Social Network Advertising

Three Ways Facebook Can Leverage Mobile To Boost Revenue

noreply@blogger.com (Hussein Fazal) — Tue, 15 May 2012 23:50:00 +0000

Republished from my Guest Post on TechCrunch:
http://techcrunch.com/2012/05/15/three-ways-facebook-can-leverage-mobile-to-grow-their-revenues

Three Ways Facebook Can Leverage Mobile To Boost Revenue

HUSSEIN FAZAL

posted 6 hours ago

12 Comments

Editor’s note: Hussein Fazal is CEO of AdParlor, an ad management and technology company for Facebook campaigns. AdParlor manages over 1 billion daily ad impressions on Facebook for clients such as Ubisoft, SEGA, Groupon, OMD and Starcom.

I must say that I have been a little bit disappointed recently in the many, many, many analysts who have been knocking the Facebook valuation with very limited insight into what is going on with their advertising business. Their revenue potential is as strong as it has ever been and the social network continues to grow its users and roll-out innovative advertising products.

While there are many things that Facebook can do to drive revenue related to display, search, and mobile – let’s take a look at three immediate steps Facebook could take to ramp up revenues from its 500 Million+ monthly active users on mobile devices.

1. Show more Sponsored Stories in the mobile news feed – A sponsored story is a piece of news that you would see in your news feed anyways – turned into an ad. It is relevant, social and most people who see a sponsored story wouldn’t even recognize it as an ad. Simply put – sponsored stories work. Looking at campaigns AdParlor has run across numerous verticals show that on average, sponsored stories have a 17% higher click-through-rate and a 38% higher conversion-rate than regular marketplace ads.

When sponsored stories were first introduced they were only shown on the right-hand column. They were then rolled out into the news feed on the web version of Facebook. At fmc they announced that they would begin to serve sponsored stories on mobile, and on April 26th it seems to have gonelive. However, most users have seen few if any sponsored stories in their mobile news feed as Facebook is slowly rolling this out while monitoring user experience. Facebook can easily flip the switch on this, increasing the volume of sponsored stories it shows in the mobile news feed and increase their mobile revenues.

2- Combining Location & Offers – A while back Facebook attempted to compete with Grouponand other daily deal sites by creating a deals product. They quickly shut that down for multiple reasons – and then re-emerged recently with an offers product. These offers are coupons which any page owner can create for free – and will begin to appear in a user’s news feed on the web. The real benefit will start to roll in when Facebook begins to serve these offers in the news feed on mobile devices to users who are near the store providing the offer. Even though an offer is free to create – if Facebook can leverage location-based mobile offers – page owners will begin to see the ROI and will purchase ads and sponsored stories against these offers to get more distribution beyond what is given for free. Additionally, brands will now have a very clear path to seeing ROI when buying fans. The investment question around the value of growing your fan base – at least for physical location retailers – will be answered. This is sure to increase the ad spend these companies will make on growing their fan base.

3 – Open up mobile device-specific targeting – There is currently a Facebook broad category targeting option for mobile devices. Advertisers can choose between Android, iPhone, BlackBerry, and Windows Phone. However – this targeting simply means that a user has accessed Facebook through one of these devices. Creating an ad and selecting this targeting will show ads to these users – however they could be accessing Facebook via the web or even a different device. If Facebook were to tweak this and allow advertisers who select iPhone to have ads show specifically ON the iPhone to a user accessing Facebook from their iPhone – this would mark a significant opportunity. Specifically – one of the largest advertising categories on mobile devices is for apps – and the massive gaming subcategory. If Facebook were to enable actual mobile device-specific targeting – iPhone, Android, and BlackBerry application developers could then leverage Facebook advertising to drive application installs – taking the user right from the click of the ad into the corresponding app store. It seems that right now Facebook wants to limit mobile ads to be sponsored stories in the news feed for many reasons – to maintain user experience, to keep users within Facebook, and an effort to make it not feel like advertising. Given this – it is unlikely that Facebook would allow ads from the mobile news feed to direct users anywhere outside of Facebook. However – the opportunity is there – and the revenue potential is huge.

GDC Shanghai - Everything You Need to Know about Facebook Ads: How Much do I Need to Pay to Get 1 Million Players to My Game?

noreply@blogger.com (Hussein Fazal) — Thu, 29 Dec 2011 08:04:00 +0000

GDC Shanghai - Everything You Need to Know about Facebook Ads: How Much do I Need to Pay to Get 1 Million Players to My Game?

View more presentations from hussein_fazal.

Slides from Facebook Sponsored Stories Webinar by AdParlor

noreply@blogger.com (Hussein Fazal) — Wed, 19 Oct 2011 03:28:00 +0000

Facebook Sponsored Stories Webinar

View more presentations from hussein_fazal.

The Dynamic Facebook Ad Marketplace - Tracking changes in Supply and Demand

noreply@blogger.com (Hussein Fazal) — Fri, 09 Sep 2011 01:55:00 +0000

One of the most interesting metrics we track is the Facebook recommended CPC (cost-per-click) bid. When creating any ad through their self-serve tool, Facebook offers a suggested bid based on the demographics you have selected. This recommended bid is a dynamic calculation that reflects the real-time state of competition within the marketplace. For a new account, Facebook will assume that you can achieve an average CTR of 0.04% and suggest a fair CPC bid for your ad based on what other advertisers are bidding in order to achieve impressions.

Naturally, demographics where there is more ‘supply’ and less ‘demand’ will be cheaper and vice versa. For example, if you wanted to target all 13-17 year olds in the US, Facebook would recommend a low CPC bid. This is because there are many of these users available; they tend to spend a lot of time on the site; and they are more likely to click on advertising. On the flip side, if you micro-target a small sector of female alumni in an affluent city, your recommended CPC bid would be higher as you are going after a small population, and there is a lot of competition for these users. This analysis of recommended CPC bids based of a certain demographic is definitely interesting, but the real fun begins when we analyze these values on a macro-level.

