Advertising on Facebook Gets Trickier

In many ways, advertising on Facebook has never been harder. Some advertisers and consultants say the company charges a lot more than it used to. Others say Facebook suffers from ad fatigue. 

By Robb Mandelbaum

Chris’ Coffee took life in 1975 as a small distributor around Albany, New York, where Chris Nachtrieb sold his product out of the trunk of an El Camino. Over time, the business grew into a substantial wholesale coffee roaster and one of the country’s biggest importers of commercial and high-end espresso machines — an enterprise with nearly $30 million in revenue and 50 employees. Along the way, Nachtrieb took note of how customers talked about their passion on early web forums, and when Facebook came along, the company posted regularly about the latest models, offered some discounts, and shared company news. But Chris’ Coffee never actually advertised on the social media platform that captures the eyeballs of 189 million Americans on a daily basis.

Then, in 2019, the company hired Albany consultant Kyle Jewell to oversee all of its marketing. Jewell decided to install a bit of Facebook software code on the product pages of the company’s website. The code would track visitors—and serve them Chris’ ads when they visited Facebook. At the same time, the Nachtriebs also had a commercial, shot by their son, a videographer, that they wanted to put into circulation. The son “made this really incredible video,” says Jewell, who now consults for mid-sized pharmaceutical companies. “The content was really gorgeous.” It shows young urban-dwellers, a man and two women, separately going through their morning routines — jogging, exercise—which culminate, of course, in a cup of coffee as two of the characters meet cute in a café.

And so, in something of an A/B test, Jewell spent several thousand dollars on two types of Facebook ad. The retargeting ads would introduce Chris’ Coffee to Facebook users who had already visited Chris’ website and presumably would be predisposed toward the company. And for several hundred dollars, they netted the company six sales worth thousands of dollars each, a solid return. But not so the video. “What happened was a remarkable failure,” says Jewell. “We spent a couple thousand dollars and got — I think the return in the reports was somewhere south of a hundred dollars. Someone bought a bag of coffee.”

‘You Can’t Do Brand Awareness for a Brand That Doesn’t Exist’

In some respects, advertising on Facebook has never been easier. The platform includes not only the flagship social media service but also its Messenger chat tool as well as Instagram, where younger users are thought to mostly hang out. In fact, according to the Pew Research Center’s 2019 study on social media habits, Facebook is more popular than Instagram across every adult demographic. But no matter: the company now offers advertisers an ad placement service that automatically finds their target audience across all of Facebook’s properties.

But in other ways, advertising on Facebook has never been harder. Some advertisers and consultants say the company charges a lot more than it used to. Others say Facebook suffers from ad fatigue. And some businesses worry about being associated with a platform that has been plagued by privacy issues, political scandals, and antitrust allegations. The total number of people in the U.S. and Canada using Facebook’s various platforms has remained basically flat for the last few years, yet the company continues to wring more money out of advertisers; in 2020, Facebook’s ad revenues in this market grew 21 percent. Facebook won’t say whether the cost of advertising in North America is increasing — globally, the average cost per ad has fallen as the platform continues to expand its reach in cheaper markets — but it has reported “healthy growth” in the number of ads shown in the North American market (along with every other market).

According to Mark Irvine, director of strategic partnerships at WordStream, which makes software to stream online advertising, Facebook is making more money by hosting more ads. To the extent the platform is squeezing more revenue out of each ad, the burden is not landing on small businesses. “Despite an expanding advertiser base, we’re not seeing SMBs paying significantly more per ad on Facebook or investing much more over time,” he says. But he adds, that’s in part because bigger advertisers are pushing smaller competitors toward the sidelines. “It’s very likely that much larger brands are investing much, much more into Facebook than they have in years prior and are competing against each other for higher prices and limited valuable inventory.”

“The Facebook ad landscape is increasingly competitive because there is only so much advertising real estate on the platform,” says Alex Medick, the chief marketing officer for Inside.com and a long-time digital marketing consultant. “It’s not just about the bidding of that ad spot and price, but it’s also about the quality of the ads you have.” By quality, Medick means more than just the crispness of an ad’s images or the text. In an oversaturated environment, an ad must first and foremost be relevant to its audience. And that means different things for different businesses.

