But perhaps the most important recent development at Facebook is one that has no immediate bearing on the company’s finances. In October, Brad Smallwood, Facebook’s head of monetization analytics—a convoluted, five-dollar title that obscures his importance at the company—took to the stage at a marketers’ conference to announce that Facebook had formed a partnership with Datalogix, a market-analytics firm with purchasing information on about 70 million American homes. Under the agreement between the companies, Facebook would be able to measure whether a user’s exposure to an ad on the site was correlated with that person’s making a purchase at a store.
That type of information is essential for Facebook. Put simply, many corporations are still mired in click-through data, a standard of analysis that fails to fully reflect purchasing activity generated by online advertising. “The click is a terrible predictor of off-line sales,” Smallwood says. “Every research company knows that’s true.”
Still, Smallwood acknowledges, Wall Street continues to view clicks as the critical measure of online-ad performance. “At some level, people have gotten used to the click, and they still want to see the click when they deal with online,” he says. “It’s kind of our job to explain that that is not necessarily the best measure.”
The numbers from the early studies are powerful. Some 70 percent of the campaigns that were measured showed sales equal to three times or more the amount spent for the ads; 49 percent brought in at least five times what the ad had cost.
* Kurt Eichenwald, “Facebook Leans In”