Overall, across multiple demographic and targeting segments, what is Facebook recommending to advertisers to bid for a click? Is there a variance between males and females? How do these values fluctuate over time? At AdParlor, we create thousands of ads every day through the Ads API and closely monitor these recommended CPC rates for changes in market conditions. This allows us to take advantage of segments when clicks are cheaper – and even shift budget according to the dynamic market conditions. What we have done is averaged out the recommended CPC rate every day using the median recommended bid of all the ads that were created that day. The ads created represent an accurate cross section of demographics and aggregately provide a strong picture on the market conditions. Let’s begin by looking at the data in the US from June 6^th, 2011 – August 15^th, 2011

The first thing to note, is that recommended CPC bids fluctuate a lot day-by-day. The average median recommended CPC price in the US over this time period is $1.44. While a lot of the values fall around this line, there are noticeable trends away from this average. In the period between July 12^th and July 25^th, the rates stayed consistently around $1.07 before jumping back up. More recently, we have seen a significant jump since August 3^rd, with a significant spike on the 10^th and 11^th of this month. Let’s take a look at the factors that can explain these fluctuations:

1 – A change in supply –the number of users, and their usage on the site can fluctuate over time. For example, there is a lot more usage on weekends than there is on weekdays. Additionally, Facebook is always making changes in the way ads are served to serve more valuable impressions on the site and this also has an impact. For example, adding a 4^th ad to the homepage or having ads rotate after a period of inactivity are both ways Facebook can increase the number of impressions available in the market, and hence can drive down market prices.

2 – A change in demand – While a large portion of Facebook advertising is done within the long-tail, there are certain advertisers, that can have a significant effect on the market. If one of these big spenders decides to take a break from advertising, or put the foot on the pedal, we can expect to see fluctuations in the market. Similarly, groups of advertisers can have the same effect. We notice a very marked increase in prices during Christmas – as retailers compete for Facebook impressions. This could explain the spike we are now seeing as ‘back-to-school’ campaigns begin to flood the marketplace.

3 – An algorithm change – The Facebook ad serving algorithm is constantly changing. In fact, even the recommended bid presented is a calculation that is always changing. Often, the smallest change in Facebook’s code can have a real or perceived change in the way ads are served, and the recommended pricing for those impressions.

Because all three of these factors are constantly competing with one another, it is difficult to conclude the real reason for the change in the recommended CPC price. Looking at data for other countries starts to make things even more interesting. Mapping the United Kingdom, Canada, and Australia on the same graph as the United States, we can see that these countries follow a similar trend. If this fluctuation is due to a major advertiser, or group of advertisers, it seems that this effect spans across multiple countries.

While there is no real way of knowing exactly what causes these fluctuations in market conditions, it is important to understand that it does happen! The value of your bid one day can vary greatly from the next with the always-changing ad marketplace on Facebook. Be aware of this effect and realize that there is no direct answer to ‘How many impressions will I get if I bid $X on Facebook?’

One final graph with the data we have collected illustrates the difference between males and females across all countries. It seems that while prices for both genders spiked up last week, it can be primarily attributed to males.

A Six-Step Blueprint for Brand Advertising on Facebook

noreply@blogger.com (Hussein Fazal) — Sat, 13 Aug 2011 02:44:00 +0000

GUEST POST BY HUSSEIN FAZAL - PUBLISHED ON ADAGE - AND RE-PUBLISHED BELOW:

http://adage.com/article/digitalnext/brand-advertising-facebook-a-6-step-blueprint/229166/

As brands continue to increase their ad spending on Facebook, there is an ongoing conversation on how to most effectively deploy those dollars. Below is a six-step 'Blueprint' for effective brand advertising on Facebook. It combines the most efficient advertising medium (marketplace right-hand-column ads) with a splash of user engagement and re-targeting. These steps are not exclusive -- you should not skip No. 1 and move on to No. 2. Rather, these should be added to the campaign one at a time, and by the end, all 6-steps should be running concurrently.

1) Standard Marketplace Ads | Objective: Grow your fan base
After you have built out the framework for your fan page -- an attractive image, a thorough set of information, images, videos, as well as some custom tabs as you see fit -- your initial marketing spend should focus on growing your fan base through standard marketplace ads. These ads pointing to your fan page will allow users to either "like" your fan page directly within the ad unit or click on the ad and "like" from the actual fan page. The goal will be to drive as many fans as possible at the lowest Cost Per Fan (CPF) rate possible while staying within your core target market. Ad copy should be kept short and effective (i.e., "If you like Cars, Like X") and should be very direct in asking the user to like your page. Ideally, give the user a reason to like your page, effectively reducing your CPF rate (i.e., by liking X, your fans get access to exclusive content).

2) 'Page Like' Sponsored Story |Objective: Grow your fan base
A "Page Like" sponsored story is very similar to the standard marketplace ads. The difference is that it will be shown exclusively to friends of your fans and you have less control over the copy. For the user seeing this ad unit, he or she will specifically see some friends who have liked your page. The idea is that if one of my good friends has "liked" the page, I should also be interested. This ad unit becomes more effective as you grow your fan base. This is why it is important to first build up your fan base through standard marketplace ads before introducing "Page Like" sponsored stories.

3) Post Frequently |Objective: Engage your fan base
This is not an ad unit but it is crucial to mention posting strategy as part of brand advertising. Ensuring that you are engaging your fan base with regular posts will give you the ROI from steps 1 and 2 -- and is essential for steps 4, 5, and 6. Since there is a load of literature on fan page posting frequency and strategy, I will just provide a few quick tips. Post at a minimum once a day. Keep your posts short (under 80 characters is ideal). Post when your audience is there (it may not always be during 9 to 5 working hours, depending on your brand). Provide clear instructions if you want them to engage. (i.e. 'I think X is amazing. 'Like' this post if you agree!). Pose questions when you post to your fan page -- these typically drive responses and a higher level of user engagement. If you do not engage your fan base with frequent and effective posts, you will be wasting your marketing dollars.

