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Understanding the Dynamics of Facebook Ads: The Impact of Friend Endorsements

As you browse through your Facebook feed, it’s nearly impossible to avoid the barrage of ads vying for your attention. These sponsored posts, like other types of content, invite reactions from users. It’s common to see that your friends have already interacted with these ads by liking them.

Advertisers aim to leverage these endorsements, particularly those from known contacts, to increase the likelihood of clicks. However, new findings from researchers at Texas McCombs School of Business suggest that the effectiveness of these endorsements largely depends on both the nature of the advertisement and the friend in question.

According to Ashish Agarwal, an associate professor in information, risk, and operations management (IROM), along with Andrew Whinston, a professor in the same field, the involvement of friends can have a counterproductive effect if the wrong type of ad is presented. Both researchers emphasize the significance of understanding how social cues in ads influence user behavior.

The focus of their study was on call-to-action (CTA) ads which employ direct and assertive language to prompt users to engage, such as making a purchase or downloading an app. This approach contrasts with informational ads that invite users to “learn more” in a more casual and indirect manner.

Advertisers are increasingly drawn to CTA ads because they push users quickly into a decision-making mindset. Nonetheless, prior studies indicated that such pressure can alienate potential customers, who may feel manipulated.

The research team sought to determine whether an increase in “likes” could counterbalance this aversion to CTA ads. Agarwal posed a critical question: “Given that these are assertive ads, how would these social cues help or hurt?”

In pursuit of answers, the researchers conducted a pair of studies.

In the first study, they partnered with a mobile app developer to run a CTA ad on Facebook, which was displayed over 710,000 times, yielding 799 “likes” and over 4,000 clicks from users. The second phase involved a lab experiment where they analyzed the influence of various ad types—CTA versus informational—as well as the impact of generic “likes” versus endorsements from friends. Each of the 982 participants identified five friends for the study.

The outcome revealed varying user responses to ads based on type and the source of “likes.” For informational ads, an increase in “likes” correlated with a higher click-through rate, with a 3% increase for every 100 generic likes, and a significant 21% rise for each “like” from a friend.

Conversely, the results for CTA ads were sobering; the total number of “likes” did not significantly affect click rates. However, feedback on “likes” from friends yielded mixed responses depending on perceived shared interests. Users were 180% more likely to click on ads favored by friends with similar interests, while endorsements from friends with dissimilar interests decreased the likelihood of engagement by 66%.

The researchers considered that users’ negative perceptions of CTA ads stemmed from a sense of being manipulated by advertisers who emphasized “likes” as part of their strategy. Yet, when friends who shared similar interests endorsed an ad, users perceived it as more credible, lowering their defenses.

The study also highlighted that users found informational ads less manipulative, thus being more open to endorsements from friends.

Agarwal advised that these findings hold valuable implications not only for advertisers but also for social media platforms that rely heavily on advertising revenue. While showcasing “likes” may enhance the performance of informational ads, the same cannot be assumed for CTA ads. He posited that advertisers should be cautious regarding the importance of these endorsements and suggested potential modifications to social media advertising strategies.

The research findings are detailed in a publication available in the journal Information Systems Research.

More information: Agarwal, Ashish et al., “The Effect of Popularity Cues and Peer Endorsements on Assertive Social Media Ads,” Information Systems Research (2024). DOI: 10.1287/isre.2021.0606

Source
phys.org