With its trove of knowledge about the likes, histories and social connections of its 1.3 billion users worldwide, Facebook helped client Reckitt Benckiser reach a very specific audience. Photo: Bloomberg
Joao Rodrigues had been listening and holding his tongue. For a day and a half, brand managers, ad agency creative types and Facebook strategists had gathered in airy conference rooms and around cafeteria tables in Facebook's Madison Avenue offices, filling up whiteboards and scratch pads with one heartfelt or clever tagline after another.
The idea was to come up with a big, sweeping campaign to market MegaRed, a premium alternative to fish oil pills, to users of the social network. Each ad had to be so compelling that it would get people to stop scrolling through their news feeds - what Facebook calls a thumbstopper.
But from where Rodrigues sat, as the guy who would write the checks for the proposed campaign, the Facebook people seemed to be missing an essential point.
The ads included descriptions of the products and reached 18.1 million women aged 45 and up on Facebook.
The advantage of advertising on the world's largest social network was that it could do something television ads could not: Using sophisticated analytics, it could help him find people who were already buying fish oil or other products that suggested they were concerned about the health of their hearts and perhaps persuade them to switch to his brand.
At the meeting, which Facebook calls a publishing garage, the company's ad strategists were saying they wanted him to spend money to show ads to every American woman 45 and older on Facebook - as many as 32 million people.
Finally, with some exasperation, Rodrigues - the marketing director for vitamins, minerals and supplements at Reckitt Benckiser, the company that owns MegaRed - blurted out what he'd been thinking. For that kind of broad blitz, he said, "I can go to television at a quarter the price."
Ever since it began selling ads 10 years ago, Facebook has been combating doubts about its value to marketers. Search engines like Google offer advertisers a direct link to people seeking out particular products, while television remains the dominant way to reach a mass audience. Now, Facebook claims, it can provide the best of both.
With its trove of knowledge about the likes, histories and social connections of its 1.3 billion users worldwide, Facebook executives argue, it can help advertisers reach exactly the right audience and measure the impact of their ads - while also, like TV, conveying a broad brand message. Facebook, which made $US1.5 billion in profit on $US7.9 billion in revenue last year, sees particular value in promoting its TV-like qualities, given that advertisers spend $US200 billion a year on that medium.
"We want to hold ourselves accountable for delivering results," said Caroline Everson, Facebook's vice president for global marketing solutions, in a recent interview. "Not smoke and mirrors, maybe it works, maybe it doesn't."
John Swift, who heads North American media buying for Omnicom Media Group, one of the world's largest purchasers of advertising, said that Facebook won't replace TV anytime soon, but it offers a flexible canvas to reach consumers. "You're not going to Facebook to watch a show," he said. "But Facebook offers the unique combination that you don't really see in a lot of digital platforms of amazing scale as well as a very personal engagement opportunity."
Both Facebook and marketers have strong reason to explore its potential.
Consumer brands, from beer giant Budweiser to start-ups like clothier Trunk Club, want to reach people where they are spending their time. More and more, that place is Facebook. In June, the social network accounted for about 1 of every 6 minutes that Americans spent online, and 1 of every 5 minutes on mobile phones, according to comScore, a research company. Mothers, the typical household's chief buyer of consumer products, are among the most dedicated users, spending nearly four times as many minutes on Facebook as other people.
Marketers are starting to become believers in the value of Facebook, shifting more of their budgets to the service from other media channels, especially print and direct mail. The company just reported unexpectedly strong growth in revenue and profits for the second quarter, prompting investors to send its stock to record highs.
Still, Facebook has changed its pitch and the products it offers advertisers so often that many marketing executives are wary. A few years ago, the company was telling brands to increase the number of people following their pages. Now it says fans are largely irrelevant. Until late last year, it was promoting the power of ads in which people's likes and comments about a brand were turned into endorsements sent to their friends. After legions of user complaints - and a class-action lawsuit - Facebook switched gears again. Now it boasts about its ability to pinpoint potential customers on their cellphones and Facebook.com based on its data about them. The company's newest offering uses those profiles to serve targeted ads inside other companies' mobile apps. Facebook is also pushing new video ads that would compete with TV for marketing big events, like movie openings.
Given the social network's constantly changing messages, it was no wonder Rodrigues was annoyed. He had come to Facebook for its promise of precise ad targeting.