4) 'Page Post' Sponsored Story |Objective: Engage your fan base
This ad unit specifically leverages your hard work posting frequently in step 3 by taking the posts you make on your fan page and turning them into ad units which are shown to your existing fans. Here is the idea behind it: If you post to your page, it is quite likely that your fans may not even see it. They may log in several hours or days after the post has been made, and miss that post altogether. The page post sponsored story will convert that post into an actual ad unit and display it on the right-hand column -- resulting in a much higher chance that your fans will see and engage with the posts that you make.

5) 'Page Post Like' Sponsored Story |Objective: Grow your fan base
This ad unit again leverages frequent posting to your fan page and is a hybrid of the page like sponsored story and the page post sponsored story. This ad is "created" when one of your existing fans likes one of your posts. It is then shown to the friends of your fans who liked your post. The concept is similar to the page like in leveraging the fact that a users' social circle will influence their actions. This can be an extremely effective way to grow your fan base as the social context is thereand the content is something much more engaging than simply your page alone. The content is leveraging a post on that page that can have a strong statement opinion, or question. Friends of your fans will be very likely to want to jump into the conversation if the post is powerful enough.

6) Standard Marketplace Ads |Objective: Leverage your large and engaged fan base
One of the biggest mistakes that brands make is feeling that growing their fan base and engaging them within the Facebook fan page is as far as this platform can go. This is not true. By growing your fan base and keeping them engaged you now have a phenomenal opportunity to direct these users elsewhere. By creating standard marketplace ads specifically targeted to your existing fan base, you can drive your fans to an external page. To give you an idea of how effective this can be, we ran a contest for a large telecommunications company that was looking for contest entries. When we targeted the brand's existing fan base, we were able to get contest entries at 10% of the cost compared to advertising to the general public. These savings can become very significant as your fan base continues to grow and you can come up with effective ways to re-target your fan base. You can leverage your fan base for contests, market research and even promoting a sale and driving them directly to your e-commerce website to make a purchase. Be sure to use unique tracking links when targeting your existing fan base versus advertising to the general public and you will then be able to directly measure the difference in performance. This final piece is crucial for brands because it allows them to see a real and direct ROI on their entire Facebook ad spend.

Prediction: Facebook Will Surpass Google In Advertising Revenues

noreply@blogger.com (Hussein Fazal) — Fri, 17 Jun 2011 01:07:00 +0000

GUEST POST BY HUSSEIN FAZAL - PUBLISHED ON TECHCRUNCH:

http://techcrunch.com/2011/06/05/facebook-will-surpass-google

Editor’s note: Continuing our exploration of how Facebook could eat Google’s lunch, guest author Hussein Fazal makes the case for Facebook’s potential advantage in advertising. Fazal is CEO of AdParlor, an ad management and technology company for Facebook campaigns.

Not too long ago—the common perception was that Facebook advertising did not work. Why would a user notice an advertisement with a small image discretely tucked away in the right-hand column? In fact, most users were building up their “banner blindness,” and ignoring the right-hand column altogether.

However, much regarding Facebook ads has changed since then. Changes in profile design encouraged users to provide more complete information and advertisers became educated in the value of hyper-targeting. Facebook’s ad serving algorithm improved dramatically and the launch of the Ads API allowed for an additional layer of intelligence to be built on top of that. Gradually, right-hand column marketplace ads became more effective for all types of advertisers—while Facebook concurrently grew its sales team to push out premium ads to brands and agencies. With all this progress, eMarketer estimated Facebook’s ad revenues at almost $2 Billion in 2010 and over $4 Billion in 2011.

Despite all this success, Facebook’s revenues are still far behind the search giant, and claiming that they will surpass Google is a bold statement. However, there is a very clear path for this to happen and it is simply a question of when. The timeline will be dependent on how aggressively Facebook executes on their advertising products. The fundamental reason why I believe Facebook’s revenues will surpass Google is the untapped power of social advertising. The concept that your friend “likes” and endorses the content behind a particular ad unit changes the game.

Data from over a hundred billion Facebook marketplace (right-hand-column) impressions that AdParlor has managed shows indisputable evidence that social ads produce a significant jump in performance. In several cases, we have seen social marketplace ads double the Click-Through-Rate (CTR) and deliver 5-10x the volume of impressions at the same Cost-Per-Click (CPC) bid compared to regular marketplace ads on Facebook (plain-vanilla display ads not socially targeted). Combine that with a lift in brand recall (1.6X), message awareness (2X), and purchase intent (4X) and we can see why social ads is an extremely powerful product. However, to see the real benefit, we need to look beyond the right-hand column ads and see how social advertising can be applied in other areas. Data from Nielsenshows a similar trend:

Display Advertising

When looking at online advertising revenues as a whole, the IAB reports that roughly a quarter come from display. With over 2.5 million web sites having integrated with Facebook Connect and 10,000 new ones joining daily, Facebook is building up a huge network of external web sites with deep Facebook integration. The opportunity for these sites to display advertising that melds contextual and social is a stone’s throw away, and something that Facebook can aggressively turn on if it so chooses.

To take things further, as “like” buttons become ubiquitous across the web, user profiles are growing with data on what they do, buy, and endorse. While Google and others leverage re-targeting, Facebook will be able to take it one step further with social re-targeting. If my significant-other visits Nordstrom.com and “likes” a pair of boots, that advertisement could now follow both of us around the web.

Every few years, a new layer is built on top of traditional display advertising (contextual, behavioural, re-targeting) but we haven’t seen innovation in quite some time. Social will be the next fundamental change, and Facebook is positioned to take advantage of it.

Search Advertising

The same IAB report shows that roughly 45% of online advertising revenues come from search. The reason why search is so much more powerful than any other medium is because it targets users that have explicit purchase intent. For example, if I search for “car insurance,” I have a very real interest in making a high value purchase. Insurance providers pay big dollars to Google for these clicks knowing that they have a good chance of converting that user into a sale.

Alongside Facebook’s deeper integration with Bing, it is inevitable that at some point we will see advertising that combines the power of intent-based search with social recommendations. However, this will be dependent on how much users are willing to share and “like.” Perhaps aggressive campaigns by car insurance providers (“Get $100 off your premium if you ‘like’ us on Facebook”) will allow us to one day search for car insurance, and see which provider each one of our friends is with. This will undoubtedly be more powerful than traditional search.

