1200% ROI with Facebook ads according to Facebook

You may have heard of the Samsung Galaxy S3 smartphone.  Right now it’s outselling the iPhone, selling about 200,000 units per day.  And according to Facebook Global Marketing Solutions VP Carolyn Everson, Facebook ads returned nearly 1200% ROI for Samsung’s three month campaign.  Everson revealed at the Business Insider IGNITION conference that Samsung spent $10 million dollars and achieved $129 million in sales directly attributable to their Facebook campaign.

1200% return on their investment?  As it turns out Samsung has sold over 30 million of the S3 phones, so 1.3 million units attributable to Facebook isn’t implausible.    But I find that calculation highly suspect and here’s why:

Did 8% of Samsung’s Facebook fans buy an S3?

Samsung has 15,680,000 fans on their Facebook page.  Assuming the cost of the S3 to be $100 (their most recent cost), Samsung would have to sell about 1.3 million units to their Facebook fans to have $129 million in sales, which amounts to about 8% of their Facebook fans.  That would be a fairly unprecedented rate of conversion, especially difficult to attribute primarily to Facebook.  Because the sales figures are such a large percentage of total Facebook fans, we have to assume that they are attributing a larger sales amount per unit to calculate sales.

Of course the vast majority of those fans own a Samsung phone.  By a rudimentary calculation 2 million phone owners would be eligible for a phone upgrade (if a cell company allows one every two years).  So converting 60% of eligible cell customers makes Facebook’s claim even more unlikely.

There’s also the issue of the campaign itself, which was at one point hijacked by Apple fans.  In fact, that particular post (what electronic item would you take with you on a desert island?) continues to be commented on primarily by Apple fans.  So there’s a question as to the effectiveness of the advertising content Samsung placed on Facebook as well.

Everything I know about the Samsung Galaxy S3 I learned from 72andSunny

There are a couple other aspects to the story which merit consideration:

First, a Google India study from last week concluding that 70% of electronics customers participate in ROPO (research online purchase offline) behavior.  It’s reasonable to assume that people are going to do research before making a phone purchase that is going to tie them to a device and a phone contract for two years.  Facebook really doesn’t have a great deal of information to offer customers looking for earnest reviews and technical details.  Facebook can increase awareness for a product like the Samsung Galaxy S3, but Facebook ads and pages are ill-equipped to convert a sale for a smartphone for ROPO consumers.

Secondly, you may not know advertising agency 72andSunny but you probably know their work.  They created two of the best campaigns of recent memory, not-so-coincidentally for the Samsung Galaxy S3 (both embedded below).  In their first campaign, they lampoon Apple users for waiting in line for an iPhone culminating in the reveal that Samsung users are holding a place in the Apple line for their parents.   In the second campaign, a husband is leaving for a trip and as his family says goodbye his wife shares two videos: one from the kids to watch on the airplane and one from her that is not suitable for the airplane (prompting one of my favorite headlines from c|net’s Chris Matyszczyk, “New Samsung Galaxy S3 ad: It’s good for sharing sex tapes!“).  The point being that there was incredibly effective creative product that did a phenomenal job differentiating the features of the phone from its competition in a memorable way.

Back to the numbers though: if Samsung sold 30 million units and 1 million (generously) is attributable to Facebook maybe there’s another way to look at this?  AdAge estimated Samsung’s ad spend for the Galaxy S3 phone would be a little over $280 million.   So even if you take Facebook at their word, their ads are still underperforming compared to Samsung’s other advertising.

…but they’re not telling the truth

Facebook has value.  Samsung wouldn’t have invested 3.5% of their ad spend with Facebook.  But anyone expecting to get $12 for every $1 spent on Facebook advertising is going to be awfully disappointed.   The Galaxy S3 just happens to be a hot item, primarily because effectiveness of the 96.5% of their ad spend that didn’t go to Facebook (and in large part due to some extraordinary creative by 72andSunny).  The fact that Facebook can’t discuss a campaign like this with pragmatism, choosing instead to take credit for far more than they could possible have accomplished is probably a good indication of the current state of Facebook advertising today.

What do you think?  Did Facebook hit this campaign out of the park or are they taking credit for too much?  And what does it say about Facebook that an executive makes these sort of claims?



Photo Credit

Jim Dougherty

Jim Dougherty

Writer and chief of miscellany at leaderswest.com
I'm the guy that wrote the article you just read. Sorry for the typos.
  • uDaeth

    I had pretty good luck with a campaign that pointed people right back to Facebook (my fan page)

    • jimdougherty

      I don’t doubt it – particularly for a person as savvy in the space as you. I look at a campaign like Samsung’s and question whether it could be replicated by another business with the same result. In this case there’s no evidence that what Facebook says is true and if FB ads could consistently deliver those returns they would be more expensive to buy. Thanks for reading and commenting!

  • http://twitter.com/podcasthero Andrew McGivern

    I believe this analysis is flawed. Are Facebook ads only displayed to your Facebook fans? No. My understanding is they are targeted to Facebook users that are most likely to be interested in your product. You can filter the distribution of the ads down to a very specific demographic.
    The number of Samsung fans on Facebook should be irrelevant in this case. No?

    • jimdougherty

      Thanks Andrew – it of course depends upon how the ad is set up, but from what I gather it was an awareness campaign to gain fans and promote engagement on the page. If that’s the case, then the analysis would be favorable to Facebook. The $100 pricepoint is a favorable to Facebook (it was a promotional price probably not valid for the entirety of the campaign). So, of course this analysis is inexact, but inexact giving Facebook the benefit of the doubt. To your point about fans, of course the Samsung fan number is relevant because the ad generates fans, the next action is generated by fans. I didn’t get any sense thats Samsung’s ads took users off-site, so I’m pretty confident of the mechanism though you could correct me if I’m wrong. Thanks for commenting and reading!

