A Neuroscientist and an Advertiser Walk into a Bar.

The overarching question on every advertiser and investor’s mind is “do Facebook ads really work.” This question, I contend, is much less superficial than the original answers would lead ond to believe. In approaching this question, a more quantitative viz. scientific approach likely should be more favorable in actually determining whether Facebook’s ad platform serves any real use. In her sproutsocial.com article, “Study Reveals the Effectiveness of Facebook Advertising,” Jennifer Besse reveals that these scientific approaches toward understanding the Facebook ad scheme have already been occurring.

As an example of this, the author cites the study done by NeuroFocus, who utilizes an application of neuroscience to advertising brands and marketing structures in order to understand their relative efficiencies with consumer conversion. In this study, NeuroFocus compared three different online viewing experiences. Utilizing the home pages of the New York Times and Yahoo! as well as one’s personal news feed on Facebook, the study demonstrated that, with the inclusion of ads on all three platforms, those ads viewed on one’s Facebook news feed commanded much greater attention and engagement than the other web sources. Their study also revealed that people are more likely to later recall the advertisements displayed on Facebook over the other web providers. As the final culmination of their research, as Ms. Beese reports, NeuroFocus determined that Facebook ads have much better conversion and saturation rates compared to television advertisements.

Although the research is certainly interesting, after reading the article I cannot help but be imbibed with a strong sense of skepticism. Despite my personal aversion and disinterest in the fields of psychological “research,” the lack of evidence of the scientific process used by NeuroFocus leads me to question both the credibility of their research and the relevance of Ms. Beese’s article. Despite my personal prejudices against this article, though, I do believe that it reveals a very important piece of information to would-be investors and advertisers. If accurate, the fact that ads on Facebook are truly more effective than those found on television would be earth shattering. Think about the exorbitant amounts of money allocated in company budgets for television advertisements. The simple realization of the inefficiency of these ads, which have dominated the several billion dollar market for years, could cause a massive capital inflow into alternative advertising sources such as Facebook. Though I believe one should conduct further research into the overall validity of Ms. Beese and NeuroFocus’ claims, if found to hold true, this could monumentally impact Facebook’s advertising business and the creation of value for both advertisers and investors.

Facebook Graph Search: An Advertiser’s Dream

In his AdAge article How Facebook’s Graph Search Will Dethrone Google Search, Dave Williams, a social media marketing expert who runs a digital marketing firm, asserts that Facebook’s recently released graph search feature will ultimately usurp Google’s authority as the king of search. If true, the impacts of this would be massive. According to Williams, “Facebook’s Graph Search has the potential to completely revolutionize search, enabling consumers to have a uniquely personalized search experience—based not only on what they want but what they like, and who their friends are, by extending the value of the social graph and first-party data to sharply differentiate Facebook’s offerings from Google.”

Williams relates that the Facebook search feature provides users results which are tailored to their particular interests, relative to results collected from the Facebook social graph. In its pairing of the continuously growing Facebook social graph with Microsoft search capabilities, this provides, according to Williams, more specific and relevant search results for users. Besides the benefits provided for individuals in reduced personal source evaluation time, advertisers also drastically benefit from the specific targeting capabilities of Graph Search. Access to the Facebook Graph allows advertisers to direct ads to specific individuals not only based upon their individual search queries, but also derived from information which the user “willingly” provides to advertisers by the things which they and their friends “Like” on Facebook, ultimately providing “socially relevant queries that just don’t happen on other (search) engines.” Williams believes that the leverage this information provides to advertisers in directing their ad traffic will ultimately reduce advertising volume on Google by a drastic amount in favor of the socially driven advertising on Facebook.

I believe that this information, provided by Williams, can easily be contextualized for both marketing professionals and investors. From the marketer’s perspective, I believe that the enhanced targeting capability of Facebook’s social graph provides more concentrated, personal information for their advertising clients. In my opinion, the hidden gem of this advertising structure is that most of the work is unknowingly done by Facebook’s users every time that they “like” a page—providing key information about themselves and their interests to advertisers. Marketers who know specifically what a client wants to see —by their own revelation—can then provide cheaper and more effective advertisements to those customers.

For investors, the advent of Facebook’s graph search has many significant benefits. If, as illustrated by Williams, Facebook’s search results ultimately provide fewer, more specific and relevant search results to consumers, we will likely see a major shift away from advertising on Google in favor of Facebook’s engine. This shift will open Facebook up to new revenue streams which have long been the key to Google’s success, enhancing the company’s profitability as a whole—and large potential gains for investors in the company’s stock.