As digital advertising continues to mushroom, Twitter and Facebook are squaring off for a piece of the pie against the behemoth Google as if their lives depended on it — and they very well may.
This story first appeared in the January 21, 2014 issue of WWD. Subscribe Today.
It’s a clash of the digital titans and the timing might be just right for fashion brands courting online shoppers and social media companies trying to cash in on their user bases. The end result appears to be a targeted and still developing approach to marketing that could alter the relationship between brand and consumer — in part by catching consumers on the go.
Twitter said it would start rolling out retargeting ad product on Dec. 5 with a tailored audience program, while Facebook began testing video ads on Dec. 17 — further evidence that the digital ad market, specifically on social mediums, is exploding. Although still in its infancy, Facebook-owned Instagram also started to roll out ads late last year, with Michael Kors as a launch partner.
According to digital analyst firm eMarketer, digital video ad spending in the U.S. alone hit $4.15 billion in 2013, up 43.5 percent from $2.89 billion in 2012, with Google-owned YouTube remaining a leader for digital video ad market share. Ad spend in this category is projected to grow by nearly 40 percent this year to $5.79 billion. Although growing at a more rapid pace, this is still a fraction of what TV advertisers spend annually — which was $66.35 billion in 2013 and $64.54 billion in 2012. TV ad spend will likely increase by 3.3 percent to $68.54 billion.
Kate Spade rolled out a shoppable video ad across Google and on its YouTube channel for its holiday campaign two months ago, created with HTML and Google’s Lightbox ad unit. The ad paired a whimsical video featuring its holiday wares that included corresponding images and links in a scrolling product bar at the bottom of the screen that took the consumer to a direct point of purchase at katespade.com. Products that appeared in the video were timed to the scrolling still-life images. According to the brand, the video received 8 million impressions and a click-through rate that surpassed the industry average by 189 percent. Overall, the campaign generated 318,947 minutes of watch time — the equivalent of 221 days.
Until fairly recently, the critique of advertising on the Web was that marketers were unable to know if they were getting a targeted view. But now — because of a slew of programmatic marketing platforms like Chango, AdRoll and Dstillery and through highly targeted media buys — marketers can reach their audiences using the enormous amount of data collected and analyzed by these companies. And if brands are successful, consumers can even be transformed into marketers, spreading branding messages that resonate with them through actions like sharing on Facebook or retweeting on Twitter.
“Mobile is the primary experience on Facebook. We’re a mobile-first company and it’s had a huge impact on everything that we do,” Nicolas Franchet, head of retail and e-commerce at Facebook, told WWD. “People using mobile is still an incredibly transformative force across many industries — particularly retail. They [consumers] are shopping on their phones and using Facebook on their phones. You want the transaction to occur.”
Even though helping partners bolster transactions is the goal, he clarified: “People don’t come to Facebook to shop; we aren’t a shopping place. They come because we’re your personal newspaper.”
Facebook works with every single one of Ad Age’s top 100 list of marketers — including American Express Co., Apple Inc., Ford Co., General Mills Inc., the Estée Lauder Cos. Inc., Google Inc., Nestlé, PepsiCo, Procter & Gamble Co., Swatch Ltd. and Wal-Mart Stores Inc.
Franchet said as businesses and retailers become more channel-agnostic, they’re increasingly turning to strategies that drive traffic to physical stores, e-commerce Web sites and mobile sites and apps. Because the social-networking site has such a large presence via mobile device, it’s become a bridge between the physical and online world — and different ad product services range from offering promotions redeemable in-store only, to product images that take the user directly to a point of purchase on the advertiser’s Web site.
Potential advertisers should increasingly see Facebook as a “palette of tools” and what Franchet calls a platform for businesses to engage with existing and potential customers. “Yes, you can reach 128 million Americans a day (101 million on mobile), but can you reach them in a very targeted way? [Now] you can decide to reach your best customers with a certain message,” Franchet said.
Fred Leach, Facebook’s head of measurement research, development and partnerships, said creating a digital aisle within the News Feed is a priority. He’s observed a complete shift from last year, where brands were using offers to engage users to focus on building bigger core-brand messages.
Chris Riedy, Twitter’s senior manager of retail, said the company really began to amp up the focus on targeting during the second half of 2012. (The company introduced promoted accounts in 2010.) Now, marketers are allowed to target by interest (Twitter looks at behavior and builds an interest graph) and in early 2013, targeting based on keywords that users were tweeting about was enabled.
Over the summer, Twitter hinted it would experiment with retargeted ads — meaning that companies could target users on Twitter who have visited their Web sites — and the feature launched early last month. Partners include businesses like AdRoll, Blue Kai Inc., Chango Inc., Dstillery and Quantcast Corp.
