Facebook Ads: How Zappos.com manages a $10 million strategy

SUMMARY: Recent wisdom tells marketers to avoid using Facebook ads to drive traffic to their websites. People use Facebook to interact and play games, the thinking goes, not to leave the network and shop for products. If that’s true, no one told the team at Zappos.com.

Zappos.com’s Facebook ads drive traffic to its website and earn an annual ROI in the $10 million range. We sat down with one of the program’s managers to understand how the team uses the ads and what might change in 2013.

by Adam Sutton, Senior Reporter

Facebook ads are known to help marketers build impressions and "Likes" on the network. When a team at Zappos.com started to tinker with ads, it wanted something more.

"The approach we took was to treat Facebook advertising like we do any other marketing channel — as a traffic driver to our website," said. Nate Luman, Social Marketing Manager, Zappos.com.

Luman works in the traffic department at Zappos.com. He used to focus on search engine advertising, but shifted his focus on Facebook ads full-time after testing them about two and a half years ago. Results have been strong and growing.

"Net-positive ROI on yearly ads spend in the eight digits," Luman said.

Some of Facebook’s latest features show even greater potential. The team started targeting ads to consumers lower in the purchase funnel and doubled ROI over the course of several months, Luman explained.

The Zappos.com team worked to carve out a strategy on Facebook and organize its large advertising program. Luman shared five insights which power the Facebook advertising strategy …

Insight #1. Drive top-funnel traffic

People visit Facebook to interact or play games, not to shop. That’s why the majority of the team’s ads are intended to pull consumers into the top of the purchase funnel and have them browsing products on Zappos.com.

The team’s ads typically feature a single product, such as a shoe. When people click, they’re brought to a landing page on Zappos.com featuring an assortment of products, not just the one in the ad.

"Look at where along the sales funnel this falls and think about the channel itself," Luman said. "There have not been many bottom-funnel ad opportunities until more recently."

Insight #2. Manage expectations with data

Luman cautions marketers not to compare the performance of their Facebook ads with the performance of their paid search ads too closely. This social network is a great tool for driving top-funnel traffic, whereas paid search programs can attract people from across the buying cycle.

Instead, Luman recommended comparing the performance of your Facebook ads with the performance of top-funnel campaigns in your paid search program. This can include searches for general product categories with general keywords such as:

Shoes

Apparel

Clothing

Handbags

"I feel a query like that shows just about the same level of intent as someone who sees a shoe in one of our ads and clicks," Luman said.

Insight #3. Serve top-funnel landing pages

Since most of the team’s ads are not intended to sell a specific shoe, their landing pages show an assortment of products. Here are the features of the landing pages:

Targeted by style — Consumers who click an ad will see an assortment of shoes of a similar category or brand.

Features the product — The landing page has to include the product shown in the ad, ideally above the fold.

Great navigation — The page must be easy to navigate so shoppers can easily browse products.

Remarketing is different

Facebook launched several new advertising features in 2012, including retargeted ads offered through Facebook Exchange. These ads reach people on the network who recently left a brand’s website without converting. Instead of driving top-funnel traffic, these ads look to convert consumers who are deeper in the buying cycle.

Luman’s team mostly focuses on driving top-funnel traffic to landing pages with an assortment of products. However, remarketed ads reach a shopper who has more experience with the brand and products, and who therefore may benefit from a more specific landing page, such as one for a specific product.

Insight #4. Organize by audience

Organization is important for an ad program as large as Zappos.com has for Facebook. When Luman’s team started to create campaigns, the first step of the process was to select a product to feature and to design the ad. Next, the team would find a relevant audience to target.

The program grew this way for some time without a plan for how the program should be managed.

"A lot of it was testing, and so there wasn’t an expectation to know exactly how we want to build out an account," Luman said. "Now, our approach really is the opposite way of organizing our ad portfolio. Now, we organize campaigns by the audience."

Instead of organizing its campaigns by product type, the team organizes its campaigns by customer personas or profiles. Then, the challenge is to understand which products and brands are most relevant to the user.

Create consumer profiles

Luman’s team helped define the audience using data provided by the brand marketing team at Zappos.com. The team also looked at:

Website analytics

Social network analytics

Comments from the audience

Interests, regions and other info from social networks

The team picked up interesting trends and used them to create profiles of different types of customers. For example, data showed some customers tend to listen to National Public Radio.

"I can get pretty creative and also describe that same person and what else they like, where they live and what they read," Luman said.

In general, the team’s core customer tends to be a middle-aged female with above average household income.

Uncover product preferences

A big challenge in this process is to understand how each customer profile translates into preferences for specific brands and products, Luman said. However, the team has a solution.

Facebook allows marketers to upload many ads at once, Luman said, and it will prioritize delivery of the ads by clickthrough rate. Only ads proving to spark interest in the target audience are served, and those that don’t spark interest are shown less often. That’s how the team discovers the products preferred by each customer profile.

"If we have a couple different variations of creative and brands for an audience, Facebook is going to prioritize them pretty quickly based on engagement and clickthrough rates. So in a way, we are allowed to assume what is relevant to those audiences," Luman said.

Insight #5. Start targeting the lower funnel

Facebook released new features for its ads throughout 2012 and into 2013, and a steady stream of new features and updates is expected to continue. Some of the features can help marketers reach shoppers who are closer to a purchase decision than a prospect from the top of the funnel.

These features are "kind of changing the game and the way we are approaching our ad portfolio," Luman said.

Here are two of those features:

Custom audiences

In September, Facebook announced it will help companies target consumers on the network by using data such as emails and phone numbers. This means marketers can use more of their CRM data to target ads on the social network, giving them the power to target messages to shoppers in the top, middle and bottom of the purchase funnel.

Note: Facebook has taken steps to ensure it never receives a company’s sensitive information, such as their customer lists, and that it never shares the non-public information of its members. The system helps protect consumers’ privacy but is somewhat complicated. You can learn more from the Related Resources at the end of this article.

Remarketing and retargeting

Facebook also launched Facebook Exchange in 2012, which allows marketers to deliver retargeted ads on the network.

Through approved demand-side platforms (DSPs), companies can target ads to consumers on the network based on their recent activity, such as their browsing behavior on the company’s website. This is another way marketers can reach mid- and late-funnel shoppers on the network with a targeted message.