When it comes to online advertising, the medium is definitely the message.
Google ads remain the standard in the fashion and retail worlds for driving traffic and consumer purchase, but brands are also quickly embracing social networks as viable advertising channels. Facebook — which reported second-quarter revenues of $2.91 billion, predominantly driven by advertising — leads the pack, followed by Twitter, Pinterest, Instagram and, soon to come, Snapchat.
This story first appeared in the October 13, 2014 issue of WWD. Subscribe Today.
Nate Elliott, vice president and principal analyst at Forrester Research, said he would still advise fashion and retail brands to spend online advertising dollars on Google’s search ads versus social-media ads.
This isn’t to say that brands should cease their spending on sites such as Facebook — he is not encouraging that — but he does urge marketers to evaluate online ad budgets the same way they would for other types of advertising. If a TV commercial isn’t delivering the desired return on investment, it will get pulled, and the same should hold true for a social one.
“So many brands are spending on Facebook out of fear or fascination, but neither of those are terribly good reasons to put money there,” Elliott said. “If key words work, you keep spending there, and it should be the same with social. Marketers need to be more hard-nosed. They need to see if the money they’re spending on Facebook or Twitter is actually delivering value.”
He noted that some brands have found success with Facebook ads (and others, if they work really hard with their ad buy, can “scratch out a positive ROI”), but, by and large, marketers report that Facebook ads perform significantly worse than search ads, e-mail marketing and even banner ads.
For Elliott, whether a brand chooses to advertise on a social site is challenging because the space is undergoing huge change. What was enticing about Facebook early on — the platform billed itself explicitly to marketers as a vehicle to create a new kind of customer relationship — never actually panned out.
“It’s chosen to only deliver a brand message to about 2 percent of their fans [unless the brand pays to have it promoted]. That’s not really a customer relationship. So, all brands can do [now] is buy ads. It’s just another place to buy ads, like Yahoo.com,” Elliott said.
Trey Laird, founder, chief executive officer and chief creative officer of Laird + Partners, who has done extensive work in the fashion industry for everyone from Gap to Bottega Veneta, said that although the advertising trajectory for every brand differs, online is part of every concept that his team crafts for a client.
“The big global fashion brands — luxury brands like Burberry and Gucci — it seems like they’re not really all about Facebook and Google. They have a much more targeted focus on style- and fashion-related sites,” Laird said.
For him, it feels odd when the user is in more of a mainstream environment, like Facebook, and there’s an ad for a rental car or cell-phone service beside a luxe fragrance.
“The fact is that we’re an image-conscious business. Yes, it’s a business and people want ROI, but, in fashion and beauty, image is so much more important than it is in other categories,” Laird said. “It’s just a fact. So, there’s a sensitivity there, and people have been slow to the uptake. It’s going to take time. Some are still ubercautious, like Prada.”
Global digital ad spend is expected to surpass $140 billion this year, an almost 17 percent increase from $120.41 billion in 2013, according to data from eMarketer. Google currently commands nearly a third of the market, or 32.35 percent, up from 31.83 percent last year. In 2013, Facebook made up 5.8 percent of worldwide digital ad revenues, and this number could reach 8 percent by yearend.
While still a fraction of Google’s revenues, Facebook is the only player to make a dent in the space in recent history, especially when it comes to mobile. Mobile ads are primed to increase by 91.7 percent this year, potentially hitting more than $36 billion, and Facebook is expected to account for 20.4 percent. Google’s share is expected to drop to 44.6 percent from 46.4 percent.
As Facebook gains more market share in the online advertising game, especially with its hold on mobile and the relaunch of multitouch-attribution ad product Atlas, it might signal a shift in Google’s longtime lead in digital advertising, especially in the fashion world.
“The leveraging of Facebook data is very strong in demographics because they know your age, your location and your likes. Leveraging that data is very important for fashion brands and retailers,” said Martin Utreras, the lead at eMarketer’s advertising forecast team.
Atlas will have access to Facebook IDs and “likes” when it comes to tracking users, whether they’re on a mobile device, desktop or using both at the same time. This ability to track users across devices is an advantage for Atlas, compared to Google’s DoubleClick ad technology, which relies on cookies to track users — a notorious limitation on mobile.
For instance, when a consumer buys an item at a physical store and, upon checkout, provides their e-mail address to a sales associate, a marketer can match the e-mail to a Facebook ID using Atlas’ technology. This formidable tool can now tell a brand that a specific person saw its advertisement at a specific time and went to buy the product in-store. Previously, advertisers had no way of knowing how an online ad affected consumer behavior once the consumer left the mobile or desktop screen.
Atlas might have an advantage when it comes to tracking a customer throughout the purchasing funnel, but the product still has to grow its network. DoubleClick has been around for almost two decades and boasts a massive roster of participating marketers.
Dan Benyamin, who cofounded — with Mike McGinley, one of Facebook’s first advisers — advertising solution CitizenNet, which maximizes the impact of ads on Facebook, said that, even though online advertising doesn’t have as large an HD-captive audience as TV does, online has the advantage of measurement.
To this point, he cited Honda as an example of a company that has cut back on TV dollars in favor of a more robust online ad strategy. The most-watched videos on YouTube are music videos, and Honda took a cue from that. The brand is taking 15- and 30-second commercials that, traditionally, would have run on TV and putting them online with sponsorship.