Even with this layer of social, in order to be successful, search market share must be won. With Facebook’s social graph, they have the first real opportunity at dethroning Google and winning that market share. Whether Microsoft ends up selling their money-losing search business to Facebook as a starting point, or whether Facebook builds an independent search product from the ground-up, this is where the biggest impact will be made in increasing Facebook’s advertising revenues relative to Google.

Mobile Advertising

With over 250 Million active users accessing Facebook via their mobile device, Facebook is building up an audience on the hottest emerging platform. With free and popular iPhone, Blackberry, and Android apps available, Facebook has yet to serve up a single advertisement on mobile and doesn’t seem to be in a rush. However, things may be changing with a small but targeted recent acquisition. It will require some work to figure out the right format, but again Facebook is at a huge advantage with the user base it has and the social graph that connects these users.

The U.S. local online ad spend is estimated at $20 Billion – which is why Google was so interested in Groupon. Now combine local with mobile and social—and you have the blueprint to build a money-spitting machine. Facebook could theoretically serve you an advertisement like this directly on your phone—“You and your good friend John are a block away from each other, you both like Pizza and its lunch time, go to Pizza Hut together and save $5 on your order”—of course with less words and more pretty pictures.

Now that the mobile advertising dollars are finally starting to materialize, we still have not seen the hockey-stick curve that we all expected. This will occur when more innovative mobile ad products are built out—and again, Facebook is at a massive advantage.

When Facebook’s VP of Global Marketing Carolyn Everson said at Disrupt NYC, “We’re one percent done on our ad products,” it may not be an exaggeration. Ads that live within the Facebook site really are the beginning of where things can go. As Facebook gears up for anIPO, expanding its portfolio of advertising products through display, search, and mobile will change the landscape in each one of these areas. It becomes even more impactful when we think about how these different products can work together connected through the social graph.

While many people think about Facebook as a powerhouse due to the number of users on the site, the real power comes with the way they are mapping users to their friends and the products, people, and places that they “like.” When Facebook decides to turn up the revenue dial, they will be able to leverage this graph and create powerful social ads across multiple platforms to a degree of scale and sophistication that no other company can match. As these products develop, Facebook will command the lion’s share of online advertising dollars—and they will undoubtedly surpass Google.

GRAPH - Facebook Virality Changes Over Time

noreply@blogger.com (Hussein Fazal) — Mon, 28 Mar 2011 23:35:00 +0000

Working on a presentation which I will be making at #socialize http://www.mediabistro.com/socialize/program.asp in New York late this week. I will be hosting a panel titled "Building a Successful Social Games Distribution Strategy" on Facebook. Thought I would share an image from one of the slides I am working on it. Hope to see you there!

Facebook Ads – Analyzing English-Speaking User Acquisition for Game Developers

noreply@blogger.com (Hussein Fazal) — Mon, 21 Mar 2011 04:12:00 +0000

Post republished from: http://www.insidesocialgames.com/2011/03/10/facebook-ads-%E2%80%93-analyzing-english-speaking-user-acquisition-for-game-developers/

In previous articles, we have discussed the factors that affect user acquisition pricing overall and the interesting sub-topic around the rising cost of user acquisition over time. In this guest post, we will examine user acquisition in the “big four” English speaking countries – United States, United Kingdom, Canada, and Australia. Most Facebook games launch in English and many of them remain exclusively in English. So the goal of this analysis is to determine the ‘market attractiveness’ of these four countries by looking at three key indicators – available volume, advertiser competition, and user quality.

Available Volume

Looking at the table below, we can see that the United States makes up a large portion of the overall population and the Facebook population relative to the other three. This also translates when we compare the number of targetable game players in these countries. In fact, out of approximately 60 million targetable game players across these four countries, the United States encompasses 74% or almost 45 million of these users. (Note that targetable game players is different from total game players as Facebook ads allows you to target users who “like” the game – and not all of the games users.)

Many application developers, upon launching their game, focus strictly on the United States given the large user base available.

However, it is of course not just the user base that matters. Outside of the big four – there are many countries that have a significant Facebook population and consequently a large game player community. We also need to take a look at how competitive it is in advertising to these users versus how valuable they really are.

Advertiser Competition

For any particular country, the competitive landscape around Facebook ads is always changing. Tens of thousands of small advertisers constantly modify their ad spend – while the power players with large budgets strategically ramp up and slow down their marketing efforts at often unpredictable times. While the general consensus is that competition is increasing overall across Facebook Ads and that CPC bids are rising, we see that effective creative/copy along with efficient micro-targeting can still result in cost-per-install pricing being just as competitive as it was over a year ago.

Successful game developers will dig deep at the micro level and examine the competition specifically for targetable game players – and even deeper to determine the competition for players of their particular game genre. Trying to advertise a city-building game when other large advertisers are bidding on those same keywords will significantly increase the competition for those impressions, increasing CPC prices, and hence the cost of user acquisition.

Given that the market for game specific advertising is always changing, it is difficult to predict how much competition you will run up against when starting your campaign. However, some analysis can be done at the macro-level. We see that competition within a country remains relatively consistent over short time periods – with the exception of holidays like Christmas. Hence, by following CPI prices at several points over the past few months from the millions of acquisitions delivered for Adparlor’s gaming clients, we have been able to come up with a relative competition scale for all four countries on Facebook. The graph to the right has been normalized to give the US a relative competition score of 1.00 so we focus on the difference between the United States and other English speaking countries. We can see from the graph above that the US is in fact the most competitive and Canada is the least competitive. The section below on user quality points to why this is the case.

User Quality

Now we come to the most important part of the analysis – user quality. Regardless of the volume available and the competition – the quality of the users is paramount in deciding which countries to advertise in. While this is normally difficult to measure, AdParlor has run hundreds of campaigns for game companies and we often measure deep metrics. We have combined the three most important metrics and devised a Retention, Engagement, Monetization (REM) score for these countries by giving a certain weight to each component – i.e. monetization has more weight than the other two metrics. It is important to note that these scores can vary widely per game based on many factors. The number and types of payment providers as well as the associated payment flow can have a significant impact on monetization and hence REM score.

