ROAS: a digital marketer’s North Star. Return on Ad Spend is understandably one of the most heavily weighted metrics for advertisers in determining the success of their online ads. As with most things in life, you want to know that when you put something in, you’ll get something in return. Return on ad spend shares some roots in the logic of Newtonian physics, that for every $1 you put into your online advertising, you’ll receive $2 back or more in revenue.
Due to Apple’s recent iOS14 announcement and subsequent privacy changes, ROAS’s reign as the supreme advertising metric may be waning. While marketers will have to adapt to these changes (you can read more about our recommendations here), we wanted to take a step back and look into one of the central tenets of online advertising on Facebook, the Halo Effect.
The Facebook Halo Effect is the curious phenomenon that as online advertising increases on social media platforms, overall organic traffic and customer engagement increases as well.
The Facebook Halo Effect is the curious phenomenon that as online advertising increases on social media platforms, overall organic traffic and customer engagement increases as well. There are a couple factors that contribute to this, which we’ll break down below. The TL;DR is that despite the upcoming changes to Facebook reporting, investing in innovative, thoughtful, and well-targeted ads will still be a net benefit for your business, even if your measured ROAS decreases.
The Roots of Facebook Advertising
It feels like a lifetime ago during Facebook’s infant years that only people with a college email could create a Facebook profile. The idea of brands on this new social platform was unthinkable and yet somehow, within a few years, it was unthinkable for a brand not to have a social media profile as part of their ever growing marketing footprint. Suddenly, nestled between birthday wishes, photo albums of friend’s nights out, and online personality quiz results were calls to buy the newest flavored cookies, snide remarks from fast food chains, and “cut the clutter” attention-grabbing initiatives from brands all across the world.
But, as the advertising platform matured and grew into its behemoth status, Facebook realized that not charging million and billion dollar brands to have unrestricted access to fans of their page was a missed opportunity to become more profitable. In the spirit of “making Facebook more about your friends and less about news and brands,” Facebook started restricting how much of a brand’s content would show up in your newsfeed. Brands, who used to go viral with a single organic post, saw their engagement dwindle so severely that a majority of their organic posts now reach around 5.2% of their total page fans. In turn, they needed to start spending money to “boost” their organic posts in order for their fans and others to see them on their newsfeeds. Nowadays, some brands only have a Facebook profile so they can run ads and hardly ever post organically.
However, spending money on Facebook ads not only generates sales through those ads, it exposes your page and your brand to cold audiences that were previously unaware of you, your product, or an ongoing special. According to a study done by Wordstream, different brands running ads increased their Facebook page fans by an average of 77%. And beyond an increase in fans, advertisers on Facebook also saw a significant jump in page impressions, more than 126% on average.
CASE STUDY 1
In one example, we worked with a sanding disc supply company to create ads to drive offsite conversion and optimized for purchases. We measured a baseline level of sales for 32 days before starting Facebook ads and then measured total sales for a period of 32 days while running ads to compare the lift from our digital advertising campaigns. The client recorded $2,484.10 in sales during the baseline period ($77.63 average per day) and $8,238.40 during the advertising period ($257.45 average per day).
We found that when ads were running, we saw an increase in website traffic and purchases from all sources, not just Facebook traffic.
We found that when ads were running, we saw an increase in website traffic and purchases from all sources, not just Facebook traffic. Furthermore, we found that Facebook only reported $4,367.81 in sales, leaving $3870.59 unaccounted for. If we assume that the baseline sales should be the same, that leaves $3870.59 – $2484.10 = $1386.49. This unaccounted amount is the Facebook Halo Effect at work, an increase in sales that occur outside of the direct advertising funnel on Facebook and Instagram. And while $1386.49 might not sound like a significant amount, it’s 32% of the total that Facebook recorded. So what would your performance look like if you knew your actual revenue from Facebook ads was over 30% higher than reported?
