For many local businesses, advertising online is synonymous with Google AdSense. Facebook ads however can be just as effective and a lot less expensive, although your approach needs to be very different.
On Google, you're marketing to someone who just typed in search terms related to your business. This is called "advertising by intent" - you know for sure that the user intends to at least visit your website, and very often they intend to make a purchase. People who search for TVs intend to buy TVs. People who search for restaurants in your city intend to go out to eat.
Advertising on Facebook is targeted on people's interests instead of their intent, so your approach to advertising MUST be different. For some advertisers, Facebook may not be an appropriate advertising channel at all. Yet for many, it can be extremely effective and less expensive than Google AdSense. The key is to create ads that people respond to on Facebook.
For reference, I spend anywhere from $0.10 to $1.25 per click for advertising on Facebook. I spend between $3.00 and $9.00 per click to advertise on Google. With acquisition costs like that, it's important that Google leads convert on the first click. Facebook leads become fans that you can continue marketing to for free (after they Like your page) and convert later with appropriate follow-up.
Rule #1 - Target Your Ads
Facebook gives you a lot of controls to target your ads. That means you can choose who sees your ad based on age, gender, and location as well as their Likes and even keywords cited in their recent status updates and comments. Not only does this drive up your click-thru rate, it drives down your cost.
You can easily create several ads with slightly or entirely different copy targeted to different groups. Is it possible to market your business to conservative religious groups and the gay community at the same time, for example? Absolutely! But you better write different copy for each ad and make sure that you target the right one to the right group or it is sure to backfire.
Remember that you are targeting on interest and self-identity, NOT on intent. The most effective ads are those that people relate to immediately by thinking "Hey, that's me!" One of my most effective Facebook ads to date was targeted to self-identified entrepreneurs, and simply asked "Have you hugged an entrepreneur today?"
Rule #2 - Understand your real value to your customers
This is not unique to Facebook ads. It's the very first tenet of any effective marketing campaign but especially important in a social environment. Often times what you consider major selling points are irrelevant to your customers. They don't care how many megapixels your cameras have or what ingredients you use in your sushi rolls. They care that they will feel proud of the high-quality pics they took with your camera, and about the social experience of dining out with friends at your restaurant. Your ad should ALWAYS focus on the benefit to your customer no matter how removed or irrelevant it seems from your product's features.
When in doubt, ask your customers why they really patronize your business. You may be surprised by the answers you get.
Rule #3 - Ask for the Sale
It's true that "click here" is trite on the web in general. However, this call to action is very effective in Facebook ads that promote a fan page, increasing click-thru rates by as much as 100% in my experience. Yet surprisingly few ads on Facebook explicitly ask people to click the Like button. A few examples I've used that got above average results all begin with the call to action:
Example 1, targeted to people by the city they live in:
[Image representing your brand]
Click Like to get in on daily deals in [Your City]
Example 2, targeted to people who like American Idol:
Super Talent or Trainwreck?
[Image of attractive young person with microphone]
Click like to see people singing their hearts out for love and cast your vote.
Stop Attack Ads
[Black and white stock photo of non-specific politician with red ATTACK stamped across it]
Click Like if you're fed up with negative campaigning and want to see real ideas instead.
This is by no means a complete guide to advertising on Facebook, but covers the most important techniques that have worked for me.