We see some general trends — females perform better than males, older users perform better than younger users, and hard-core games perform better than casual games. However, there are also differences at a very granular level where we see certain genders and age ranges within certain countries monetize better for certain game genres. To protect the IP of our clients, we have decided to keep the specifics internal and simply publish these scores on an aggregate level for these four countries.

Conclusion

Now that we have looked at available volume, advertiser competition, and user quality, let’s relate that to market attractiveness. The data above shows that the REM score for Australia is higher than the United States while the competition for those users is lower. This is a clear indication that your marketing efforts should include the Australian users – however, does this mean you should shift your budget away from the United States?

The answer is no if you understand the relationship between volume, competition, and quality. You will notice that while those initial Australian users provide some very positive ROI, CPI rates will quickly increase given the limited population of game players available in this market. The fact remains that there are over 15 times more targetable gamers in the United States compared to Australia, meaning that CPI rates increase slower over time despite more competition for these users. For large campaigns, the United States will quickly catch up to Australia in terms of ROI as there are simply more users available at lower price points.

While the analysis of volume, competition, and quality on the big four English speaking countries is interesting, the ‘fairness’ of the open market and an educated game developer community has balanced out the economy, making it difficult to gain a strong competitive advantage with this data. However, the breakdown across Europe, South-East Asia, and other areas prove to be more interesting where we see countries that have relatively high volume, low competition, and high REM scores. It is important to keep these three factors in mind, when assessing how valuable a country can be and deciding where to put your advertising dollars.

Facebook Ads and the Rising Cost of User Acquisition

noreply@blogger.com (Hussein Fazal) — Wed, 19 Jan 2011 02:22:00 +0000

Post republished from:

http://www.insidesocialgames.com/2011/01/18/facebook-ads-and-the-rising-cost-of-user-acquisition/

One of the most frequent questions we are asked is ‘How much will it cost to acquire users for my Facebook game?’ The answer to this question depends on many factors.

A brand new casual game targeting both genders and all ages in Indonesia can pick up tens of thousands of users very quickly, for pennies per user. On the flip side, a poker application with a large existing user base and a laundry-list of permissions, targeting 40-year old American males, can pay several dollars per user. Important background information on the many factors that affect pricing is discussed in our longer white paper – this post instead examines an interesting sub-topic around user acquisition. We dig deep into the rising cost of user acquisition over the length of a campaign, and why this occurs.

On average, for every 100,000 users you attract to your application via Facebook Ads, you can expect your cost of user acquisition to increase by 10%. Before examining why this happens, we’ll first take a closer look at click-through rates (CTR) and how Facebook makes money on a cost-per-click ad campaign.

CTR and its value to Facebook

If you were to bid and be charged $1 per click with a CTR of 0.01%, you then have an effective cost per thousand users, or CPM, of $0.10 to Facebook. For every 1,000 times Facebook shows your ad, they are only making 10 cents.

If you can double that CTR to 0.02%, your ads will have the same value to Facebook,even if you’re paying only $0.50 per click. By increasing your CTR, your ads can be much more valuable to Facebook, allowing you to significantly drop your bid.

The screenshots below highlight a target market in the US and compare the suggested bid for a new ad versus a proven high CTR ad. In the case of the high CTR ad, we can get a fair amount of clicks even at $0.10!

Why does the cost of user acquisition increase over time?

Once we look at why the cost of user acquisition increases over time, you’ll understand why we started by examining CTR. But first, remember that user acquisition pricing and volume goals go hand-in-hand. For the same application, you may be able to acquire users for $0.30 or $3.00. For the purpose of this discussion, we’re going to assume that the daily volume desired stays consistent – while other factors need to be changed to sustain this volume.

Let’s say we build a brand new city-building game on Facebook application and decide to launch a Facebook Ads campaign. We have several good things going for us. There are a ton of users who are ‘low-hanging fruit’ which we can go after – the subset of hard core Facebook game players who are constantly looking for the hottest new game to play. We can also leverage interest targeting and go after players who are fans of other city-building games. The game and the creative in the ads are brand new, and hopefully spark interest in those users you’re targeting.

Given these favourable conditions, a click-through-rate (CTR) of 0.15% and a conversion rate (CVR) of 65% is very achievable. If you’re willing to pay $0.50 per user given these metrics, you should be able to bring in 15,000 users per day in the prime English speaking countries – US/CA/GB/AU. The question now is, how long can this last?

As you continue your advertising campaigns, a few things are happening. Users are starting to get tired of your ads, despite an attempt to keep refreshing new images and copy. More importantly, the most hard core game players are starting to dry up.

The market of active targetable users who are interested in other city games is starting to diminish, and in order to keep the volume of users up without increasing the rate, we must open up keyword targeting on the users. While these other keywords / interests also work well, the CTR will not be as high as when specifically targeting city-building games. Gradually there’s a drop in CTR across the campaign. (Click the image below for a higher resolution.)

From the anecdote above, we saw the effect a drop in CTR can have on the value of that ad to Facebook. On an aggregate level across our ads, we’re now getting fewer impressions for our same CPC bid. Additionally, the conversion rate (CVR), or the percent of users who end up clicking on allow and entering the game post-click, also begins to drop, having a direct effect on our cost of user acquisition.

As CTR and CVR gradually declines, and if we want to maintain a consistent volume of new users, we eventually have no choice but to increase the price we’re willing to pay per user. Our cost of user acquisition begins to rise roughly at the rate mentioned above – 10% for every 100,000 users we bring on.

Is this always the case?

Every application is different in terms of its appeal and the size of its target market – hence, the speed of its CTR and CVR erosion. With constant refreshing of creatives, an appealing application, and a commitment to finding the target markets that work on a granular level, it’s quite possible to fight off the rising cost of user acquisition. We’ve worked with applications that were able to drive half a million US users at $0.50 within a relatively short period of time, without having to increase the CPI rate. But even in these cases, the market forces eventually win, and in order to sustain volume CPI rates must be increased.

