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> What matters in the end is if there's a positive ROI on the ad spending From what I've seen, the big brands don't really know the ROI of their ad spending. T

> What matters in the end is if there's a positive ROI on the ad spending From what I've seen, the big brands don't really know the ROI of their ad spending. They allocate X% to digital, Y% to outdoor, Z% to TV, etc. Then they sub-allocate across channels within each category. It's not really about ROI. And smaller advertisers don't have much in-house capability to measure ROI. Instead they rely on Facebook's own analytics. Only a handful of companies I've seen actually build their own analytics, measure customer acquisition cost, and match acquisition cost to lifetime value for specific customer cohorts. The smaller firms that do their own analytics invariably discover that 95% of the traffic from "paid social" Facebook ads is low quality, high churn, with deeply negative ROI. And it's impossible to isolate the 5% high quality, low churn, positive ROI traffic and just pay for that.

the_watcher 7y ago
Basically everything about this is wrong. Big brands invest far more in measurement than small advertisers. Smaller companies who do their own analytics and seriously invest in Facebook ads tend to find that they perform better than all but their most core search keywords. It's true that "seriously investing" in Facebook ads is much more involved than the equivalent investment in search ads, but it's absolutely false that the traffic from Facebook ads is definitionally low quality.
- jliptzin 7y ago
  I don't know about the experience with others, but I've built a few different online businesses over the years and I am always tracking my ROI on digital spend intensely. I have almost always found Facebook traffic to be extremely poor, especially when compared to Adwords. Obviously display vs. search advertising naturally have big differences in conversion rates, but the difference was always way more extreme than I had anticipated, to the point where I've just completely given up on Facebook entirely.
  - disgruntledphd2 7y ago
    what kind of attribution model did you use? In general, last-click methods will substantially under-value FB and over-value Google. This occurs because you see an ad on FB, don't click, but search to get back to the website, and click on a Google ad. I've found, that for a lot of b2c businesses, FB provides extremely good ROI. Google is much better for b2b though.
- panarky 7y ago
  > perform better If by "perform better" you mean "generate traffic" then I agree with you. Facebook ads really do result in a lot of clicks. And if you're running a political or awareness campaign, maybe that's what you want. But it's hard to measure ROI for this kind of campaign except by comparison with other traffic sources. On the other hand, if you're selling a product or service, and you track narrow cohorts from prospect through conversion, repeat buy, defection and churn, you can compare total acquisition cost of the cohort with LTV of the cohort. Regardless of the product or service, I usually see CAC >> LTV at the cohort level. Within a cohort, usually < 10% of customers have CAC <= LTV, but it's nearly impossible to target this subset in advance, so negative ROI dominates the cohort.

the_watcher 7y ago

Basically everything about this is wrong. Big brands invest far more in measurement than small advertisers. Smaller companies who do their own analytics and seriously invest in Facebook ads tend to find that they perform better than all but their most core search keywords. It's true that "seriously investing" in Facebook ads is much more involved than the equivalent investment in search ads, but it's absolutely false that the traffic from Facebook ads is definitionally low quality.

jliptzin 7y ago
I don't know about the experience with others, but I've built a few different online businesses over the years and I am always tracking my ROI on digital spend intensely. I have almost always found Facebook traffic to be extremely poor, especially when compared to Adwords. Obviously display vs. search advertising naturally have big differences in conversion rates, but the difference was always way more extreme than I had anticipated, to the point where I've just completely given up on Facebook entirely.
- disgruntledphd2 7y ago
  what kind of attribution model did you use? In general, last-click methods will substantially under-value FB and over-value Google. This occurs because you see an ad on FB, don't click, but search to get back to the website, and click on a Google ad. I've found, that for a lot of b2c businesses, FB provides extremely good ROI. Google is much better for b2b though.
panarky 7y ago
> perform better If by "perform better" you mean "generate traffic" then I agree with you. Facebook ads really do result in a lot of clicks. And if you're running a political or awareness campaign, maybe that's what you want. But it's hard to measure ROI for this kind of campaign except by comparison with other traffic sources. On the other hand, if you're selling a product or service, and you track narrow cohorts from prospect through conversion, repeat buy, defection and churn, you can compare total acquisition cost of the cohort with LTV of the cohort. Regardless of the product or service, I usually see CAC >> LTV at the cohort level. Within a cohort, usually < 10% of customers have CAC <= LTV, but it's nearly impossible to target this subset in advance, so negative ROI dominates the cohort.