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How to Drive ROI with Facebook’s Custom and Lookalike Audiences

Published: March 28, 2013

Author: Todd Herrold

Social network advertising spend is projected to grow to 32 percent in 2013 to over $10 Billion, according to a recent eMarketer report. But despite this growth, many brands and direct marketers are still unsure how to find the right audiences on social networks, particularly Facebook. Luckily, Facebook offers two powerful tools marketers can use for targeting users on Facebook: Custom Audiences and Lookalike Audiences.
For some time, Facebook has provided highly granular targeting options based on the detailed information it has about its users. Standard targeting options on Facebook include demographics like age, gender, and relationship status, as well as geographic location, educational status, likes and interests and much more. But recently, Facebook greatly enhanced its audience targeting options by offering the ability for marketers to target specific Facebook users based on information the marketer already has.
Custom Audiences enable brands and direct marketers to find their prospects and customers among Facebook users, based on email addresses, phone numbers, or Facebook user IDs. Now advertisers can find the exact people they want to reach with highly relevant marketing messages — and expand that audience with Lookalike Audiences.
Let’s find out how.

Start With Custom Audiences

First, based on business objectives, you segment your customer or marketing database into meaningful groups of individuals that you would like to find on Facebook and target with specific advertising messages.
Next, you upload the list(s) into Power Editor, Facebook’s browser-based ad management tool. The tool then “hashes” the list, transforming it into a set of encoded data; to ensure privacy protection, Facebook uploads this encoded (and protected) data to their servers, rather than the actual email addresses or phone numbers.
Facebook then compares the encoded or “hashed” list to its own hashed user database, adding any matches to your Custom Audience as Facebook user IDs. After completing the matching process and creating the Custom Audience, Facebook deletes all the matched and unmatched data from your computer and their servers, storing the Custom Audience file in your account and making it available for targeting or exclusion during the ad creation process.
One important note: a Custom Audience remains available only in the account in which it was created. Facebook does not share this list with other advertisers and does custom audiences createnot share personal information about the people in the Custom Audience. For more information about how Facebook uses information, you can read its Data Use Policy.
Now, you are ready to target your ads on Facebook to the specific users in the Custom Audience. Or alternatively, you can exclude these users from your target audience so that they do not see your ads. As an example, you can use a Custom Audience to target ads to customers who have recently made a purchase in-store or on your website, perhaps in order to present a particular offer to those customers. Similarly, you could exclude these users from seeing an ad targeted exclusively to new prospects, rather than existing or past customers.
Custom Audiences work in tandem with Facebook’s standard targeting criteria, such as demographics and likes and interests, making them an exceptionally powerful tool. By using Custom Audiences along with native Facebook targeting criteria, you can create incredibly fine-tuned ad campaigns. As an example, a hotel chain might target a Custom Audience list of their best customers or loyalty program members, targeting only those in the list who recently got engaged, and creating an offer ad with special deals on honeymoon accommodations. The possibilities are virtually limitless.

Double Down With Custom Audiences

Once you create a Custom Audience, test your ads or offers, and confirm that the audience meets your defined business objectives, you can extend your campaign reach to target additional Facebook users with similar characteristics to the members of the Custom Audience through another Facebook feature called “Lookalike Audiences.”
To create a Facebook Lookalike Audience, enter Power Editor and click on “Create Similar Audience.” Facebook recommends that the Custom Audience, used as a base for the Lookalike Audience, include at least 500 people; the larger the list, the more information Facebook’s algorithms will have to find similar users.
You can choose to create a Lookalike Audience that is optimized toward “similarity” or “greater reach.” Optimizing toward “similarity” will create a Lookalike Audience that includes the top one percent of the people in the selected country who are most similar to the Custom Audience based on interests and demographics. Optimizing toward “greater reach” generates an audience of the top five percent of people most similar to the Custom Audience. Lookalike Audiences may also be combined with other demographic and interest targeting options, offering a tremendous degree of granularity and precision.

The bottom line

Advertisers not yet using Custom Audiences and Lookalike Audiences should begin leveraging these powerful targeting tools within Facebook as they both offer substantial benefits. Remember though, when exploring any new ad campaign, take a test and learn approach.
With Facebook’s Custom and Lookalike Audiences, advertisers can:
1. Reach specific individuals with more targeted and relevant messages
2. Exclude these individuals from receiving particular ads or offers
3. Find new audiences based on similarity to existing customers
4. Increase efficiency of campaigns through higher conversion rates and lower costs
And best of all, Facebook charges no additional advertising fees for using these new targeting tools. Give them a try and let us know what you think!
– Todd Herrold

25 E Washington Street
Suite 420

Chicago, IL 60602

(650) 539-4124

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