Facebook Con: Will It Lead To Its Collapse

by: Jaffer Ali

I am not much into prediction. It seems like prediction is the chief marker of a charlatan. But let me make the case for how Facebook snookers hundreds of thousands of advertisers and if these guys ever catch wind, they will pull ALL advertising from its platform.

Here is how their advertising system works. First, FB gladly gives the marketers and their agencies *free tracking* for impressions,  clicks and orders. FB places a pixel on marketers’ order receipt pages and the fun begins.

Understand, this is similar to the cliché of allowing the fox to guard the hen house. Every person that orders from you AND also has a FB account, has Facebook looking for ways to attribute orders to their platform. The more orders that they can attribute to FB, the more they can charge for advertising.

So let’s take a look at the following scenario. Let’s say you send an email ecommerce offer to 1 million people. Let’s say out of that million, only 100,000 open the email with maybe 20,000 people visiting your site.

Assume out of those 20,000 people that 3% will place an order, making 600 orders. So far so good. Now if 80% of those people have FB accounts and somehow saw the ad you placed on its platform, FB wants to attribute all of those 80% as coming from FB, EVEN IF THEY NEVER CLICKED FROM FACEBOOK.

You see the essence of the Facebook con is not to use the last click to attribute the sale. No, they want to say that those people who saw your ad on FB made them buy from you. Most agencies also do not want to use “last click attribution” because they often get paid based on a percentage of how much money the marketer spends on media. The agencies are aligned with whatever makes the marketer spend more money, so as is the habit of great cons, accomplices are wittingly and unwittingly recruited.

My company has tested FB with agencies three times AND bought advertising directly. We always test, even though we think we will get negative results. But our company, PulseTV.com did something differently. We ran independent 3rd party tracking alongside Facebook’s tracking. Plus we insisted on using last click attribution. For those not in the online advertising industry, this means that sales would be attributed to the last media source from which a buyer clicked.

If the person last clicked from Facebook, the order was attributed to them. If the person last clicked from an email we sent them, the email list that generated the click and order would get the attribution. This is the fairest way to even the playing field for every media source you use.

Results?

Facebook attributed 3X more orders using its tracking system than the independent 3rd party tracking system.

The practical issue is that FB’s media rates continue to escalate amidst this deceptive way of tracking orders. And the problem is compounded when you market online, the penetration of US Households with Facebook approaches 90%.  But wait, there’s more! Agencies encourage marketers to upload the emails of all their customers so they can be targeted on FB’s platform. They also make this *free* but charge marketers around $10/M (per thousand) to reach marketers’ own customers. Never mind that it costs us about $.05/M to reach our customers by sending them email. This is not a typo, We pay five pennies to reach 1000 of our customers via sending them email. And when you upload those emails and put banners in front of them AND you also send emails to those customers, FB will attribute ALL of the sales to Facebook.

How do they get away with this?

  • They give tracking services away free. PulseTV, we pay $2000/month for independent tracking and this is the best expense we pay. It strips bull***t from the numbers.
  • Agencies are aligned more with FB’s attribution methodology than with marketers’ interests
  • Most media buyers have no skin in the game, it is not THEIR money being spent.
  • Every ad trade publication touts getting away from using the “last click”. THEIR interests are aligned with whichever companies pay their way. Conferences don’t want me speaking but want agency hacks.
  • Of course marketers also are using lifetime value metrics to exacerbate excess media spending.

We have been at this game a long time. We know that there is always a reckoning, but a long con takes its time to permeate through a system. And this particular fraud takes place by cleverly stacking the deck and controlling the parameters of discussion.

Jaffer Ali is a serial entrepreneur and currently the CEO of PulseTV, an e-commerce company. He recently started his ninth entrepreneurial adventure; TrySERA.com, a data company that identifies website visitors and allows marketers to re-market to them via email.

2 thoughts on “Facebook Con: Will It Lead To Its Collapse

  1. alexpetralia

    If you control the measurement system, and tie $ to the measurement, and convince everyone your measurements are legitimate…

    Well then you are Facebook

    Or Google

    Like

  2. Hi Jaffer,
    Great article and I love to see that you are influenced by NNT in your writing and thinking. Exciting to find another NNT inspired digital marketer!

    I’m a senior developer and marketer with 20 years professional experience (10 development years and 10 marketing) currently in management consulting working with digitalization of sales and marketing teams at v. large corporations You have great points about agencies. Also, the no skin in the game argument is interesting here although it could be made for most jobs that deals with procurement.

    Agencies/FB do however have a good point; Last click attribution is not a good way to measure effect. Performance (sales-driven) marketing is not a simple linear system of clicks and not a complex system either – it’s mostly a game of propensity. The best way to calculate media channel effect is by incremental testing. Imagine a scenario where you show your ads for a million people (group A) and no ads for a million people (group B). Which group do you think will have the better conversion rate on your site? Yes, group A will have a slightly larger conversion propensity. By how much is a measure of the effect of your marketing channel.

    I studied myself for a year and found out that on two occasions I saw an FB ad and then googled and bought the advertised product 1-4 weeks later. In your attribution model Google would have received full credit when FB should have had at least 90%. I realize that studying myself is not a statistically perfect method, but something tells me that more people than I sometimes have a similar pattern.

    Happy to discuss!

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s