In your own words, explain how Facebook targeted ads work.
Three years into its establishment, Facebook Inc. was still unprofitable and had less than sixty million active users. It used a marketing platform whereby companies had free Facebook pages that they used to promote their products. In 2007 it changed its strategy and adopted the targeted ads system, and spent years developing it. Facebook's ads work target consumers based on various aspects, including life milestones, demographics, and shopping habits (Terlep and Seetharaman, 2016). As soon as advisers realized that they could locate their target audience among one billion and seven hundred million people through Facebook, they sought its services to reach these monthly active users. Facebook has been taking advantage of this need to reach consumers and hence requires higher prices from advertisers that demand its targeted marketing. If a firm wishes to benefit from narrower targeting, it must incur the expensive ad. Since this social network appears as a singular scale marketing platform, it has increased its ad revenue significantly and intensified its dominance in online business (Marshall and Alpert, 2016). Facebook may continue to have increased ad revenues, so long as advertisers such as restaurant, political candidates, moving companies and others find users that are highly likely to consume their products and services.
For what reasons is P&G choosing to move away from Facebook’s targeted ads?
The numerous household goods maker, Procter & Gamble Co., initially used Facebook's targeted ads to reach various subcategories of clients, such as first-time homeowners that needed to furnish their new homes. However, P&G’s chief marketing officer, Marc Pritchard, said that the company used this strategy excessively. Therefore, P&G is moving away from Facebook’s targeted ads because it is seeking a practice with unlimited effectiveness (Terlep and Seetharaman, 2016). It wants to reach more consumers with the right precision and without too much targeting and narrowing. Nevertheless, Pritchard points out that the company will not withdraw entirely since it could still benefit from targeted ads where they are necessary. This decision is based on some of its products, such as pampers, whose buyers are expectant and lactating mothers that Facebook can reach easily.
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Describe the type of calculations you would recommend that P&G and other advertisers use to evaluate whether to use targeted ads or ads that reach a broad audience.
When advertisers such as P&G want to evaluate which method to use, whether targeted or broad audience ads, they should calculate how both perform separately and when combined. They should experiment by monitoring and analyzing how sales change in both cases to acquire the right calculation. If P&G noticed that that sale stagnated after using targeted ads but rose after expanding the audience, then it should consider both methods. An overall audience is likely to increase sales because it has identified as well as unidentified customers.
What criteria would you recommend that advertisers consider in determining whether to run targeted ads or ads with a broad reach?
I would recommend advertisers to consider the size of their brands as they choose whether to run targeted or broad reach ads. Companies should use either method according to its size; for instance, a company based in one state in the U.S can narrow advertising to reach clients in that state. Using broad reach ads to advertise to other U.S states does not make sense. Therefore, if a business is small, then it needs targeted ads because it has a limited or minimal client base. On the other hand, a large brand like McDonald's needs a broach reach because it has customers worldwide, which means that it does not require targeted media. Nonetheless, a global or multinational company could also need targeted ads depending on the type of service or product in question. For instance, a courier service company like FedEx can advertise to a general audience and narrow it down to its regional areas where consumers are likely to import goods for retail or consumption. Facebook can target such clients based on their shopping habits. Therefore, the criteria to use any or both of the methods depends on some factors.
References
Marshall, J., and Alpert, L. I. (2016). Publishers Take On Ad-Agency Roles With Branded Content. The Wall Street Journal .
Terlep, S., and Seetharaman, D. (2016). P&G to Scale Back Targeted Facebook Ads. The Wall Street Journal.
