‘Own the loop’: Why CPG giants like P&G and Johnson & Johnson are buying more Facebook direct-response ads

On Facebook, conversion ads appear to encompass sponsored posts, carousel ads and video ads that include call-to-actions like “buy now,” “shop now” or “get offer” and link back to their individual websites where consumers can make their purchases directly or, once there, be directed to other sites where they can buy products. CPG companies are choosing to run conversion ads over awareness or consideration ads, the other two ad types Facebook categorizes ads into.

“For companies that didn’t traditionally have a website where they sold products, and instead went through other resellers, we are starting to see a focus on people finding ways to sell their own products and seeing more and more budget go toward conversion-based ads,” said Brittany Richter, svp and head of products and services at Dentsu’s media buying agency iProspect.

While other platforms like Amazon, Instagram and Pinterest are seeing more conversion ads being sold, ad buyers say Facebook is overwhelmingly gaining most of the DR ad budgets. The increase in the number of DR ads is a boon for platforms with their deep pools of customer data for targeting. Overall, CPMs are typically higher for DR ads on any platform because simply put, they ask more of the user and the return can be quantified with a sale.

“If we’re bidding and optimizing toward reach, which we do for awareness campaigns, the CPM will be lower than if we’re bidding or optimizing on something more specific, like a conversion,” said Richter.

One ad buyer said they have seen CPMs as high as $60 on Facebook when a company is trying to reach a hard-to-reach audience with a large budget and content that asks a lot of a customer, such as asking someone to open a new bank account. But when targeting a broad audience with a modest overall budget, asking a customer to do something they might want to do already, CPMs can dip as low as $3.00.

Gillette is running ads that direct consumers to its Gillette on Demand service, which it launched in May 2017, in response to the growth of competitors like Harry’s and Dollar Shave Club, purchased by Unilever in 2016 for reportedly $1 billion. Neutrogena is running ads to bring customers to their own site where they can buy goods directly. Ads for Pampers and Aveeno, on the other hand, are leading users to their websites where they can then choose to buy online through options like Amazon, Jet.com, Walmart or Target. By directing users to their own sites first, Pampers and Aveeno can then see where customers ultimately purchase their products.

“There is an overall trend in the industry of brands marketing directly to consumers,” said Noah King, svp and group director at Havas Media’s Socialyse. “If you own the online store, you own the loop.”

Richter said it’s a dramatic change in strategy from when CPG brands would mostly buy awareness ads on Facebook that directed users to retail stores like Target or Walmart as places where they could purchase their products. She said she began seeing CPG interest in conversion ads on Facebook when the service introduced its Dynamic Ads about three years ago.

“Facebook realized that if they didn’t start doing real conversion-based options that work well, they weren’t going to get the share of the spend that they could,” she said. “Since they have been focused on that, we have been seeing a total uptick in direct-to-response.”

Facebook has introduced a number of upgrades to its dynamic ads in the past year, including first-party cookies for Pixel, categories for dynamic ads which targets people by specific categories like sunglasses instead of individual products, a format that features multiple advertisers in one ad unit and overlays that highlight product prices or discounts.

Karin Tracy, head of industry for retail, luxury and fashion at Facebook, said traditional retailers are also buying more conversion ads as they track people to both their online sites and physical stores.

Renelly Morel, social activation director at GroupM’s Essence, said she is also seeing retailers like Home Depot, Michael’s and Crate & Barrel run more DR ads. The Home Depot is running six times the number of conversion ads than it is awareness or consideration ads. According to BrandTotal, Home Depot is currently running 7,546 conversion ads on Facebook, while its awareness ads number 384 and consideration ads number 667.

“The goal for retailers is to drive return on ad spend which is a key measure of success in retail,” said Morel.