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What New Facebook Product Ads Offer Online Merchants

There has been much reaction to the news that Facebook launched Product Ads on Tuesday. We checked in with an expert to learn more about the social networking site’s new advertising program for online merchants.

Larry Kim is founder and CTO of Internet marketing software company Wordstream. When asked what he thought about Facebook Product Ads, he said it was difficult to assess their effectiveness without having tried it for clients firsthand.

However, he shared some interesting thoughts with EcommerceBytes about what Facebook Product Ads had to offer compared to Google Product Ads based on his knowledge and experience. While some observers are speculating on which ad program for merchants is more effective, Kim explained the strengths of each.

For example, Google Shopping ads are so effective because those ads shown to people who are actually searching for those products, leading to high conversions – but, they are also limited by the number of product searches at any one time.

Kim believes Facebook’s new ads will have lower conversion rate since they are not necessarily shown to people who are actively searching for products – though they do utilize buyer behavior. But a big advantage is that ad inventory is not constrained the way Google’s is, he explained.

Here is exactly what Larry Kim had to say about Facebook vs Google product ads:

Google Shopping ads are incredibly powerful. Image + Price + high commercial intent queries yield ridiculously high conversion rates. I wrote about it here.

The downside? Limited query volumes. There’s only so many product searches happening, and search is becoming increasingly mobile where Shopping ads exist too, but don’t do as well.

The Facebook product ads thing will be targeting ads based on information being shared by users in their timelines, past purchase data gleamed from data partnerships with data brokers including Epsilon, Acxiom, and Datalogix. (see: #1 on this article), and remarketing.

The commercial intent behind those ad targeting mechanisms are (much) weaker than search where someone is explicitly searching to buy something. However, past purchase behavior and remarketing are still decent predictors of future purchase behaviors and thus these ad targeting mechanisms convert much better than relying on demographic targeting alone.

The big advantage Facebook has is that they’re not constrained by ad inventory the way Google is. If you’re selling pet food using Google Shopping, you are limited by the number of times people search for those items. Facebook on the other hand is pretty much unconstrained. People spend over a half hour on Facebook all day – that’s plenty more opportunities to target people with ads.

The reason why this matters is because supply constraints impact price. A relatively low number of searches for specific products means higher competition for those ad placements, and higher cost per click, which erodes advertiser ROI.

So, if the new Facebook product ads convert to sales at half the rate of Google Shopping ads, but cost 5 times less (due to more ad inventory), you’re still way ahead.

Kim blogs regularly about Internet marketing, advertising and paid search on the Wordstream blog.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.