James Borow is the co-founder and CEO of GraphEffect, a startup that has developed a brand-focused Facebook advertising platform and garnered some impressive clients, such as Microsoft and Sears. Borow spoke to Digiday about his company’s business model and why click rates shouldn’t be the focus of Facebook strategy.
Lookalikes are common in online advertising. What makes it different with the social graph?
It literally could not be more different. This is because in Facebook, cookies are strictly prohibited and you can never target individual users. There is a common misconception that you can target individual people on Facebook, and that is absolutely not the case. Instead, you can target people in aggregate who have stated that they like or are interested in something. As a result you tend to run into a problem where you find a like or interest that is performing really well, for example the New York Times, but not every person who likes the New York Times has told Facebook that they do.To solve this, we engineered our proprietary lookalike system to analyze previous results that we’ve seen from campaign targeting and to dynamically make an educated guess about how to target people who have similar interests. You can think of lookalike modeling as a targeting recommendation engine for Facebook advertising that we leverage to continually put your ads in front of the types of people who care and want to engage.
Facebook ads have notoriously low-click rates. Why is that?
Facebook advertising is not about the click-through rate; this is something that we stress to people everyday. It is not search, it’s not even traditional display, and it therefore cannot be held to the same norms. Instead you should think about Facebook as television advertising in which you are trying to achieve a long-term goal, and ads are the first step of the process. At GraphEffect we often tell people that Facebook advertising is not transactional inventory, it is centered around a story economy, and the goal is to engage your users and leverage word of mouth marketing at scale. A high or low click-through rate is irrelevant if you are not engaging and building a relationship with your target audience.
How valuable are social relationships as an ad signal? Won’t Facebook ad performance always badly trail that of search, which has a clean intent signal?
Again it’s not about comparing Facebook to search, as it’s not apples to apples. In Facebook the goal is to build relationships, engage those users, amplify those engagements to friends and then convert. It is much different than buying a keyword and trying to close the deal off that initial click; it’s about continual engagement.
How will Facebook advertising evolve, and what will GraphEffect’s place be?
I think that Facebook is going to continue focusing on sponsored stories and really leveraging this concept of people’s friends making the recommendation as opposed to the brands themselves. My hope is that a year from now most of the ads on Facebook will not be traditional ads but, instead, your friends letting you know that they found something you might be interested in. It is a bold and ambitious concept and one of the main reasons that companies like GraphEffect will continue to build on top of this platform for a long time to come.
Will the basic banner eventually die?
The best executions have been by brands who follow the build- engage-and-amplify approach. Some great examples are American Express, Clinique and Live Nation. Each of these brands understands that Facebook marketing is not just about ads and that ads are a lever that can boost content and engagement. At GraphEffect, we think that more and more brands are going to start to embrace this concept and that may spell the end of the basic banner as no one can deliver word-of-mouth marketing at scale like Facebook, which is trouble for the other guys. Marketing on Facebook is really about having a conversation. If you can wrap your head around the fact that this is not search and it’s not traditional display, but it’s really a communication platform, then that’s when you really see the opportunity. As a result, the biggest barriers are primarily education related. Sponsored stories in particular are something that most people are still trying to digest. I think marketers are going to have an “aha” moment in early 2012, and from then on a lot of the current barriers will be broken down.