NOTE: Please join me on January 25th at Inside Social Apps for a lunchtime roundtable discussion “Purchasing Facebook Ads – user acquisition pricing & strategies” and provide your feedback on this article in person. Look forward to the open discussion.

Where do U.S Facebook Game Players come from?

noreply@blogger.com (Hussein Fazal) — Mon, 22 Nov 2010 03:54:00 +0000

AdParlor has put together an interactive Google map where they pulled a random sampling of 1 Million installs delivered to the largest Facebook games on the platform.

Take a look below:

http://www.adparlor.com/GamePlayers.aspx

Facebook's Surprise - self serve advertising growth

noreply@blogger.com (Hussein Fazal) — Thu, 21 Oct 2010 04:57:00 +0000

Interesting article on the growth of Facebook's self-serve advertising platform. It also brings up the very interesting topic of facebook expanding their advertising outside of the site itself - into Facebook connect sites, search, and eventually to the wider internet...

"So far, advertisers can use the self-serve system only to buy ads that appear on Facebook. But as the social-media giant expands its footprint across the Web and into the mobile realm, third-party publishers and businesses will have more ways to link with Facebook, and I believe the ad platform will expand beyond Facebook's walls as well--just as Google's AdSense program has."

Read full article here:

http://www.technologyreview.com/business/26437/?p1=A

Facebook Developer Garage - Toronto

noreply@blogger.com (Hussein Fazal) — Thu, 21 Oct 2010 04:49:00 +0000

I will be speaking tomorrow at UofT at the Facebook Developer Garage. Will be covering paid application growth - with a focus on Facebook Ads (right-hand-column) and the factors that effect pricing. Hope to see you there! http://www.facebook.com/event.php?eid=124088140973668

Growing my Facebook Application

noreply@blogger.com (Hussein Fazal) — Tue, 08 Jun 2010 17:17:00 +0000

Today, AdParlor has released a white paper titled 'Purchasing Facebook Application Installs - Everything you need to know'. This covers the different types of installs available for purchase - incentivized, banner, facebook direct - as well as the many factors that affect pricing.

One of the more interesting points is the comparison between quality and pricing of installs. Take a look below:

An important point to note is that the pricing of application installs can vary up to 400% based on how you - as an application developer and advertiser - can control CTR and CVR.

Highlights and the download can be found here:
http://www.adparlor.com/FBInstallWhitepaper.aspx

AdParlor launches Cost Per Install on Facebook Ads

noreply@blogger.com (Hussein Fazal) — Mon, 19 Apr 2010 15:12:00 +0000

Official Press Release: Read Here

Article from TechCrunch: http://techcrunch.com/2010/04/19/adparlor/
(full-text below)

Just in time for f8, AdParlor this morning announced a tool that allows developers of Facebook apps to purchase Facebook Ads on a “cost per install” basis.

With the launch of the new tool, developers can purchase ads in order to grow their user bases through Facebook directly, which AdParlor’s Ali Merali says means deeper targeting, higher levels of engagement and additional volume in application installs for their clients.

AdParlor, which offers a banner advertising network as well as a virtual currency monetization platform, says it has delivered well over 10 million application installs across other Facebook apps to date.

Their new product is built on top of the Facebook Ads API, and essentially allows app developers to buy Ads on a fixed CPI by country. AdParlor also touts its optimization engine, which it says could not only result in the creation of “hundreds of ads” but also dynamically adjust bids to bring quality installs at a much lower rate than is the case now.

According to Facebook’s public stats, there are more than 500,000 active applications currently on the Facebook Platform, although only some 250 applications have more than one million monthly active users (despite the social network itself boasting more than 400 million users). Advertising on Facebook is one way to sign up more users.

Unfortunately, AdParlor is debuting the program to a select number of existing clients only. Based on the testimonials on its website, those include social gaming powerhouse Zynga and PHD Network.

Audio Interview w/ Social Times on AdParlor and facebook application growth and monetization

noreply@blogger.com (Hussein Fazal) — Thu, 18 Mar 2010 06:27:00 +0000

Re-posted from social times - direct link here

For this week’s Podcast Friday, I had the opportunity to sit down with Hussein Fazal, the CEO and co-founder of AdParlor. We discussed AdParlor’s current strategy, their brand new auction feature, Facebook credits and the future of social advertising and media. The full interview is below.

Interview with Hussein Fazal, CEO and Co-Founder of AdParlor: Hide Player | Play in Popup | Download

Here are a few of the interesting points from the interview. I strongly recommend listening to it, as we cover a lot of ground and Hussein makes a series of interesting insights.

Hussein clarifies the difference between incentivized and banner installs.
AdParlor has pushed out over 5 million application installs.
How will AdParlor’s new application install Auction System help advertisers and publishers?
Synergies between AdParlor’s banner network and offer wall products
We discuss which types of offers are win-win-win for advertisers, publishers and users.
Facebook Credits: What effect will they have on the industry?
What is the nature of the competition between AdParlor and other advertising companies?

As a note, this is the first entry in “Podcast Friday”, a weekly audio podcast that will range from interviews to feature analysis on different topics. Tune in next Friday!

How do I grow my facebook application?

noreply@blogger.com (Hussein Fazal) — Sat, 20 Feb 2010 21:54:00 +0000

With over 500,000 facebook applications currently active on the platform, application developers are always looking to cut through the clutter and have their application rise the ranks. Constantly this question arises - so I have decided to lay out what I know in this blog post.

The first thing of course, is to have a great, engaging, and viral application. This is dead obvious however, and a massive sub-topic on its own, which I will not delve into. However - many application developers simply have an app that sucks! They spend money and effort attracting users, but these users don't stick, and these users don't bring on others. As a rough guideline, a good app with well-built viral features means that for every 1 new user you bring on, that user should attract 4 other users.

Now that your app is engaging and viral - and you have submitted your app to the directory, let's talk about how to cost-effectively bring users to your app.

1 - Cross-promote - If you already have an application on the facebook platform with a significant user base, this is the first place you should be looking to promote your new application. You can very cost-effectively start bringing users over onto your new app by simply creating ads for your own application. If you don't have any existing apps, you may want to scour the developer forum and see if there are any larger application developers, that are willing to advertise your app.

