Facebook’s Brad Smallwood Offers More Data On Ad Effectiveness, Says Datalogix Partnership Isn’t A Privacy Risk

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Facebook has been doing a lot of talking in the last day or so about its recently announced partnership with Datalogix — the company published blog posts explaining both the privacy implications and summarizing the results that advertisers have already seen. And Facebook’s head of measurement and insights Brad Smallwood is at the IAB MIXX conference today, where he gave a talk about the partnership.

The goal of the partnership is to track whether Facebook ad campaigns are driving in-store sales and to find the common themes among the campaigns that work. Facebook and Datalogix have tracked about 50 ad campaigns from which they have already drawn three general lessons.

First, Smallwood said that ad impressions, rather than clicks, drive sales. In fact, in the DataLogix campaigns, 99 percent of sales were from people who saw ads but didn’t interact with them. To back that up, he also also pointed to a Nielsen study showing that there’s virtually no correlation between clicks on ads and either brand metrics or offline sales. Smallwood added that focusing on clicks makes sense in some cases, such as direct-response campaigns, but those clicks don’t tell you anything about “the otucomes that happen in the grocery store, in the car dealership, or in the local coffee shop.”

Second, he said that reach (rather than just targeting a narrow audience) is an important part of these campaigns, just as it is in television. Brands that maximized the reach of their campaigns saw a 70 percent improvement in the return on investment.

Finally, he said brands need to optimize the frequency of their ad campaigns, specifically by reallocating impressions from people who see an ad frequently to those who don’t. Seems like an obvious point, but Smallwood said brands who made that kind of shift saw a 40 percent increase in ROI. He also said the “frequency sweet spot” will differ from brand to brand, and from campaign to campaign — if you’re an established consumer packaged goods (CPG) company, people probably don’t need to see your ad as often as they would if you were launching a brand-new tech device and needed to get consumers familiar with the details.

Now, 50 campaigns may seem like a pretty small sample size, particularly since they weren’t randomly chosen. But after his talk, Smallwood pointed out that the companies were selected by Facebook’s “client council,” so the social network couldn’t just choose the advertisers that would see the most impressive results. Even though the initial campaigns came from CPG brands, Smallwood said there’s no reason you couldn’t expand the studies to include other types of advertisers.

So far, the partnership seems to have attracted attention (at least from the press) primarily for its privacy implications. When I brought up the privacy concerns with Smallwood, he said that neither Facebook nor Datalogix should gain any additional information about individual users — instead, both companies use hashed data to create an aggregate picture of how many people who saw a given ad campaign actually bought related products.

By the way, if you want a more impartial analysis, here’s how the Electronic Frontier Foundation laid out the process:

This will provide Facebook with data about how well an ad is performing, but because the results are aggregated by groups, Facebook shouldn’t have details on whether a specific user bought a specific product. And Datalogix won’t know anything new about the users other than the fact that Facebook was interested in knowing whether they bought cranberry juice.

I asked if Facebook is feeling more pressure to monetize its user data now that it’s a publicly traded company, and Smallwood responded that Facebook has been “building these systems right from the start” (presumably, he wasn’t referring to the Datalogix partnership, but the general suite of ads and analytics products).

It’s also worth noting that Datalogix is already tracking this kind of purchase behavior for non-Facebook ad campaigns, so it may seem a little unfair (though unsurprising) that the Facebook partnership is drawing so much scrutiny. Is Facebook being forced to clear a higher bar on privacy than other companies?

“I certainly feel like there’s a lot of scrutiny on privacy,” Smallwod said. “And there is a higher bar, but it’s an internal bar that we hold ourselves to.”