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BUSINESS INSIDER

Facebook v. Google - A New Edge In All-Out War For Digital Advertising

Zuck-san
Zuck-san
Owen Thomas

Facebook is the upstart, Google is the grizzled veteran -- and still the powerhouse -- in the massive battle for online advertising dollars.

But when the cash register rings, who gets the credit? That is the billion-dollar question in advertising these days—particularly in Internet advertising, where it's easy to track clicks and links, but often hard to pin down exactly which view of an ad drove a sale.

Now Facebook is making it easier to show that an ad displayed on the social network led to a sale—even an ad seen days or weeks ago.

The technology is called conversion tracking, and after years of testing the idea, Facebook quietly rolled it out to all advertisers in a little-noted move last week.

The idea is pretty simple: Facebook creates a customized conversion pixel that advertisers place on a page—like a checkout page on an e-commerce site, or a signup page for a subscription, or an app-download page—where a consumer's taking the action they hoped their ads would prompt.

That lets Facebook link sales to ad campaigns, showing in aggregate which ads generated the most response.

Google has long had similar features, along with Google Analytics, a dashboard for doing deep analysis of users' actions on a website.

But Facebook has rolled out something far more powerful that can consistently track users across mobile devices and desktop websites.

It can do this because it has a single, unified identity for each of its users, who tend to stay logged in to Facebook far more than any other website.

Google has responded by rolling out Google+. Often misunderstood as a social network, Google+ has been described by executive chairman Eric Schmidt and other executives as an "identity layer" across Google products. Its social features provide an incentive for users to log in with Google accounts. But they have yet to do so with anything like the consistency and frequency that Facebook users do.

Facebook experimented with conversion tracking in 2010, abandoning it and then rolling it back as a service restricted to its biggest advertisers. More recently, it has been combining a limited test of conversion tracking with a feature called Optimized CPM, which automatically tunes campaigns to specific marketing goals like product sales or app downloads, rather than crude link-clicking metrics.

Those tests seem to be successful: On Tuesday, Facebook quietly announced that the feature was available to all advertisers around the world.

Why does this matter? Google has dominated online advertising for a host of reasons, but the chief one is the measurability of its ads. When a user clicks on a link, that sparks a storm of data used by Google and its advertisers alike to tweak their next campaign. Search-engine marketing is now a science rather than an art.

And because it is so easy for Google to show a direct link between a click and a sale, it has commanded the lion's share of online-marketing budgets, especially in direct-response categories.

But any student of marketing knows that the demand funnel is long and complex, with multiple exposures to a message required to prompt a sale.

Google dominates the end of the funnel, catching consumers when they are in a mood to buy (as they typically are when they type product-related keywords into a search box).

Facebook, because of its ubiquity in people's daily habits, can play in the middle of the funnel, offering the kind of frequency marketers need to break through to ad-inundated consumers.

And now Facebook can show how those ads lead to purchases—even if they don't happen in the moment a consumer clicks.

Facebook still can't compete with Google at the end of the demand funnel. Its recently announced Graph Search is unsuitable for almost all product queries in its present form, save maybe for categories like movies and music.

But if conversion data can shift some spending away from Google—or, more likely, from the billions of dollars of offline, unmeasured advertising spending that both Facebook and Google hope to capture—then Facebook stands to gain.

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