Facebook goes all-out to prove its ads work

CNBC's Julia Boorstin reports the results of a study on Facebook ads.

By Roland Jones

Following an uproar of skepticism over its business model after its initial public offering last month, Facebook?s is going all-out to persuade companies that advertising on its site works after all.

A new report partially-funded by Facebook and compiled by Internet research company comScore says marketing on Facebook is effective because it influences consumer behavior and leads to increased purchases for the brands that make use of the social-networking site.

The report comes after a Reuters/Ipsos poll found that four out of five Facebook users had never bought a product or service as a result of advertising or comments on the social network site, underlining, to some observers, the challenges it faces when it comes to drawing in revenue.

Since it went public in mid-May, investors? worries about Facebook?s money-making abilities have pushed the company?s stock price down 29 percent since its offering last month, reducing its market value by $30 billion to roughly $74 billion.

Tuesday?s report looks at the behavior of Facebook users who have become fans of certain brands and products. It found that those users tend to outspend other consumers for that particular brand. ComScore cited Amazon, Best Buy, and Target as examples.

Brand pages on Facebook now see more traffic than their corresponding brand websites, comScore found, although most brand exposures on Facebook happen through a user?s news feed rather than through visits to a dedicated brand page on Facebook, as users spend the highest percentage of their time on Facebook looking at the news feed. That ends up being the primary channel for brand exposure, comScore said.

Larry Chiagouris, a professor of marketing at the Lubin School of Business at Pace University in New York, said the report?s findings don?t necessarily show Facebook ads are effective in getting people to click through and buy a product.

?It doesn?t surprise me that people who like something are more likely to take action to buy that product,? he said. ?The question is how to get someone else to like it.?

Andrew Lipsman, vice president of industry analysis at comScore, noted that traditionally advertising effectiveness online has been measured by how many visitors to a site click on an ad to visit the retailer?s website. For Facebook, those numbers have tended to be low, he said.

ComScore?s report, by contrast, aims to show how a brand on Facebook can increase awareness and, over time, lead Facebook users to purchase a particular brand or product, Lipsman said.

?What we?re doing here is measuring the behavior of those who are exposed and not exposed to brands on Facebook, and you can see what the impact is,? Lipsman said.

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