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Topics include: Direct to consumer / E-commerce / Data & privacy / Martech

Why Facebook has picked now to make a bigger ad pitch to retailers

Facebook’s pledge to show its users the products they want the most could be a major step in its efforts to answer the one question on every retailer’s mind: Does advertising on the social network actually help increase sales?

It is the challenge frustrating many retail marketers’ efforts to measure the effect of adverts on sales in a cheaper, straightforward way. The cost of uploading anonymised data to Facebook, combined with the uncertainty around a nascent commerce strategy, has painted gloomy picture for advertisers but it could be about to get a lot brighter.

Facebook’s latest Product ads allow retailers to forego the hassle of creating specific campaigns for specific audiences themselves, relying on the social network to reach the right buyer with the right product.

Behind the scenes Facebook is retargeting and customising ads based on data from a brand’s product portfolio and its own profiling of users. Consequently, retailers can surface more than one product in their catalogue at any given time whereas in the past they have found it difficult to show Facebook users the products they are actually interested in.

It promises advertisers the ability to follow users throughout the entire consumer process, from the moment they discover a desired product all the way until they click 'buy'. This chimes with what retailers are trying to do across the wider web, driven by the need to track tangible commercial returns from customer engagement.

“If your business has lots and lots of products to advertise, all that variety can present some challenges,” Facebook opined. “Businesses are already seeing strong results with product ads”.

Online retailer Target used the ad unit and saw 20 per cent uplift in conversion rates compared to other Facebook ads, while Shutterfly posted more than a 20 per cent spike in click throughs from both current and new customers hit with the ads.

In a marketing world increasingly disenfranchised with the value of likes, retailers want to gauge how social media can influence purchasing and not just intent to buy. It is a subtlety Puma is trying to overcome, having told The Drum last week that it planned to make its social ads shoppable to drive impulse sales.

Bernie Segal, managing director at Accenture Interactive, said: “We’ve seen “buy it now” buttons become more widespread as a natural extension of social media into commerce, to improve convenience. This year, we will probably see companies expand this to reduce the pain of navigating fragmented experiences and also start branching into other parts of their customers’ lives - providing value in unexpected places and surprising ways. For example Airbnb is reported to be extending their offering to providing a local companion/concierge service and lifestyle magazine.”

Despite the proliferation of Facebook stores and buy buttons, recent evidence suggests that retailers are struggling to adequately respond to those shoppers already making the effort to engage them online.

Major retailers in the UK and the US receive on average 24.26 posts and 234.50 comments from their Facebook followers, according to a Brandwatch study of 60 brands. Around 89 per cent of consumers’ comments are therefore left unanswered on the social network.

The disparity stems from a fragmented customer journey marketers are currently wading their way through. Advancements, while minimal to date, have led many FMCG companies to reassess their online relationships with retailers as they realise that the biggest shop front needs to be the web.

Companies like Diageo, Mondelez and AB InBev don’t just want an e-commerce site now they want to have a joined-up commerce proposition, covering everything from global online storefronts to social commerce as well as in-store.

Yory Wurmser, retail and ecommerce analyst at eMarketer, said: "Facebook has clearly learned from Google's product listing ads by including automatic product feeds so that retailers can keep ads aligned with real-time inventory.

"With the wide-scale introduction of product ads, Facebook is creating a full menu of direct response advertising for retailers; however, those with less sophisticated inventory systems may face some challenges with this feature."

Facebook has staggered its direct sales offering up until now for fear of failure. But after seeing the success of Google Shopping, the search giant’s ads for products based on search results, the social network has been given encouragement that people will take to the ads. Retailer spending on Google Shopping ads jumped 47 per cent in the latest quarter, according to Adobe.

Joel Windels, EMEA marketing manager at Brandwatch, also commented: “The importance of being on Facebook can seem resolute to retail brands with Facebook drawing in over 1.35 billion monthly users. However, brands know that if they wish to be seen by this large audience they'll need to pay - Facebook's algorithmic timeline punishes posts that have not been promoted. Whether retailers feel this promotion translates into sales or if it's a financially smart form of promotion is known only to the retailers. One thing is for sure, Facebook will do their best to make the social network a site for retailers to generate sales.”

With Facebook projected to generate $17.23bn advertising revenue in 2016 marketers can expect its attention toward the ecommerce area to grow.

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