"We go against fish oil users," he declared at the brainstorming meeting, meaning he wanted the ads to appear on the news feeds of those users. "We go against people who have heart concerns." Several other RB managers chimed in their support.
Brett Prescott, the Facebook advertising strategist leading the two-day session, was used to this kind of reaction and came back with a well-honed response. Yes, Facebook looked more expensive than TV. But advertising on Facebook was like firing a shotgun. "And you are firing that buckshot knowing where every splinter of that bullet is landing," he said.
Laurent Faracci, RB's chief marketing officer for the United States and Rodrigues' boss, was also at the publishing garage. He was willing to give Prescott's approach a chance.
Making a Thumbstopper
Unlike some products that have hit it big on Facebook, such as Oreo cookies and the Wendy's pretzel bacon cheeseburger, MegaRed krill oil isn't an easy product to "like" or even understand, which makes selling it all the more difficult.
MegaRed is essentially a premium variation of fish oil - a nutritional supplement purchased by roughly 1 in 6 American households and swallowed in the belief that it will lead to a healthier heart. "Taking fish oil is not a pleasant experience," Faracci said. "It's a huge pill and a fishy aftertaste. As soon as you take it, there's a burp back."
MegaRed's capsule is smaller, and the company claims its oil is more quickly absorbed by the body. It also comes from Antarctic krill, a tiny crustacean, instead of from larger fish that can accumulate toxins in their bodies.
But the pills are expensive, costing about $US57 for a year's supply, more than double the $US25 price of generic fish oil. Big retailers like Walgreen and Costco have also come out with their own brands of krill oil that undercut MegaRed's prices.
Complicating the sales pitch is conflicting science. According to the National Institutes of Health, there is some evidence that fish oil can reduce high triglycerides, which are one indicator of high cholesterol and may be a risk factor for heart disease and stroke. But a new analysis of past studies of fish oil by researchers from the University of Auckland in New Zealand, published online in December by JAMA Internal Medicine, found little proof of health benefits. And some research has suggested that high consumption can actually be harmful.
Indeed, RB's lawyers won't let its marketers claim that MegaRed pills lead to a healthier heart. They can only suggest it with scientific-sounding language like "supports three markers of heart health": triglycerides, C-reactive proteins and the omega-3 index.
Not exactly a thumbstopper.
RB, a British company that owns big consumer brands like Lysol cleaners and Durex condoms, bought MegaRed in December 2012 as part of its $US1.4 billion acquisition of Schiff Nutrition. It was convinced it could increase sales by brightening the stodgy marketing of MegaRed and other Schiff brands like Move Free and Airborne.
Faracci discovered Facebook's value in 2012, when he oversaw a campaign for Lysol Power & Free, a version of the cleaning solution with fewer harsh chemicals. The campaign, aimed at mothers, emphasised the health benefits of using a gentler product and generated twice as much in sales as it cost. According to measurements from Nielsen, it made the people who saw it 8 percent more likely to consider buying the product.
Faracci was convinced that MegaRed could pluck the heartstrings of Facebook users in a similar way.
The goal of the two-day "garage" last August, which Faracci allowed me to attend, was to come up with specific MegaRed ads that would be compelling enough to grab the attention of a mother or grandmother scanning her Facebook feed on her phone while in line at the supermarket - and eventually, prompt her to buy the pills.
MegaRed had 8 percent of the dollar value of the "heart health" market, which includes fish oil, according to RB's analysis of IRI shopper data through Sept. 8, 2013. But the company's research showed people didn't know much about the brand. Once they learned about it through Facebook, Faracci believed, many of them would switch.
Facebook, which has held around 200 of these sessions with more than 100 companies over the past few years, hosted the meeting in midtown Manhattan (it has since moved to bigger quarters near Astor Place). The garage brought together about 20 people from RB, Facebook and the brand's advertising agencies, Karlen Williams Graybill and MRY.
Before the session began, RB and its agencies had settled on a theme: "What does your heart beat for?" The idea was that taking a daily MegaRed would keep your heart going so you could do what was important to you.
MegaRed's previous Facebook ads drew about one "like" or other interaction for every 260 people who saw them. The company wanted to do a lot better.
The people in the room began tossing around ideas. An image of a sine wave with the sound of a heart beating? Love stories? Music from the band Heart?
No, too literal.