“If a retailer knew that a certain person had been to their Web site, they can share that data with a third party who will then pass it to us. They can create specific ads for people who have just been to their site in the past week,” Riedy said of Twitter’s tailored audience program.
As for ensuring it doesn’t inundate users with promoted content, Riedy said Twitter adheres to “conservative capping rules” when it comes to ads. He declined to reveal how many, but said a user can’t see more than a certain number of promoted tweets per day.
“Fashion and luxury brands do really well on Twitter a lot of the times because they understand and can build content people can engage with,” Riedy added, listing partners that range from Chanel, Louis Vuitton and Dior to specialty retailers like Gap Inc., Aéropostale Inc. and Abercrombie & Fitch Co.
Accessories and lifestyle brand Alex and Ani, which saw revenues north of $220 million last year, advertises on both Facebook and Twitter. Ryan Bonifacino, vice president, digital strategy, contended that fourth-quarter campaigns were the company’s best acquisition investment across all digital mediums. Return on investment for the quarter ranged from five to nine times the average, with ROI on new customers through nonbranded targeting even higher from high rates of repeat purchases.
For the period, Alex and Ani spent $551,394 on direct advertising with Facebook (not Facebook Exchange, which is managed by AdRoll). The campaign’s reach was 50.4 million users with impressions that topped over one billion. Return on ad spend was $6.54 per dollar spent, with cost per click 37 cents and a conversion value of $3.6 million — with 48,567 total conversions.
“Facebook has the most significant share of digital ad market today compared to virtually any other company except Google,” Clark Fredricksen, vice president of eMarketer, told WWD, noting that although much smaller, Twitter’s share is growing very quickly. Facebook commanded 5.7 percent of the digital ad space last year.
Factors like time spent on mobile devices and Facebook’s transition into a mobile-first company have allowed the channel to capture market share in the digital ad space at a much faster rate than competitors. The reason, according to Fredricksen, is that Facebook was able to serve a high volume of ads to its user base at an extremely targeted level.
“This has helped Facebook achieve an unprecedented level of mobile display ad sales. If you look at much of the growth in mobile, a lot of it came from ad dollars that advertisers previously spent on desktop, not new dollars pumped into Facebook,” Fredricksen said. “As users shifted from desktop to mobile, those ad impressions that they were serving shifted with them. Users increased usage of mobile dramatically, and Facebook was able to shift its revenue very quickly to mobile as well.”
One reason digital ad spending is growing so rapidly is that it remains inexpensive compared with traditional media.
According to Dax Hamman, chief executive officer of programmatic advertising platform Chango, Twitter charges on a cost-per-engagement basis, which includes actions like a click, a follow or a retweet, at an average rate of about $1 per engagement. News Feed ads on Facebook are cost-per-insertion and display and video ads on Facebook Exchange are charged on a cost-per-impression basis.
Chango works with clients like eBay Inc., Bloomingdale’s, Gilt Groupe Inc. and Lego to determine media buys on media outlets like Facebook and Twitter. The company has raised about $18.6 million in funding since 2010 from iNovia Capital, Rho Canada Ventures, Metamorphic Ventures, Extreme Venture Partners and Mantella Venture Partners.
On a typical month, Chango mines through about eight billion searches that go through search engines such as Google or Bing, according to Hamman. As part of its services, the company helps marketers target individuals in the channel they think is most relevant to them using third- and first-party data.
For example, what Twitter has been able to do with its promoted tweets is take data from platforms like Chango and send promoted tweets to users based on that data.
“You could be on Google searching for Valentine’s Day outfits and Bloomingdale’s could now extend what they’re doing with Chango, and send that person a sponsored tweet letting them know that Bloomingdale’s is a good place to fill that need,” Hamman explained, noting that when a consumer puts something in their cart on bloomingdales.com and abandons it, it’s a valuable piece of data for the retailer. “Previously, display ads were the only way for a marketer to remind a customer, but now social media provides a more approachable channel to target individuals.”
He drew a distinction between advertising on Facebook and Twitter. The former is a passive environment, meaning that users — whether on desktop or mobile — aren’t there to achieve something in particular besides entertainment or looking at photos. The advertising on Facebook is viewed while the user is passively looking. With Twitter, the execution is an “@” tweet directed at the user, where they would receive a notification letting them know that a new tweet was sent to them and potentially take action immediately.
“With the arrival of tools like Facebook Exchange and Twitter’s Tailored Audience program, it’s bringing a new level to [digital advertising] that we haven’t seen before. Now marketers shouldn’t just be asking when or what message they should be putting in front of the consumer,” Hamman said. “They should be asking: through what channel does each individual prefer to hear from me and hear my content and messaging? We’re on the verge of a big shift in the marketer’s mind-set.”