2 - Paid Advertising - Banner Installs - There are several Ad Networks out there that will allow you to purchase installs on a CPI (Cost per Install) basis. The idea is that an advertisement for your application will be shown - as banner ads - on other applications. A facebook user on another application (with the ad networks reach) will see your ad, click on it, and proceed to install your app.

The ad network will ask you to place a pixel (small chunk of code - usually an iframe or an img) that will allow them to track whenever a user clicks on an advertisement for your application and then proceeds to install your app. As a tip, you should only place this pixel such that it fires when a new user enters your application - and not for existing users.

Networks will have different CPI rates based on the country of the users you are trying to attract. For example, US users would be roughly twice the price of users in Thailand. Some networks will also offer a cost per engagement model, where you are only charged if the user installs the application - and then proceeds to complete a certain action (i.e. pass level 1). You would then place the tracking pixel after the user completes this action. Of course, the cost per engagement rate would be higher than a simple cost per install rate.

3 - Paid Advertising - Incentivized Installs - Many networks that monetize virtual currency will also allow you to purchase incentivized installs from them. In this case, a user would be awarded an in-game virtual currency in another application as a reward for installing your app. For example, they could be playing 'World Domination' and within this game they collect gold coins so that they can buy more weapons. The network would work with the developer of 'World Domination' such that any user who installs YOUR app is rewarded with X gold coins within World Domination. The major problem with this form of install, is that most users will install your app simply to get their gold coins, and then never engage with or return to your application at all!

There are some pros to this method however. The volume of incentivized installs available is very large. These installs can be purchased cheaper than the banner installs, so it is a good way to inflate your MAU number. Incentivized installs actually work moderately well for gaming applications, as it is mostly other gaming applications that these installs come from. Finally, the portion of users that stick around with your application are usually quite monetizable as they are comfortable with the concept of completing offers to earn virtual currency - as that is how they got to your app in the first place!

4 - Paid Advertising - facebook direct - Another way to advertise your application is to buy advertising directly with facebook. Right away, you will notice that ads can only be purchased on a CPM (cost per thousand impressions) or CPC (cost per click) model as opposed to a CPI (cost per installs) model! This means that you need to have some way to monitor the conversion rate and calculate your effective CPI. Any developer can go directly to the facebook ads manager and begin advertising, however there are certain agencies that will also manage this spend for you for a small markup fee. These services can often be VERY helpful as the optimization skills they have from experience and skill will more than make up for the markup they are taking. CPC's from facebook can range from $0.02 to $2.00 depending on your target market and CTR - so there is a ton of variability there depending on your ability to produce effective ads targeted to the right market.

There is a wide range of ways paid options to grow your application. Keep in mind that all users are not created equally. Normally Banner and facebook advertising users have the highest engagement rate - while incentivized installs have a lower engagement rate. The market prices reflect this. Based on your method and the country of the users you are attracting, your CPI cost can range anywhere from $0.10 to well over $1.00. It makes a lot of sense to bring on the right partner to grow your application if you want to make a significant splash into the market, and so that you can focus on building a great app. Looking forward to replies on this post - and I can be reached at any time for advice at hussein [DOT] fazal [AT] adparlor [DOT] com

Virtual Goods Summit

noreply@blogger.com (Hussein Fazal) — Sun, 25 Oct 2009 01:33:00 +0000

Although the market for virtual goods continues to expand at a phenomenal rate, the business activity around this industry is just starting to catch up. A great networking opportunity is taking place next week in San Francisco at the Westin Market Street.

The Virtual Goods Summit 2009 should be a hit. The 2009 edition of the virtual goods summit will bring together thought leaders in this space to talk about what's changed, what's working, and the key challenges facing the industry. You can use the discount code ADPARLOR to save 15% off tickets.

I will be there along with other members of the AdParlor team. Come and network with us, and more importantly, we are giving out some really neat gifts on the Friday (Oct 30th). Guess what we are giving out, and you could win an extra set.

Safer ads for the facebook platform

noreply@blogger.com (Hussein Fazal) — Mon, 19 Oct 2009 02:45:00 +0000

AdParlor launches 'SuperSafe' ads, aiming to comfort developers who are nervous about the recent facebook policy enforcement.

Article available on Inside Facebook

Elephant in the room

noreply@blogger.com (Hussein Fazal) — Mon, 31 Aug 2009 06:50:00 +0000

There is an elephant in the room. That of falling eCPM's within social media applications. I am going to discuss facebook applications as this is the most relevant in terms of volume, growth, and overall revenues in the market. Many facebook apps built revenue projections based on eCPM's they were seeing several months ago, now have to revamp their thinking, as they are now earning a half, or even a quarter, of what they were previously seeing! This is not the case for all apps, but overall the general trend seems to be downwards. First let me apologize to those blog readers who care more about the advertising side than the publishers angle. Now, let me try and explain why this is happening?

1. Mobile Advertising Regulations - Recurring billing from mobile services were one of the driving forces behind strong eCPM's. Users - whether they were aware or not - completed these offers in droves, driving revenues to the ad networks and back to the publishers. Recent media coverage required facebook to take certain actions to modify the wording, presentation, and billing of these offers.

2. User Information - A few ad networks decided to take advantage of information in an inappropriate manner. Creating deceptive ads and storing user information. This caused a major backlash from facebook users, causing facebook to impose strict guidelines. Applications can no longer pass ANY user information to ad networks. This means even the ad networks that were using this information to legitimately target advertisements, are now unable to do so.

3. Ad Fatigue - The same ads that were working/converting just a few months back now have a significantly lower CTR and a significantly lower conversion rate. Users are becoming 'bored' of clicking through on ads within social media applications and are rather sticking to the main attraction.

Is this the end of making money on social media applications? No - Definately Not! Several reasons:

Despite dropping eCPM's in the past 6 months, there has been a recent rebound in the past few weeks. Ad networks have been diversifying their ads, improving their technology, and optimizing galore.
Despite dropping eCPM's, applications are growing bigger and the overall facebook user base keeps growing - generating more impressions overall.
Whereas previously only impressions from certain countries were monetizable, global impressions are actually starting to see an increase in eCPM's!
There is a still a massive and growing revenue opportunity in the virtual currency space and more and more application developers are beginning to take advantage of this.

