspaper or come across it in their daily routine. They need to drive by that billboard or have the TV or radio on at the precise time that ad is running. These type of advertising platforms are still very much alive today, but they are shifting with the advancement of technology. Each of these platforms offers what is called a 'shotgun' approach to marketing. In short, they blast their message out to as many people as they can without knowing if the message is being targeted to the intended user. I know what you're thinking...some of these platforms are targeted to the intended user, for example the computer magazine "WIRED" will have ads about computers, hardware, software, etc. The businesses anticipate the readers have an interest in computers and therefore want to narrow the shotgun blast to a more focused audience. While this has proven effective over many years, it lacks an important concrete data set...the conversion factor. How many of those readers who came across that computer ad actually made their purchase from that ad? How long did it take them to make the decision on conversion? Is there a way that company can retarget that same individual with a follow up campaign that helps leads to conversion?
While the answers to these questions are possible...they take time, money, and resources to analyze and calculate the ad's return on investment (ROI).
So now you may be asking yourself...what does Facebook do different? The answer to that question requires many hours of discussion...but to summarize in my Part II bold statement...Facebook sells laser focused target audience data to businesses for the purpose of maximizing marketing campaign impressions and increasing conversion rates. While it may seem that this is merely a jumble of various terms tossed together in a sentence, it is quite easy to breakdown.
Let's concentrate on the laser focused target audience data. Imagine a world without Facebook...for me its quite simple, since that was my childhood. Now imagine how much more effective ad placement in Wired magazine would be if every single time a user picked up the magazine, they were forced to answer a series of questions about themselves, their interests in computers, and their intended curiosity of why they picked up the magazine in the first place. Also imagine that the answers to those questions determined which advertisers would be seen to that user at that moment. How much more effective would those ads be in targeting the specific audience that requires that product/service? The answer is VERY! If an advertiser that offered virus protection software (we'll call them VPS) only pays for and gets their message in front of users in need of help with malware...they are much more likely to convert that user into a customer of their products. So here's the takeaway...an effective marketing campaign knows who the target audience is and how to maximize the budget in order to reach them.
Let's take the same example, only this time use Facebook's business tools. As we learned in Part I of this series, Facebook has the ability to capture and segment all user input data sets calculated throughout a user's engagement. Facebook then monetizes these input data sets by selling them to businesses like VPS who want to place their marketing dollars in front of a more define target audience. The key point here is the "user input data sets". These are voluntary inputs that a user offers Facebook. There is a tremendous value to the validity of that information vs the questionnaire in our previous example of Wired magazine. In this case, VPS can reach a much larger audience focused on one area of interest and allocate more of their marketing budget to reach individuals that they know want, need, or directly showed interest in their service.
So what are the data sets that a company like VPS can purchase from Facebook? Again...a discussion that can take hours, if not days, to fully get through. In short, Facebook campaigns are broken into three categories: AWARENESS, CONSIDERATION, and CONVERSION. Each of these categories have sub-categories that help the business define the purpose of the campaign...and more importantly, the anticipated ROI yield.