Online retailers get their wish: New Facebook advertising campaign tool provides customer tracking while protecting privacy

On Friday, November 16, 2012, Facebook announced the roll-out of a new conversion tool that  would allow online retailers to track those who visit their site by first clicking on their Facebook ad. The new customer tracking tool is the latest advertising campaign feature with the aim of boosting Facebook ad revenues and proving its ability as a major marketing force. Currently the tool is being tested; however, Facebook expects that it will be fully implemented by the end of November — just in time for holiday shopping.

Promise fulfilled?

Facebook went public in May 2012 amid a frenzy of buyer excitement. Since then, the stock which was initially priced to sell at $45 has plunged to a low of $20 by mid-November. Many attribute the loss of momentum to the troubling question of how Facebook can add to revenues through the sale of online advertising campaigns. Online retailers would like to know how to use the social media tool to drive its roughly 1 billion users to their sites.

This new tracking tool is just what retailers have been asking for. Eric Abent described its benefits in his November 16, 2012 post, for titled, “Facebook launching sales tracking for retail partners.”

The information that it provides to retailers contains no personal data on the customer. According to Abent, “It will tell retailers if you clicked on an ad and then proceeded to purchase the item, but other than that, retailers won’t know anything that could be used to identify you. [...] Another benefit of this new sales tracking tool: it will help advertisers determine who to target with their ads.”

All this and cost savings too

The tool will be a boon to online retailers seeking immediate sales rather than relationship and brand-building. After targeting its ads, potential customers will be sent to sites tailored to their tastes. The intended results are more sales conversions and the numbers to prove it — a conversion consisting of a consumer taking an action such as signing up for a newsletter or completing a purchase.

Alexei Oreskovic pointed out another benefit of the tool in his November 16, 2012, article for the Oakland Tribune titled, “Facebook to let e-commerce advertisers track users’ purchases.”

Regarding reports on the testing of the conversion tool, Oreskovic said, “Online retailer, which has tested Facebook’s new service, was able to reduce its cost per new customer acquisition by 39 percent when it served ads to consumers deemed most likely to convert, Facebook said.”

The cost savings is based on how Facebook charges for the ads. Rather than charge based on the number of clicks, retailers are charged based on optimized CPM or cost per thousand impressions.

How does it work?

In addition to lower costs, Facebook’s ability to target its ads means that the likelihood of conversion is increased once a consumer clicks on an ad. In a November 16, 2012, article for titled, “Facebook to Help Brands Track Ad-Driven Sales Conversion measurement tool smartens ad buys as well,” Tim Peterson explained how the tool works and its future implications.

According to Peterson, the marketer obtains a piece of tracking code from Facebook and places the code on whichever web pages on their site that they want to track. The page could contain the e-newsletter registration, sales items page, shopping cart or a sales checkout page for example. A conversion is counted when a consumer clicks on a Facebook ad and is directed to any web page containing the tracking code.

Quoting Facebook’s product manager for Insights, David Baser, Peterson reported, “Because Facebook can get an aggregated picture of the types of users that buy a product or sign up for an email newsletter after clicking on ad — including gender, age, interests and connection to brand’s Facebook Page — the company can run an advertiser’s ads to those types of users most likely to convert, Baser said.”

Execs at Facebook expect that the tracking tool will prove to online retailers the value of its advertising services, placing it on par with rivals such as Google.

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