Looking forward to your comments on the above - and any other thoughts.

Stanford Presentation @ Always On Conference

noreply@blogger.com (Hussein Fazal) — Mon, 24 Aug 2009 06:50:00 +0000

Got a hold of the video.

Just got a hold of a MUCH better version of the video which also shows my slides in action synchronized with the presentation. Thanks to the guys at vivu for this coverage.

AdParlor presenting @ Always On

noreply@blogger.com (Hussein Fazal) — Wed, 29 Jul 2009 06:32:00 +0000

Quick note - AdParlor will be presenting at the Always On conference on Thursday around 10am PST. Watch Live: http://alwayson.goingon.com/ecom/productview/24424

Always On - AdParlor CEO ShowCase

noreply@blogger.com (Hussein Fazal) — Mon, 13 Jul 2009 00:14:00 +0000

Quick Note - On Thursday July 30th @ 9:40AM PST (12:40 PM EST) I will have 6 minutes to present AdParlor at the Always On conference at Stanford University in Palo Alto. If you are going to be attending the conference, please shoot me an e-mail so that we can meet. If you will not be attending, feel free to join 15,000 others in watching the live webcast!

http://alwayson.goingon.com/ecom/productview/24424

Virtual Currency Monetization

noreply@blogger.com (Hussein Fazal) — Mon, 01 Jun 2009 17:19:00 +0000

One of the key revenue drivers within social media - that is already big, and picking up more steam every day - is virtual currency monetization. Wanted to make a quick post about this topic from the Publisher/Application developer standpoint as well as the Advertisers perspective.

How does this work?
Let's illustrate with an example. As an application developer, you have built a facebook application that is a game of world domination. Within this game, your users collect 'gold coins' (your games 'virtual currency') which they can use to buy land, weapons, and various items. Companies such as AdParlor, Super Rewards, and OfferPal will give your users another way to get these gold coins. For example, your users can now purchase gold coins directly using their mobile phone. They can also earn gold coins by completing a quick survey. When your users make this purchase or complete this survey, they get their gold coins as promised and you, as the developer, make REAL money.

PUBLISHERS - What does this offer wall look like? How much can I make?
Here is a sample offer wall from AdParlor on an application where the virtual currency is 'Flair Credits'. Application developers have seen eCPM's that are not even on the same scale as eCPM's seen from banner advertising. If they have created a genuine desire for their users to earn virtual currency within their game, they will complete offers in order to earn. Many of the offers are actually quite useful such as allowing users to register for a book club and receive discounted books. Offers such as a book club can pay out up to $20 / new subscriber! The 'companies / offer providers' above have also invested a significant amount of time developing algorithms to bring the highest paying and most completed offers to the top of the offer wall, while taking into account the users demographic information.

ADVERTISERS - What does this mean for me?
This is interesting to advertisers for many reasons. Let's say you are a market research firm looking to have surveys filled out or an exciting new online game looking to bring on new players. This offer wall allows providers to only award users with their virtual currency upon completion of an action. For example 'Must complete survey and enter valid information to earn your Flair Credits'

Now the question may be 'Aren't these users simply completing my survey to get their virtual currency and not because they are genuinely interested in responding to my survey' The simple answer is - most of the time - YES! For this reason, there are only certain types of advertisers where this method is useful. A user signing up for a book club, would probably have a genuine interest as they are putting in their credit card number. Also, these types of campaigns count on users seeing the value of the subscription and deciding to stick with it (not canceling). Some market research firms simply need to collect a volume of valid e-mail addresses for lead gen purposes - and this method can definitely work.

Market Size
There have been lot's of estimates on the size of the virtual goods market in the US and worldwide. Instead of trying to re-hash everything here, there is a great post by Charles Hudson discussing the social networking virtual goods market versus the external virtual goods market as well as US vs. Global. Have a read here.

As always - I welcome your feedback!

Facebook Thoughts

noreply@blogger.com (Hussein Fazal) — Wed, 27 May 2009 04:07:00 +0000

Guest post by Ali Merali - Social Media Consultant @ AdParlor
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" Until recently, I had a very ‘love-hate’ approach to facebook. Loved how I could connect with all those long lost buddies around the world and share all our stories in any way and form we wanted. The hate portion would resonate every time I discovered those ever intrusive “facebook snoopers” who used the tool as their personal tabloids!

But that all changed a few months back when I began to see what facebook was becoming: the gateway to a new digital marketing era. It’s not something that hits you overnight, but once you step into the space, you begin to realize that social media can be a huge empowerment to brands and organizations (IF done correctly).

It’s tough to know what’s an ‘official’ fan page on facebook as opposed to one simply created by a fan who publishes no new content. But the quest to find a well executed fan page shouldn’t prove too difficult. Those are the pages in which you see a constant stream of ‘two-way’ conversations on the brands wall. That’s right traditional marketers, TWO-WAY conversations (Begin hyperventilating now…) Those are the pages where companies are not commanding and controlling their messages and finally, where brands show personality and magnify their presence by treating the consumer as an influencer rather than a puppet.

Social media is certainly establishing an exciting yet awakening time for marketers and it’s thrilling to be a part of it all. "
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Guest post by Ali Merali - Social Media Consultant @ AdParlor

ad:tech

noreply@blogger.com (Hussein Fazal) — Mon, 27 Apr 2009 18:09:00 +0000

This past week, I had the opportunity to attend ad:tech in San Francisco along with the rest of the AdParlor team. One thing which was immediately obvious to me is that we are NOT in a recession - OK, maybe we are, but it was not apparent at a show like this.

ad:tech is THE event for digital marketing. Although a lot of the exhibits were taken up by payment platforms and SEO type companies, the majority fell on the actual digital banner advertising side. There was representation there from most of the large banner networks. One thing that was interesting is that there was still not much representation from the social media side. There were a couple of ad networks that monetize social media traffic, but no real presence fom agencies that help brands enter this space.