The Challenge: Facebook Ads is not proven to be an effective direct sales medium. While this has led to shareholder frustration, advertisers should ignore the focus on sales and optimize for engagement and awareness.
When it comes to Facebook Ads, there's a significant disconnect between Wall Street and Madison Ave. Since Facebook's IPO in May, investors have been looking for revenues high enough to justify a multi-billion dollar market cap. They haven't found them. On Thursday last week, Facebook released their first earnings since their IPO. For investors, the results were predictably disappointing.
For advertisers, the fixation on Facebook's earnings is a distraction. The plain fact is that Facebook Ads isn't a direct sales channel; it's an awareness channel.
Earlier this month, Ad Age and Citigroup conducted a survey to determine why marketers use Facebook Ads. Overwhelmingly, marketers use Facebook Ads to, "Build awareness and sentiment for my brand." Others were trying to drive website traffic or build their fan base. Fewer than 10 percent of respondents said they were trying to generate sales leads or engage in social commerce.
The Ad Age survey reflects an important reality about Facebook Ads: while they're a powerful way to build brand awareness, they are not a strong direct sale mechanism. Of course, this doesn't mean that marketers should ignore them altogether. As Max Kalehoff recently wrote at MediaPost, "Facebook Ads, thus far, have proven to work best toward top- and middle-of-funnel marketing goals. Therefore, the fact that brand-building is the top goal is not surprising."
When marketers recognize Facebook Ads as an awareness and engagement channel, they can optimize and budget their Facebook investment accordingly.
KEY TAKEAWAYS FOR MARKETERS
» Allocate Budget for Every Stage of the Conversion Funnel
Ultimately, your entire marketing budget is directed toward one goal: driving revenue. That said, each stage in the conversion funnel should have its own budget. Determine how much you're willing to spend at the top the funnel -- "Awareness" and "Lead Generation" -- and allocate a percentage of that budget to Facebook Ads.
» Define "Awareness" KPIs ("Key Performance Indicators")
If you optimize your Facebook Ads for direct sales, you'll always be disappointed. By defining "Awareness" KPIs, including "likes" and website visits, you'll be optimizing for Facebook's strengths. Measure results accordingly.
» Track Facebook Leads to the End of the Funnel
Not all leads are created equal. Determine how often leads generated by Facebook Ads eventually lead to sales, and allocate your "Awareness" budget accordingly.
About Ernan Roman Direct Marketing Corp., (ERDM):
ERDM provides Voice of Customer-driven Customer Experience Marketing consulting services for companies such as IBM, MassMutual, QVC, NBC Universal, Microsoft, Hewlett-Packard, and Symantec Corp. They have conducted over 9000 hours of in-depth interviews with customers and prospects of these clients to gain an in-depth understanding of their expectations for a high value customer experience.
Ernan Roman, President, is recognized as an industry pioneer and was recently inducted into the Marketing Hall of Fame for creating three transformational methodologies: Integrated Direct Marketing, Opt-in Marketing, and Voice of Customer Relationship Research.
He was also named by Crain's B to B Magazine as one of the "100 most influential people in Business Marketing".
His latest book on marketing best practices is titled, "Voice of the Customer Marketing: A Proven 5-Step Process to Create Customers Who Care, Spend, and Stay." 
Ernan is also the author of the widely read blog, "Ernan's Insights on Marketing Best Practices", (www.erdm.com), and author of "Opt-in Marketing" and "Integrated Direct Marketing".
www.erdm.com
ernan@erdm.com
Andrew Cherwenka: Permission Marketing: Facebook's Cash Cow and a Marketer's Dream
I almost never see online ads.