News

POV: Facebook Product Ads

Mindshare Point of View

Earlier this week Facebook unveiled a new advertising unit, Product Ads, as it continues to make strides in aggressively growing its ad revenue and commerce capabilities. Product Ads will enable advertisers/brands, particularly retailers, to dynamically showcase three products for sale within a single carousel ad unit, both on desktop and mobile. Each product highlighted will have its own image, description and click target. Facebook’s system will recognize when products are out of stock and cease advertising them. The new units are similar to Google’s Shopping Ads, which perform a similar function, and have been very successful for the company.

Details and Implications

Facebook has a massive array of personal-interest information on over 1.4 billion users.  With such a rich first-party data set, retailers and others selling products directly should be able to target very precise audiences based on everything from demographics to interests (music and fashion) not to mention geographic location; keep in mind over 70% of Facebook’s current ad revenue comes from mobile, a number that continues to increase in as more users come online via mobile-centric markets around the world. So the first benefit to advertisers is essentially precision-targeting of “shoppable” ads down to your geographic location via mobile phones.

These ads are also dynamically optimized, meaning that the products featured will be tailored based on users’ activity and interests. They will adapt to show viewers what they want most from a brand/advertiser. There is also the facility for brands to highlight products that have been frequently viewed on their website/mobile app, or showcase best-selling products.  Consequently, the second benefit for advertisers is dynamic adaption of the creative unit, including product and messaging, to maximize relevance to the user.

Finally, Facebook are making visuals in the ad unit a priority by actively encouraging videos and photos. Facebook may have learned from Google; in 2014 Adobe research indicated that merchants spent 47% more on Google Shopping Ads, whereas text based ad spending actually decreased by 6% in the same period. This approach also makes sense given Facebook’s consumer focused ethos; concentrating on the aesthetics is a relatively simplistic way of enhancing the user experience. So the third benefit is a highly-visual ad format, which continues Facebook’s efforts in this space with Instagram ad units and its new video ad units.

Early tests of the product have produced positive results; Shutterfly states that its CTRs increased by 20%, while Target indicated that these ads have done particularly well on mobile, where conversion rates are twice as high.

Summary

Product Ads are another indicator that the “shoppable” ad space is heating up and early results indicate that consumers are embracing it. These new commerce-enabled ads are also proving to be another major battle ground between Google and Facebook, with Yahoo and Bing lagging behind with only a small proportion of the market share. Facebook’s Products Ads certainly has the propensity to prevail as the market leader, purely due to the amount of data collated by Facebook on a considerable proportion of the population. In short, it has breadth and depth in people and data, and a proven track record in successful rolling out new ad units.

For advertisers and brands this presents an excellent opportunity to deliver dynamic ads designed to evoke a more personal connection, which ultimately increases the chances of a consumer reacting, particularly on mobile. Given the visual nature of the ads, advertisers should concentrate not only producing relevant content, but content which is captivating and visually creative. Done well, these new units can actually lead to more sales, directly or indirectly through retail partnerships.