Facebook is partnering with retail POS (point-of-sale) system vendors Marketo and Square in order to closely track users' in-store purchases along with the help of their phone's GPS capabilities. While the possibilities are clearly tantalizing for marketing and sales organizations, Techcrunch's report on the deal goes as far as calling it the "Holy Grail of advertising":
Facebook has found the Holy Grail of advertising in a set of new partnerships with point-of-sale systems like Square and Marketo that will prove who bought what after seeing Facebook’s ads. Even if you don’t buy something, Facebook will also now know you visited a store based on a new feature that matches GPS, beacons, WiFi, radio signals, and cell towers with brick-and-mortar coordinates.
This data could get advertisers to spend a lot more on Facebook because it will be able to demonstrate exactly how ad views led to in-store purchases and foot traffic. Ninety percent of sales still happen in physical retail stores, not online. Facebook is pushing to evolve the industry past flimsy metrics like ad views and clicks, towards measuring when ads actually inspired purchases anywhere.
Though Facebook aggregates and anonymizes the data to protect privacy, the fact that there’s no specific opt-out option is a bit unsettling. All you can do is hide particular ads you see in your feed, or turn off location services for Facebook entirely, which people who are pissed might do even if it degrades other Facebook functionality.
Analysis: Facebook's Move Has Multiple Implications for Marketers, User Privacy
"This is a good way for B2C companies to prove the revenue effectiveness of ads, as previously you couldn’t tie the actual purchase to the ad," says Constellation Research VP and principal analyst Cindy Zhou. "Retargeting ads work, and if you keep seeing the same ad over and over on an item you viewed but didn’t purchase, the likelihood of you buying it is higher."
What Facebook is doing represents a long-desired advancement for marketers, says Constellation Research VP and principal analyst Dr. Natalie Petouhoff. When social networks came along, "because it was online and you could 'follow the digital bread crumbs,' it was thought that it would be easier," she adds. "But the ability to give direct attribution was still difficult."
With this partnership between FB and Square and Maketo, marketers don't have to rely on first or last attribution, Petouhoff says. "In the past there were studies done to try to make the correlation, using questions such as 'how likely are you to buy something after seeing an ad on Facebook?' And there seemed from the studies to be a direct correlation."
Facebook's profits have been soaring lately, and this next-generation ad platform could help continue driving that growth.
"While [Facebook CEO Mark] Zuckerberg may not have intended to become a social CRM-social commerce platform when he started the company on college campuses, certainly the need to create a revenue model is necessary after all the money that has been invested in Facebook," Petouhoff adds. "Investors want their return."
Meanwhile, Facebook has long faced criticism over user privacy issues. It shouldn't be let off the hook here, says says Constellation Research VP and principal analyst Steve Wilson.
"It's abhorrent really that Facebook won't let users opt out of this," Wilson says. "This attitude proves that the real customers of Facebook at the advertisers. The whole platform is designed to extract as much metadata about Facebook users and sell that data to advertisers."
"There is doubt whatsover that location data is Personally Identifiable Information," Wilson says. "It cannot be anonymised. Facebook can mask it before they send it off to businesses, but it will get instantly re-identified by correlating it to credit card numbers and CRM identifiers.
"Of course advertising is a legitimate business," Wilson says. "We all need it. Done right, we welcome it. But it has to be done right. If advertising is so good, then why are the big informopolies so sneaky about it? Why not engage users in an intelligent conversation about it, let them know how their location data is used, and give them options to duck out if they don't like it?"
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