CASE STUDY 2
Another client we work with is a high-end, ethical apparel brand for women. They do not focus on traditional advertising methods and instead invest exclusively in paid Facebook and Instagram ads. In February, their total revenue attributed to Facebook was $37,000. However, Google Analytics reported total revenue closer to $40,000, and even still according to Shopify these numbers were underreported. The brand’s revenue on Shopify (the real number) clocked in closer to $50,000. These discrepancies in reporting are a combination of underreporting via the different platforms and also an increase in organic traffic and engagement, bolstered by paid social ads.
Dark Engagement Outside of the Ad
When a user comes across your ad in their newsfeed, there are two potential paths: either they will stop to engage, or they will keep scrolling. If they decide to engage, either by clicking the post, following the call-to-action, subscribing, shopping, starting a lead, etc., Facebook is able to track it and quantify it. We can see specific stages of the funnel: for example, if the user clicks the link but spends less than 10 seconds on the landing page, if they browse, and add to cart, but do not purchase, if they click around the website and look at best sellers, then leave. There are various data points to pick apart and analyze while optimizing your campaign.
What is harder to track though, is the second occurrence: when a user is served an ad and does not engage in the moment, but chooses to look up the brand later via search or going directly to the brand’s website and purchasing a product. This action often won’t be directly attributed to the Facebook ad, but the user could have been influenced or primed to buy due to that ad. Here are some common examples of user behavior that Facebook has various levels of ability to track:
- A user leaves a brand’s site mid-purchase then sees an ad that reminds them to come back.
- A user clicks on an ad on mobile but switches over to their laptop to purchase.
- A past purchaser sees ads in their feed, then buys independently of the ad when it’s time to restock.
According to a study conducted by Facebook:
“Almost 9 in 10 survey participants (87%) said they took some sort of action after seeing product information on Instagram, while almost 8 in 10 (79%) of respondents said they searched for more information about a product after seeing it on the social network. Nearly two-thirds (65%) said they visited the brand’s website or app.”
These one-off situations happen every day, every minute, and it can skew the results on Facebook and on Google Analytics. What happens if a user searches for a product and then is served an ad later in their newsfeed of that brand? Should Facebook receive credit if the user was already intent on buying and clicked on a retargeting ad?
The problem is that despite each platform’s ability to track users and provide data on their browsing and spending habits there is a gap in knowledge between these different tech giants, a gap that will continue to widen with the latest iOS14 changes and Facebook’s response to them. The crux of the matter is Facebook and Google and Apple do not want to share their users’ data with one another, even though there’s often a huge overlap between Facebook users with iPhones and people who log into Facebook on Google Chrome.
CASE STUDY 3
We work with a couture fashion brand that does a mix of traditional and digital advertising. Prior to running Facebook Ads, their revenue from online sales averaged around $61,000 per month. Within a few months, ecommerce revenue had increased by more than 50%. Much of this increased revenue was attributed to other sources in Google Analytics despite no other changes in the marketing mix over that time. Ultimately, the exposure the brand was getting on Facebook and Instagram was leading directly to increased sales volume but the effect was not being fully captured in the platform-specific metrics.
That’s what we mean by “The Halo Effect.”
Ultimately, the exposure the brand was getting on Facebook and Instagram was leading directly to increased sales volume but the effect was not being fully captured in the platform-specific metrics.
This discrepancy between Facebook analytics and Google analytics can present a challenge to digital marketers, especially in agency/ client relationships. This reinforces the importance of looking at the data holistically- rather than relying solely on ROAS to determine the efficacy of your marketing campaign.
The Good News
Despite the inconsistencies in reporting across platforms, the Halo Effect of Facebook is still a powerful tool for brands to leverage in their online advertising strategy and campaigns. Beyond the simple equation of ad spend/ revenue-producing tangible purchases, running Facebook ads increases your brand’s ability to connect with cold audiences and to re-engage with those that might be semi-familiar with your brand. And as Apple’s changes with iOS14 become our new reality, digital marketers will have to look more holistically at metrics rather than relying solely on ROAS to determine the efficacy of their campaigns.
The good news?
ROAS will still be a useful metric to look at but will no longer constitute the “be all, end all” of performance marketing measurement. Not being tied down to one number should foster continued innovation and creativity in the digital marketing space, which is good for everyone – marketers, brands, and users.