Augmenting the Effectiveness of Facebook Advertisements
In How Advertisers Can Beat Facebookâs New Advertising Paradigm, author Kazu Takiguchi advises certain strategies that advertisers can use to get the most valuable impressions on platforms such as Facebook for the least amount of money. Takiguchi argues that advertisers should not make a single generic ad; rather advertisers should make numerous advertising campaigns that each target niche audiences and demographics, claiming that this will increase your return on investment (ROI) for that campaign.
Using our in-class analysis on advertising as a matching market we can analyze the logic behind this claim. First, let us consider a situation where an advertiser only has a single advertising campaign for a general audience; while you may get a large number of impressions the click-through rate of the slot containing this ad will be very low as the advertisement is not engaging for most users. However, if we consider a situation where an advertiser has numerous advertising campaigns, each targeted at a different demographic, and we know that the platform (i.e. Facebook) will tailor that ad only towards a specific audience, the slot containing that advertisement will have a much higher click-through rate. As a result, platforms such as Facebook will prioritize your tailored advertising campaigns over more general campaigns as, depending on the revenue-per-click of the advertisement, it likely increases the revenue of the platform.
Takiguchi also investigates the affects of the recent Cambridge Analytica scandal on Facebook, claiming that the privacy breach has resulted in Facebook reducing ad inventory on the platform. As a result, this supply shortage makes it increasingly more difficult to create a perfect matching between advertisements and advertising slots, which will increase the overall price of each advertisement. This means that as a result of this scandal, advertisers will have a lower ROI for their advertisement campaigns. In fact, from May to August this year, ROI from advertising has decreased from an index value of 2 down to below 0.5.