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Lookalike Modeling's Potential and the Future of Custom Audiences

Published: February 7, 2013

Author: Caroline Watts

extended audience reach
Lookalike modeling, if accurate, could give advertisers high-potential extended reach.

One of Facebook’s most powerful ad targeting tools may also be the one that has been promoted least. Released last year, Custom Audiences had the potential to be one of Facebook’s most important ad products. Many marketers have picked up on the potential, and Facebook, despite their discreetness, may be planning to take this product far going forward.

A Refresher on Custom Audiences

Last year, Facebook quietly announced a tool called Custom Audiences. Custom Audiences is a tool, available through Facebook’s power editor, that allows advertisers to target by email address, phone number, or Facebook ID. With this tool, you can create and target a list of current customers, another list of lapsed customers, and a list of email subscribers who have never made a purchase. You can create an unlimited number of lists, and you can serve any of Facebook’s different ad formats, including Facebook mobile ads, to those lists.
Despite the lack of fanfare, Custom Audiences is actually an impressive form of targeting, and many advertisers have reported impressive results. Even the earliest results, released soon after the launch, were highly encouraging.
Because they have so many users, Facebook has been able to reach an extremely high percentage of most marketers’ target audiences. Facebook has said that they frequently see match rates of 50%, meaning they can reach 50% of your list. In some instances, they’ve even seen match rates at 95%. So, in addition to highly effective targeting, you can reach many if not most on your email list.

What’s Next for Custom Audiences?

As with the Facebook Exchange (FBX), Facebook has not been marketing Custom Audiences aggressively. Unlike the Facebook Exchange, Facebook has no partners to rely upon to trumpet Custom Audiences.
After the beta launch of the Facebook Exchange last summer, FBX partners were (and continue to be) the most vocal advocates of the Facebook Exchange. But Facebook Exchange is only available through those same approved partners who have been touting the Exchange; there is no self-serve option. Custom Audiences, on the other hand, is a self-serve tool, available only through Facebook’s power editor.
Facebook certainly has motive to keep mum about new targeting techniques, given the privacy backlashes the social giant is prone to sparking. On the other hand, a post-IPO Facebook needs to drive revenue, and the way to do that is by pushing their most effective advertising tools. Custom Audiences might be one of those tools. So, what’s next?

Facebook is Diving into Lookalike Modeling

Inside Facebook has reported that Facebook is testing a new extension of the Custom Audiences tool called Lookalike Audiences. The Lookalike Audiences tool will allow advertisers to target people similar to their existing contacts. Here’s how it will work: you, the advertiser, upload your list (say, a list of existing customers) to Custom Audiences. Based on an analysis of the list, Facebook will create another audience segment of people with similar characteristics. That new audience segment can then be targeted with any of Facebook’s standard ad formats (much like Custom Audiences).
In short, you’d have access to a new, unrelated, highly targeted audience. The price structure isn’t yet known, but the value of the feature could be staggering.
This powerful extension of Custom Audiences could fill a new niche for marketers looking to expand their targeting pool and introduce their brand to a new, relevant audience. It’s a logical extension of the existing tool, and Custom Audiences and Lookalike Audiences could be an extremely potent combination.

What Does That Mean for You?

Custom Audiences has incredible potential for many advertisers, and it’s likely worth testing with one or two simple lists to see if it can drive results for you. It’s not yet available outside the closed beta, but I anticipate it will perform well and that Lookalike Audiences will eventually be rolled out to Facebook advertisers at large.
If and when it does get released to the general public, will you try it?
Caroline Watts

1 S Wacker Drive
Suite 2250

Chicago, IL 60606(650) 539-4124


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