For companies like Chris’ Coffee, competing with many others to sell widely available, even commodity, products, relevance is embedded in the brand, not the product itself. That’s especially true on social media, says Arthur Tamayo, of the Fairfax, Virginia, digital marketing firm Epion. “Your goal in any social media has to be contributive to a community — you have to be empathetic to what they want. You won’t be successful in social media if you’re not genuinely trying to create a dialog between your brand and your target audience.”

The most rudimentary way to provide value is with information: a fitness studio might share nutrition information, or other health and fitness tips. But it’s a mistake to look at the value proposition in purely transactional terms. Empathy suggests that the connection or contribution your brand makes should occur at an emotional level. And here’s where Chris’ Coffee’s video foundered. It tried to make an emotional connection — but with coffee generally, not Chris’ Coffee in particular. “Our brand wasn’t that strong,” says Jewell. “You can’t do brand awareness for a brand that doesn’t exist.”

Since then, Jewell has concluded that the company’s customers, who tend to be CEO types, will more likely connect with the story of the business. “What other company in our space could say we went from some selling coffee out of the back of a 1975 El Camino Super Sport to nearly a $30 million company?” he asks. “They’re going to latch onto the founder’s story and understand how much work it took to build that company. They’re going to immediately understand us, and we’re going to understand them.” They are spreadsheet guys, he says, more taken by the nuts and bolts of production than the romance of the first sip. “If I were making that video again, it would be us dumping green beans from the nine different countries we import from,” he says, “seeing the coffee whirl around in the roaster.”

For businesses selling wholly new, or unusual, products, presenting relevance is a different matter entirely. In 2011, the creators of the now-famous Squatty Potty faced the problem of introducing their bathroom foot stool to an unsuspecting public. Like the Nachtriebs, founder Bobby Edwards had a compelling, intensely personal origin story — his family brought Squatty Potty to market after his constipated mother found that off-the-shelf stools were too high and bulky for comfort. (Original name: Judy’s Poop Stool.) There are all sorts of ways to tell that story, but Edwards had a more basic problem: at the time, few people understood why a Squatty Potty might even be necessary. “If it’s a new product, solving the pain point is the first step,” Medick says. “People will always pay to make their lives easier, and sometimes they might not know they have a pain point until you point it out to them and tell them there’s an easier way.”

The Unicorn Changed the Way I Poop

Edwards didn’t need a consultant to grasp the concept. “People didn’t know they had a problem, so we had to tell them they had a problem,” he says. Initially, he sent out stools to influencers; when they wrote up their experiences, Edwards posted the content on Facebook. When the format changed to ads, he says, “I always based the ads on ‘You’re pooping wrong.’ ” Quickly, Edwards discovered that humor, particularly salty double-entendres, sold better than a straight face. In 2015, Squatty Potty stormed Facebook—and then the whole internet—with “This Unicorn Changed the Way I Poop,” the bawdy and brilliant video that opens with a rainbow-tufted unicorn pooping rainbow soft-serve onto a conveyer belt of wafer cones.

The company had already scored some great publicity — endorsements by Dr. Oz and Howard Stern, and an appearance on Shark Tank, too — that generated $8 million worth of Squatty Potty sales in the first nine months of 2015. But the reach of that video, which cost about $200,000 to make and $50,000 in seed advertising, dwarfed all of the earned media. After launching the ad in October, the company booked $10 million in sales for the rest of 2015, and $38 million in 2016. Variations and re-cuts of the video, shown mostly on Facebook and Instagram, powered millions of sales for several years. “We haven’t come out with something that’s been as successful,” says Edwards. “The unicorn still performs better than any other content.”

Recently, though, Squatty Potty has dialed back its advertising with Facebook. Edwards says it’s gotten more expensive, and his marketers tell him that Facebook’s new user privacy settings make it harder to assemble so-called lookalike audiences, users who demographically resemble Squatty Potty’s known online shoppers. (Edwards no longer oversees daily work at Squatty Potty but remains its chairman.) Mostly, though, Edwards and his investors are looking to put the company up for sale — and Squatty Potty needs no introduction now.