"The things we share on Facebook are stories of the heart," said Eric Schnabel, a creative strategist from Facebook's Chicago office who had worked on marketing other products that made health claims, like the cereal Special K.
The team started free-associating ideas for poignant emotional moments. A son's wedding. Playing tennis every week. Caring for a Harley. Going to a jazz festival. Soon the whiteboard was covered with sticky notes.
Next they stepped into the shoes of two model customers, both female, from two different generations, to help the marketers tailor their pitches.
Agnes was a 65-year-old baby boomer. The team started filling out her profile. She regularly went to yoga and Zumba classes and played golf. She travelled a lot, heading to Vermont for a three-day weekend. She liked to pull out pictures of her grandchildren. She was Facebook friends with her grown-up nephews but her own son had unfriended her.
Linda, a Gen X-er, was 50. She aspired to raise healthy kids and was worried about her parents' health. Perhaps she was divorced, trying Match.com for online dating.
Schnabel laid out a few guidelines. Visuals count. "Great words with an image attached to them are the purest form of expression," he said.
Story lines that stretch across multiple ads, spread out over days or weeks, could also be very effective. "We try to make them more like 'Law and Order' than 'Game of Thrones,'" Schnabel said. "You don't need to see every episode in order for it to make sense."
But don't overdo it, he warned. Ads that pop up too frequently feel like spam. Facebook itself generally aims to show one ad for every 20 items in a person's news feed, although users who like or comment frequently on ads might see more.
Discussing Agnes, the fictional grandmother, the group focused on passions she never had time to pursue. One ad could show a couple her age wearing backpacks in front of the Eiffel Tower. Another, learning to cook the perfect meatball in Italy.
A home run would be a message that people liked enough to share with their friends and family - giving a free boost to the campaign.
The most thumbstopping idea of the day came from Roger Lu, a Facebook manager who primarily works on data and ad targeting: A child's crayon drawing of his grandfather pulling a quarter from his head, with the caption: "Thank you for finding money in my ear, Grandpa."
"It's much more emotional and much more unexpected," said Schnabel approvingly.
Selecting the Targets
Figuring out the ad content was the fun part. The tension between Facebook and RB emerged when it came time to figure out how MegaRed should spend its money.
Modern data collection practices have made it remarkably easy to locate individuals based on what they tend to buy. Online shopping carts and store checkout scanners record purchases, and data brokers like Datalogix gather information from loyalty cards, customer email addresses and other sources to build a profile based on their past purchases.
Facebook and its competitors can match that offline data to their own dossiers on users to help marketers target their pitches and evaluate the effectiveness of their campaigns. Although the matching has Big Brother overtones, Facebook says it takes pains to protect user privacy, using a complex process to make individual profiles anonymous before matching them.
At the meeting, Rodrigues argued that MegaRed's money would be best spent going after a narrow group of consumers. Tapping into Datalogix's database of retail purchases, MegaRed wanted to find not just current fish oil users but other people worried about their hearts. Called "look-alikes," they are signalled by their purchases of products like canned salmon, oatmeal, Cheerios, health supplements, aspirin and blood pressure monitors, as well as by liking Facebook pages on heart-related topics.
The Facebook folks countered that such specific targeting would be very expensive. Under Facebook's auction system, advertisers compete for limited slots in the users' news feeds; the more targeted the pitch, the higher the cost for reaching each 1,000 people. With only a small pool of targets, RB would be competing with other brands that wanted to reach those same people, forcing it to pay more to be the advertiser that won the slot.
Also, Prescott argued, the emotional campaign for MegaRed might very well draw in people whose potential interest in fish oil was not readily apparent. MegaRed should show ads to every American woman 45 and older and see who was interested in each one, then place those ads in the feeds of people in the same demographic buckets, he said.
Kyle Benedetti, who at the time was director of sales for SocialCode, an ad management platform working with RB and Facebook, said, "We can tell you within the first 15 minutes of a post whether it's a good post or a bad post."
In Faracci's experience, that ability to shift a Facebook campaign quickly based on immediate feedback was the platform's biggest strength.
Rodrigues was more sceptical. "We don't know whether Facebook is the right tool," he said.
"Let us take these inputs and see how big these audiences are," Schnabel urged. If the broad-brush approach wasn't working, the data should show that pretty quickly.
