Proving the Power of Referred Intent

Proving the Power of Referred Intent

July 30, 2013

In May of 2012, General Motors publicly announced its decision to pull $10 million in advertising spend on Facebook. This move spurred CMOs of other big companies to voice similar concerns, and put into question the effectiveness of Facebook ads. But less than a year later, in April 2013, GM returned to Facebook advertising with a series of mobile ads for the Chevy Sonic.

In that span, marketers across all verticals gained appreciation for the potential of social media advertising. According to the 2013 Social Media Marketing Industry Report, published in May 2013 by Michael Stelzner of Social Media Examiner, 97% of marketers used social media to market their business (up from 94% the previous year). Meanwhile, 86% of marketers reported that social media was important to their business (up from 83% the previous year).

The recent growth of the social media advertising industry certainly seems consistent with this sentiment. According to a report by BIA/Kelsey, the spend on paid social media advertising in the US reached $4.6 billion in 2012, and is expected to double to $9.2 billion by 2016.

Unsurprisingly, Facebook is a dominant player in the market. In 2012, Facebook reported $2.16 billion in advertising revenue in the US and $5.09 billion globally. Additionally, Facebook recently announced that it has obtained one million active advertisers, a major milestone for the social media giant.

What makes social media–and Facebook in particular–such a promising channel for marketing?

The answer is obvious–the social.
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After all, that’s the key advantage that Facebook has over Google, the undisputed king of Internet advertising ($43.7 billion in advertising revenue in 2012; an estimated 2.5 million active advertisers).

What Evidence is There for the Effectiveness of Social?
Salesforce.com recently published a report benchmarking the performance and costs of various Facebook ads. The study compared 11 types of Facebook ads, ranging from Mobile App Install Ads to a variety of Sponsored Stories, measuring key performance indicators such as Click Through Rate (CTR), Cost Per Click (CPC), and Cost Per Thousand Impressions (CPM).

The top performers?

Sponsored Place Check-In Story was the highest performing ad with a Click Through Rate of 3.20%, while Sponsored Page Post Like Story and Sponsored Page Post Action Story had CTRs of 2.32% and 2.13%, respectively. These outperformed External Website Ads, Page Posts, App Ads, and more.

It’s no coincidence that the top three performing ads were all sponsored stories. According to Facebook, “sponsored stories are messages coming from friends about them engaging with a business. Businesses can pay to promote these stories so there’s a better chance people see them.”

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Even more revealing was the comparison of a sponsored story vs. a non-sponsored story. The study looked at the number of app installs and page likes, comparing the performance of the sponsored story and non-sponsored story version of each. Though the sponsored story ads were more expensive than their counterparts, the improvement in performance more than compensated for the extra cost!

The average app install rate of the Sponsored App Action Story was 6X higher than the non-sponsored App Ad yet cost only 25% more. And though the Sponsored Page Like Ad was 30% more expensive than the Inline Like, it was 17X more effective at driving page likes!

There’s no doubt that the reason that these ads are more effective is because they attach the name of a friend or family member to that particular brand. The success of the sponsored story underscores the power of Referred Intent, which can be described colloquially as “word of mouth.” And there has been plenty of research to confirm the notion that this type of referral is more effective than traditional methods of advertising. A study conducted by Goethe University Frankfurt and the University of Pennsylvania revealed that referred customers contributed to higher margins and also had a higher retention rate, making them more profitable in both the short and long run.

The power of Referred Intent can be seized upon by social media, and Facebook naturally arises as the ideal platform due to its 1.1 billion member userbase.

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Ampush’s technology is designed to leverage the power of Referred Intent, thereby amplifying the voice of a brand’s most influential advocates to engage new consumers with far greater scale and speed than with traditional advertising. The AMP Social Marketing Platform maximizes reach and virality through personalized content and user-generated stories appearing on the News Feed. These stories are promoted with paid media, amplifying the voice and actions of users to attract new customers. With Facebook advertising and Ampush, the power of Referred Intent can be fully realized!

Lawrence W HeadshotLawrence Wang, marketing intern at Ampush, is a rising senior at Harvard University studying applied math and international studies. In addition to his passion for start-ups and technology, Lawrence enjoys writing, reading, traveling, and exploring all parts of San Francisco.