The Leads We Were Getting Were Better on Google

Laura Zander also happened to turn her company, the online knitting emporium Jimmy Beans Wool, into a viral sensation at about the same time. Zander opened Jimmy Beans in Truckee, Nevada, in 2001, and soon found a following, including among ski bums who came to create their own caps and other slope wear. In 2016, she managed to recruit the actors Hugh Jackman and Taron Egerton for a promotional video. The actors were starring in Eddie The Eagle, a skiing biopic with a knitting subplot — sort of the mirror opposite of Jimmy Beans Wool. The ad, in which Egerton and Jackman raced to see who could finish a knitting project first, generated millions of views on Facebook.

At first, Zander was a reluctant Facebook advertiser. Advertising on the social media giant struck her as “kind of lowbrow. It wasn’t attractive; it wasn’t aspirational.” In Zander’s view, Jimmy Beans is more than just a knitting shop — it’s an online community of artisans. Nevertheless, Zander took the plunge in 2014, and Facebook quickly appeared to generate sales. She poured time and money — $226,000 in 2015 — into the platform, mastering how to target prospects by building lookalike audiences.

But even as the video riff on Eddie The Eagle soared, Zander was pulling back from the platform. This was partly because she doubted Facebook’s sales-generation math. But she also found that the best-performing ads tended to offer some sort of deal, and “We’re not a promotion-heavy brand.” Moreover, though Facebook initially favored advertising that resembled posting — that is to say, individualized and authentic-looking — it’s lately moved to explicitly distinguish advertising from posting and also to limit the reach of commercial posts in users’ feeds. In general, posting and advertising serve different business functions, according to Medick. A business posts on social media to engage with its audience, while “an ad is created for the purpose of driving someone to take a particular action.” But that distinction, Zander says, works against Jimmy Beans. “It’s a craft industry — high-touch, authentic, very, very emotion- and community-driven,” she says. “So people can see past promotion and advertising.”

Indeed, in the last few years, Jimmy Beans has turned the conventional wisdom about advertising on Facebook on its head. According to Alexandra Henley, who manages Jimmy Beans’ social media activity, its organic posts have actually generated more sales than its paid advertising since 2019. And its most successful paid ads mimic its organic posts. This ad format especially lends itself to showcasing products at some depth, and that’s how Jimmy Beans uses the platform today. “The advertising we do is when we have a special product, or a new product launch, or if we have an event, or a designer who has designed something for us,” Zander says. “Then we put an ad on, and we take the time to create a very special ad, and we let it run for quite a while.” Since 2017, the company has limited its Facebook spend to the mid-five figures.

Meanwhile, the company found that disparity in results between advertising around demographics (as on Facebook) and advertising around intent (as with search results) grew noticeably. Jimmy Beans typically spent at least $200,000 on Google ads, and though that’s dropped too, it’s stayed high enough that Google continues to provide Henley with an ad rep to help improve results. “We got this really great Google ad rep who was giving us a lot of advice, giving us different display ads to post, or different keywords to search,” she says. “Our strategy had been more on keywords, and our Google rep helped us do more of a broad net, along with different ad types. We were just seeing that the leads we were getting were just better on Google.”

Facebook remains a small part of Jimmy Beans’s ad strategy. In 2020, the company spent $15,000 on Facebook (less than a tenth of what it spent on Google), and began targeting homebound crafters with beginner how-to kits for knitting and crocheting. “Those ads were effective,” says Henley. “I only turned them off because we ran out of kits.”

Then, in July, Jimmy Beans joined advertisers who boycotted Facebook for not doing enough to stop online hate speech. Henley turned off the ads, and discovered that “our returns didn’t go down.” Even so, she’s loath to eliminate Facebook advertising altogether, mainly out of fear that doing so could diminish the reach of the company’s posts. “We have a very healthy Facebook strategy now, which is exactly where we want it to be,” she says. “So do I want to rock the boat?”