Crunching the Numbers
Over the next few months, the creative team produced dozens of specific ads and began putting them into the news feeds of both fish oil users and the broader audience.
In mid-November, shortly after the eight-week marketing campaign had begun, nearly a dozen members of the original team reassembled for a progress report.
One of the first ads targeted at the broad group - the photo of a boy and his grandfather, "being there to push him in the right direction" for his first bike ride - had already drawn more than 18,000 likes and nearly 600 comments.
"My heart beats when my grandkids r happy my 6 year old just learned how to ride his bike n he did it on the 3rd try," wrote Marybeth Ortiz, a housecleaner from Nevada, whose comment was highlighted in the team's review (Turns out, though, she never bought any MegaRed.)
Another ad, a scene of ice and snow promoting MegaRed's Antarctic roots and aimed at heavy vitamin shoppers, had fallen flat, as had some ads aimed at fish oil users.
"I have found that the MegaRed smells and taste WORSE than the generic fish oil capsules!!" Carolyn Davis, a Facebook user in Tennessee, wrote in response to an ad about krill oil's claimed lack of aftertaste. "It turns my stomach to even open the cabinet I store it in!! As soon as this bottle is gone I will never buy it again!!"
"It's OK that things don't work," Faracci said at the end of the review. "It's much cheaper than using market research."
Still, RB's marketers are sticklers for measurement, and the final exam for Facebook would be how the ads did on several crucial performance indicators.
When the campaign was completed at the end of December, it was clear that it had failed on one goal: It had fallen well short of the 100,000 fans MegaRed wanted to add to its Facebook page.
But how Facebook did on the most important measurements - the number of people who saw the ads and the effect on their purchases of MegaRed - would take several more months to assess, requiring Nielsen surveys of people who saw the ads and an analysis by Datalogix of MegaRed purchases by Facebook users in the supermarket.
In April, the results finally came in.
During the eight-week campaign, 18.1 million women aged 45 and up saw at least one ad, according to Nielsen's research. That was 56 percent of the target audience. The number who said they were now more likely to buy MegaRed rose by 2 percentage points.
About 1 out of every 84 Facebook users who saw the ads liked, commented on or shared them - triple the rate of engagement with MegaRed's previous ads. That greatly increased the chances that their friends on Facebook would also see the messages.
On the most crucial measure - sales of krill oil - the campaign generated about twice as much revenue as RB spent on the ads, according to an analysis by Datalogix. That was better than RB's historical return from TV ads, which the company measures once every year or two.
MegaRed also gained more than a percentage point of market share, with 9.2 percent of the dollar value of the heart-health market, based on RB's analysis of IRI shopper data through Feb. 23. RB was also running TV ads, handing out samples and doing in-store marketing at the same time, but the company says the Facebook campaign contributed to the gains.
The campaign's performance turned Rodrigues into a Facebook fan, and MegaRed is now running video ads on the social network.
"We need to be where the consumer is," he said in a recent interview. "And if on top of that, I get a bigger return on my investment, that's even better."
Still, television will continue to get most of the marketing budget, both for MegaRed and for other RB brands. "We're never going to stop TV," Faracci said. "It has a massive role to play. It is a primary source of entertainment. It has good economics."
But Facebook has established itself as a powerful complement, he said, sometimes extending the reach of a campaign to millions of people who never saw it on television.
RB, which has gone through about 10 publishing garages with Facebook, is so pleased that it is escalating its global commitment to the platform. It plans to announce Monday that it will spend at least $US100 million on Facebook over the next few years as part of a deeper partnership between the two companies.
"Facebook is a fantastic tool for doing personalised marketing at scale," said Heather Allen, who oversees all of RB's marketing efforts worldwide. "This will be a successful relationship with us if it really drives business results."
Facebook has committed an entire team, headed by Prescott, to work on RB campaigns around the world, including Britain, Italy, Brazil, India and Australia. "We're putting skin in the game with them," he said.
With legions of other companies yet to win over, Facebook is expanding its publishing garage program internationally and offering other creative consulting services to big brands and ad agencies. "There's no question that in order to work with the world's largest marketers, you have to invest resources to do that," said Everson of Facebook.
However, Facebook has 1.5 million advertisers, most of them small. Eventually, she hopes, her company can find ways to teach all of them how to turn their ads into thumbstoppers.
"That's a long-term journey," she said. "That's the North Star that we're trying to get to."
The New York Times