How hypertargeted should a Facebook ad be?

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Major brands are increasingly using more precise profile targeting – or “hypertargeting” – through Facebook as a cornerstone of their digital marketing and advertising campaigns. During the third quarter of 2011, TBG Digital's advertisers spent more than 50% of their Facebook budgets acquiring “likes” for the first time in TBG's history. Few, however, realize the entire range of factors that make the process hugely complex or have access to the wealth of data needed to get a solid grasp on how hypertargeting works in practice or how best to employ it.

It's clear that brands need to harness customer data on a large scale. But they also need to understand and properly deploy ever-changing Facebook targeting options. Managing this process requires technology, but even more importantly, experienced human resources with institutional knowledge and expertise.

Navigating this landscape requires an effective "test and learn" strategy. Age, gender, relationship status, location, education, interests, "likes," and even the time of day are all important variables whose relative performance and influence is in constant flux. Targeting that may work one week may not work the next, for any number of reasons. The most important thing here is quickly identifying the trends, which also requires access to benchmark data to aid in campaign planning and optimization.

Only an ad strategy that is capable of continuously testing a variety of ad iterations using various combinations of targeting criteria (from precise to broad), and then using those results and retesting, can continue to harness the true power of cost-efficiency and optimization on Facebook.

The benefits of proper targeting can be significant. While all of the factors above play a role in increasing click-through rates (CTR), a recent TBG study showed that, next to the strength of a given brand itself, keyword targeting in “fanning” campaigns is the single biggest influence on campaign performance. Keyword targeting, for example, can reduce an advertisers “cost per fan” (or “cost per like”) by up to 45 cents.

It is the art of balancing the relationship between cost-per-click (CPC) and CTR and how they relate to that other all-important acronym, ROI (return on investment), that drives a successful campaign.  For example, a major consumer packaged goods company sponsoring a reality show could target females, 25-30 years old, single, college-educated, living in and around Atlanta near retail locations, who like shopping, wine and reality shows (and, in particular, the sponsored reality show). Want to get more granular? Then whose birthday is in less than a week? Who is a newlywed? Who is engaged? Who has young children? Only Facebook provides the ability to target this powerfully.

However, building a cost-effective campaign focused on this audience is not as simple as it may appear. There are millions of targeting combinations available in Facebook advertising and more than 850 million users to target. How does a company find out what works for whom? If a client has a target market of females 25-30, then this target within Facebook will see CPCs at a certain level. If instead we choose to target females 18+, CPCs will be cheaper but CTRs will also be lower as the broad nature of the targeting will see less users will click on the brands ads. On Facebook, as CTRs decrease, the CPCs increase, so finding the ideal balance of costly hypertargeting versus less expensive broad targeting is as much art as science.

To continue with this example (based on a true story, as it were), the advertiser needs to know how much CPC will go up if it targets people in specific ZIP codes. If it's a dramatic increase, the company may find that it is better to target Fulton County, or even the state of Georgia. Then, of course, the advertiser and its agency would need to mitigate any potential negative impact from wastage (ads served to those outside the target audience) and make allowances for how this non-targeting could affect traffic and conversion analysis.

We all know that Facebook is a game-changer. However, it's an entirely different game week to week – one whose rules are still being written, and whose field of play is still being drawn up. Advertisers should give themselves every advantage by understanding the rules, and by partnering with people who do, before taking the field.
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