Big Brands Are Still a Big Opportunity for Facebook (FB)

By Markets Fool.com


Brands are underutilizing Facebook. Image source: Facebook

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Brand advertising is about creating connections with potential customers. It requires repeated exposure and storytelling to make those connections, along with a platform that can provide that exposure and allow brands to tell their stories. For years, that was print media and television. But with the rise of Internet use in conjunction with the pocket supercomputers we call smartphones, establishing a Web presence has become a key part of any brand's advertising strategy.

Nonetheless, one of the biggest Web advertising platforms of all, Facebook , says it is still underutilized by big brands. Speaking at a J.P. Morgan conference recently, Facebook's vice president of global marketing solutions, Carolyn Everson, discussed the hurdles Facebook has to overcome with brands, along with the social media giant's advantages over other digital ad platforms such asTwitter in attracting brand advertisers.

If it ain't broke ...
Facebook's top problem with big established brands is that those brands have been advertising on television and in print for years, and that has worked very well for them. After all, that's what enabled them to become big brands in the first place. As such, Facebook must educate brands on the value its platform can offer.

Everson noted that it will take time to transition brands from print and television to placing Web and mobile ads on its platform. Education will be a big component of that, and it starts with providing information brands can readily understand.

When Facebook began placing advertising on its platform, its measurement capabilities were no better than those of traditional advertising. It could tell advertisers how much advertising on Facebook lifted their brand recognition and recall, and that was about it.

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Earlier this year, Facebook introduced "conversion lift," which helps brand advertisers measure the actual sales impacts of their advertisements. Its aim is to solve the old problem summed up by marketing pioneer John Wanamaker: "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Facebook is working with advertisers to leverage its huge audience, as well as some technology from its Atlas demand-side platform, to measure the actions taken by people shown a series of ads versus those taken by a similar audience that didn't see the ads.Conversion lift is something Facebook is uniquely suited to provide advertisers.

Facebook's other advantages
Facebook has several additional features that make it extremely appealing for brand advertisers:

  • Custom audiences: Custom audiences allow advertisers to take a list of previous customers developed from in-store and online purchases and target them on Facebook. The ubiquity of the platform means a high percentage of these former customers are on Facebook already, and targeting those users is likely to result in better conversions.

  • Lookalike audiences: Similar to custom audiences, lookalike audiences capitalize on Facebok's extensive user data to find customers similar to an advertiser's most worthwhile audience. That means an upscale women's clothing brand won't need to fine tune its targeting on Facebook; it just uploads customer data and Facebook takes care of the rest.

  • Attention: Between Facebook and Instagram, the company commands about 20% of time spent on mobile devices, or about 5% of all time spent with media, according to Everson. It thus makes sense that Facebook should capture about 5% of a brand advertiser's budget, but large brand marketers still lag behind. For reference, the advertising market is expected to reach $600 billion this year. Total mobile ad spend was just $13 billion last year.

A path for continued growth at Facebook, but bad news for Twitter
Attracting more brand advertising dollars to digital provides another path for growth at Facebook, and it's downright necessary for Instagram to prove successful. For Twitter, however, brand advertising is already a large part of its business. On Twitter's first-quarter earnings call, CFO Anthony Noto told investors that direct sales -- ad sales associated with brand advertisers -- account for more than 50% of revenue.

As ad dollars shift to digital, Facebook is well-positioned to capture an outsized share of brand advertisers' budgets. That will spur further growth at Facebook while dragging down revenue growth at Twitter. That's particularly noteworthy in light of Twitter's recent struggles with direct-response advertising.

The article Big Brands Are Still a Big Opportunity for Facebook (FB) originally appeared on Fool.com.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, JPMorgan Chase, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.