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Summary:

Facebook is offering companies more information on the way fan pages are used — and new data shows that it’s for one simple reason: it’s by far the most effective way for brands to reach customers, which makes it an easy way for Facebook to cash in.

campalyst-blu1

Facebook’s advertising machine is growing fast, and it’s growing big: estimates put 2011 ad revenues at some $3.8 billion. But it’s also a system that is always being tweaked as the company tries to turn its vast trough of users into more cash.

The latest changes, you may remember, are an attempt to convince advertisers that they should be focusing on engagement more than click-through rates — what Mathew characterised as an appeal to “forget about clicks”. From the outside, it may be difficult to understand why this matters — but here’s some data that might shed some light on what Facebook is doing and why advertisers love fan pages so much.

Courtesy of social analytics firm Campalyst, we have information on a campaign run for Blue1, a Finnish subsidiary of Scandinavian Airlines. Through August and September, Blue1 ran a campaign across three different channels: a Facebook page with regular status updates; Facebook ads targeted on potential customers; and more traditional display ads.

Here’s what they found: branded fan pages — and the updates that users see — are vastly more successful than other ways of advertising on Facebook.

To be more exact, Facebook Pages convert people into customers at a far higher rate than other forms of advertising. The conversion rate is four times higher than ordinary display ads and more than six times higher than traditional Facebook ads. And when they do convert into purchases (airline tickets in Blu1’s case) people who are fans spend more: an average of 30 percent more in this case.

This makes sense, of course: somebody who visits a fan page has already declared their interest in a given topic, and so they are clearly more likely to purchase. But it’s also interesting in terms of how Facebook limits access and visibility, because the most important way to get people to visit a fan page is through status updates that appear in news feeds.

Here’s another intriguing stat: these click through rates are achieved despite the fact that — at best — only a third of fans actually see updates in their feed. On an average day, just 14 percent of users who are already fans of a brand will actually see updates that brand makes.

Given all of this, it’s not hard to see why Facebook has been slowly expanding the data available on fan pages and encouraging people to look at engagement stats while at the same time reducing the ability of those pages to inject themselves into the news feed. Now it can charge advertisers to get into people’s streams with what it calls Sponsored Stories.

“What Facebook did with the Sponsored Stories was give brands a tool to pay for reaching more people and boost the reach of their fans through the fan pages,” says Campalyst CEO Jevgenijs Kazanins.

“Effectively, they are saying that reaching fans in the stream is hard (and it became even harder due to changes in the stream) but there is a way to increase it by buying Sponsored Stories.”

  1. If I’m not mistaken, the first chart says that the performance of Facebook Pages vs. display ads is not 4:1, but really 1.57:1. The ratio of 4:1 seems to be between Facebook ads and display ads; which actually surprises me as being a very poor performance for Facebook ads.
    (Indeed what I read is: Facebook Pages = 6.3 x Facebook ads ; Facebook Pages = 1.57 x Display ads; thus Facebook ads = 1.57/6.3 x Display ads.)
    Interesting insight in any case.

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    1. Ach, yes my mistake — meant to say display ads are 4x FB ads.

      Also correct: it’s worth pointing out the very poor performance of FB ads compared to other options here.

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  2. GigaOM, thanks a lot for the coverage!

    @P82 you are right, the conversion rates for Facebook Pages vs display ads are 6.3:1, the conversion rates for Facebook Pages vs Facebook ads are 1.57:1 – so display ads outperformed Facebook ads roughly four times.

    For those willing to dig deeper, the full case study is also available here: http://www.slideshare.net/campalyst/do-facebook-pages-help-brands-sell

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  3. More than just clicks, actually for once I feel FB has a point and a good one at that. The problem with advertising is, despite the fact it is usually boring, indolent and too much of a mass appeal is that it doesn’t capture single, individual hearts. A new IBM survey showed that top CEOs of global companies report their biggest challenge are information management and social media. On the social media part, they know they can sell to a wide market but are clueless as to listen to what individuals want. Get it? They are starting to sense they need to interact more one on one and get in the trenches instead of pushing insipid and most of the time, not needed products down people’s throats. Whoever gets this will get the rest of the picture. Steve Jobs understood this well and look at where the company is now, despite all odds!

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  4. Fan pages are very good for google search engines.google indexes them very well.I love facebook and it is an awesome advertising tool.
    Casey Mahoney Brad P

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  5. I think there are plenty of room for new features for the Facebook fan pages and the possibilities are limitless. Having said that, I think that the key to any successful fan page is posting great content which can engage your fans; not just simply posting them from third party apps. I haven’t heard of Sponsored Stories though and thanks for sharing that tidbit!

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  6. Great article and very insightful. Just to play DA, it should be noted that this is one company and one campaign. Scientifically not a large sample size to make a foregone conclusion. Would love to see other companies and other products studied–esp. the multi-nationals, food & beverage, apparel, entertainment and so on; they and their customers are quite different. Could vary widely or could reinforce. Thanks again!

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    1. Mike, thanks for the comment, we agree :) We’re also looking forward to working with more brands and agencies to better understand this brave new world of social media marketing. Judging by the response to this article though, there is definitely a need for more quantitative data on the topic.

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  7. Where did you get the stats to prove that only 14-36% of fans are reached by fan page status updates?

    Has it always been that way, or was that a recent adjustment?

    Personally, I feel like if I want to ‘like’/’fan’ a page, I’m opting in to their updates, and expect to see them all.

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  8. I for one would prefer liking a Fan page and clicking on the ad. Again, the keyword is “engagement.” Customers these days are already proactive. Before they buy, they understand the business first and know the people behind it. They want to be convinced the product deserves their money. Ads don’t really promote that kind of communication.

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  9. The secret behind Facebook’s obsession with fan pages http://t.co/VtgWJvt5 #sm

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