With multitouch-attribution ad products such as Atlas, several data points can prove that, for example, people who saw a branded ad 20 days prior to purchase ended up buying more often than the people who didn’t, Benyamin explained. He said this sort of information is good news for the large number of fashion and retail brands that have a presence on Facebook, which can now give credit to branding campaigns.
“A lot of the big-brand dollars at top of funnel are TV dollars. Then, you’re just filtered down to the bottom to conversion. Now, Facebook has attribution from the top to the bottom of the funnel,” McGinley noted.
Marc Fishman, cofounder and ceo of Hyperactive, a social-media analytics company that works with brands such as American Airlines, Coca-Cola, McDonald’s, Verizon and M&M’s, isn’t as impressed by Facebook’s most recent efforts in the advertising space.
“As much as I believe in the platforms, I don’t believe that ad purchasing is the power to the platforms. They have so much power beyond that,” Fishman said. “The thing brands are getting when they purchase ads is reach, and they’ll get reach in other places. You will never beat the reach you’ll get on TV.”
Marketers might see higher conversion and click-through rates from social media versus other channels, but what Facebook is best suited for is connecting users with the brand and allowing communication between the parties. To Fishman, efforts such as Facebook’s relaunch of Atlas mirror other companies’ strengths — for example, Google with search ads or TV with reach — and Facebook can’t compete in those areas.
Advertising might be the area in which Facebook generates the majority of its revenue today, but this might not be the case for the long term.
“Most marketers or analysts would measure the success of retail brands on social media by the number of fans and followers a brand has, but I would say the real winners in this game are the ones that move their fans and followers — whether they have 100 or 1,000 — to action or to ultimately make a purchase,” said Fishman.
He argued that, in the long run, Burberry’s implementation of the “buy” button on Twitter (launched as a test in September) has more significant implications than Facebook’s efforts. It likely won’t get the same near-term results as what Atlas might garner, but, over time, the “buy” button plays to what Twitter does best.
Burberry was the first fashion brand to use Twitter’s “buy” button, enabling users to purchase nail polish from the spring runway show in-tweet. While not posted as advertising specifically, the “buy” button allows brands to convert reach from social channels into sales.
For Twitter’s second-quarter earnings — which grew by 124 percent, to $312 million — advertising revenues drove more than 88 percent of the top line.
Nathan Hubbard, head of commerce at Twitter, told WWD last month that he expects the “buy” button to roll out to 100 percent of U.S. users quickly — as soon as a matter of weeks to a month. The company views commerce as a stand-alone revenue stream that can parallel its growing advertising business, but the two might be more interrelated, he said.
“[Twitter understands] their strength is that they’re a place where you can make connections and people can be influenced by other people’s decisions,” Fishman said, comparing Twitter to Facebook, which, he noted, “owns the communication channel between brands and consumers.”
At Twitter, ads range from products that get users to take an action — like downloading an app or visiting a site — to building campaigns that are more of an engagement play.
“We’re uniquely positioned, so we can meet the needs of a retailer at either side of the spectrum,” said Chris Riedy, director of retail at Twitter, noting that brand awareness sits at the top of the funnel, consideration in the middle and purchasing at the bottom.
He pointed to Lululemon, whose efforts on Twitter right now are geared toward actionable responses versus three months ago, when the brand was more focused on fostering engagement.
“One campaign is to drive installs of their mobile app — and, in most spheres of retail, the mobile shopping element is really important, so helping drive installs is key — [as well as] just driving traditional Web traffic,” Riedy said.
Joanne Bradford, Pinterest’s head of partnerships, said the platform’s revenue model is focused on advertising, the vehicle of which is Promoted Pins. To date, 80 percent of users access the site from a mobile device, and 40 percent of the overall audience falls into the Millennial age range. Fashion is one of Pinterest’s largest categories, and if a brand successfully implements “pin it” buttons (to increase traffic back to the brand’s site) and develops a strong board strategy (to foster engagement), Promoted Pins are the next step to broaden those efforts and reach a broader scale.
“There’s a lot of earned value in a Promoted Pin. A pin is usually repinned anywhere from five to 10 times, and Promoted Pins are seeing a little better performance than that,” Bradford said.
A Promoted Pin from Old Navy has already seen nearly 500 repins, well above the average repin rate.
The first advertiser on Instagram was a fashion brand — Michael Kors — and, of the platform’s initial partners for the ad rollout, 30 percent were either fashion- or retail-related (including Kors, Burberry and Macy’s). At Pinterest, where Promoted Pins launched in April, Lululemon, Banana Republic, Gap, Old Navy and Target were part of the first group of more than a dozen marketers poised to run campaigns.
“We go where our fans go, and we believe that more and more consumers are spending their time on Instagram for both inspiration and product discovery. We’re successful on Instagram. The ads allow us to target a ‘like’ audience outside of the women who are already familiar with Michael Kors,” said Lisa Pomerantz, senior vice president of global communications and marketing at Michael Kors.
During New York Fashion Week, Michael Kors had both the most “liked” photo and video on Instagram, the former garnering 93,000 likes and the latter more than 70,000. It also maintained, for the same period, the most engaged brand page of any designer on Facebook, seeing a total of more than 647,000 likes, shares and comments. It’s no wonder Pomerantz called multitouch tools a “great step toward a more advanced understanding of the consumer’s journey.”
Evan Spiegel, Snapchat’s cofounder and ceo, revealed last week that the social messaging network will soon introduce advertising. Spiegel said the ads are not targeted and will live in the app’s “Stories” section, where posts live for 24 hours before disappearing.