  • http://www.facebook.com/bethmcshane Beth McShane

    Wow… my first take-away, as a Portland Native is that 3/4 of the founders of 72 and Sunny were formerly with Weiden and Kennedy …..

    I am, however a strong proponent of Facebook advertising as a means to an end…. since my mom is on Facebook, it only makes sense that her friends, as well as mine like to play in the FB sandbox… therefore it would be foolish to overlook Facebook’s influence on specific audiences…..

    • jimdougherty

      Well, the first negative thing I can say about them is that they moved from Portland. Bad move. :)

      Your word choice is exquisite when you describe Facebook ads as a “means to an end.” That’s a phenomenal way to consider them. Facebook’s insistence that their ads are converting customers (especially to the degree they do here) is irresponsible, and I think that’s why there’s a lot of value in people like you with experience in what works and doesn’t in that space.

  • http://barrettrossie.com/ Barrett Rossie

    Well one thing’s for sure. If Samsung believed he hype, they’d be funneling more and more funds into FB advertising, until they reached a point of diminishing returns.

    I know I’m not a typical FB user, having been in advertising most of my adult life… But I can’t even remember seeing any particular Facebook ad. Maybe I’m immune?

    • jimdougherty

      … or maybe Facebook is just that good? :) Thanks Barrett for the insight – even though 3.5% of $300 million is a pretty good chunk of change I suspect Samsung understands Facebook’s role in their campaign. Both Facebook and Twitter have become so over-the-top dishonest about what their ad products so that it’s almost comical. Appreciate you reading and commenting!

  • http://www.razorsocial.com/ Ian Cleary

    It’s hard to believe alright. Did they just measure clicks from a Facebook ad to sales on their page? Very unlikely!

    When the new iPad comes out if you put loads of Facebook ads on you’ll have impressive stats but if you stand at the side of the road and advertise the new iPad you’ll probably get good conversion also!

    • jimdougherty

      Thanks Ian, I doubt they’ll release the details of how they came to that. Great point about the iPad – co-opting a great marketing campaign is one thing, but showing effectiveness for many would be ideal. Cheers!

  • http://twitter.com/Chris_Eh_Young Chris Eh Young

    It all looks like flawed calculations and incomplete data to me. I see nowhere where it shows a direct click through to sale. All the numbers are speculative at best. This is clearly another case of Facebook mistaking causality and correlation. But until we learn, they’ll continue to get away with it.

    • jimdougherty

      Thanks Chris for reading and commenting. I think a lot of these social networks are going to have to take a hard look at what they can actually quantify and adjust expectations. Of course for a public company like Facebook or a heavily financed private company like Twitter admitting that they can’t leverage their user data for sales has some serious ramifications. Cheers!

  • http://thecollegestartup.com/ Travis

    It seems like at the VERY least you should be accounting for the actual amount of money that Samsung gets per device after the carrier subsidies. I’m not entirely sure how much Samsung really gets as a total, but I assume it’s going to be slightly less than apple, who on average gets about $650 for each device sold at the $199 retail price point. Doing the math on this at a $100 price point makes everything absurdly skewed to me.

    Considering all the factors, yes this is likely a sensationalized success story to make Facebook Ads appear more attractive, but I would put my money on the idea that instead of just moving more units to add up correctly it was, instead, a higher average revenue per transaction. Couple that with the broader reach of existing fans + FRIENDS of Fans, and all the sudden things seem much more believable.

    • jimdougherty

      You’re absolutely right, Travis. I used $100 as a best case scenario, but you’re absolutely correct that it’s a lowball number. Because we know about how many units they’ve sold and about how much Samsung spent on advertising, I thought it would be prudent to give Facebook the benefit of the doubt, but I agree with you that the actual price per phone is higher, which means that the number of phones sold attributable to Facebook would be lower and their return comparable to other advertising would be lesser. But of course neither of us knows what figures Facebook uses and probably won’t.

      The challenge for me is to understand how Facebook thinks that this success is applicable to anyone else advertising on their platform. What I found especially interesting was how the Samsung campaign actually wasn’t executed perfectly, and they still have pretty stellar sales. I think the success for this campaign has a lot to do with a great product that’s positioned well in its market and has very little to do with the execution of their Facebook campaign. But I’m open to being proven wrong – in fact I think it would be sensational if Facebook ads could replicate that kind of success for people.

      • http://thecollegestartup.com/ Travis

        I think the key factors here are likely.

        1. It was a decent product with mass appeal

        2. The market was ripe for a good alternative to the iPhone

        3. Margins were high enough thanks to subsidies to get an insane ROI

        Personally, I haven’t had much luck with Facebook Ads producing any sizable ROI.. but I don’t think I’ve ever had an offer that was an amazing fit. I’m more inclined to believe it could be done under these circumstances though after having great success with LinkedIn Ads.

        For example, I promoted live events for a speaker at the start of this year that absolutely crushed it (case study here: http://thecollegestartup.com/linkedin-advertising/ ). We ended up spending about 30k a month for the next few months because the ROI was so damn high. However, it was the high margins.. the great fit with the audience.. and the well seasoned marketing funnel that made it all work.

        • jimdougherty

          Great insight Travis – I don’t disagree that people could get return on Facebook ads, but I tend to believe your assessment of the product and the market much more than the fact that Facebook ads were that effective. Great point about LinkedIn ads too. Appreciate your insight!