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Facebook’s ads and standards in social network advertising November 3, 2007

Posted by jeremyliew in advertising, facebook, social media, social networks, strategy, widgets.
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Facebook is launching its new ad platform on Tuesday at ad:tech.

Mashable quotes Silicon Alley Insider with reports on one element of the launch:

Facebook is reportedly launching Pandemic, which is a program for advertisers to buy pages. It looks to be somewhat like a sponsored page system, and will offer an additional option for sponsored groups that advertisers can set up. The sponsored pages will have games and other applications that users can interact with.

More coverage from Venturebeat

Techcrunch says that there is more to the platform:

Project Beacon

Beacon is the internal project name at Facebook around an effort to work with third parties and gain access to very specific user data. An example may be a purchase of a book or DVD from Amazon. Under Beacon, the fact of that purchase will be sent to Facebook and automatically included in the user’s News Feed.

At the point of sale on the third party site, the user will see a “toast” popup asking them if they approve the sale information being included in their Facebook News Feed:

facebook beacon

The feed information includes the user name, what they did (bought something), what they bought, and where.

Both sound like exciting innovations. These new forms of advertising will help close the gap between the % of time spent on social networks and the % of ad dollars spent on social networks. It is inevitable that there will be a large advertising market for social networks

To understand if there is an advertising model for social networks and their widgets, you have to ask two questions:

1. Is this a mass market medium?
2. Is there value to an advertiser in having a user willingly affiliate herself* with their brand?

* e.g. Friending Scion in Myspace, or joining an “I love my ipod” group on Facebook, or skinning their personal photo slideshow with a Casino Royale theme on Rockyou.

The answer to these questions is clearly “Yes”. Based on that, I’m confident that we’ll see a large new form of advertising emerge over the next few years. Exactly when that occurs will largely depend on how quickly the big advertisers and the big social networks and widget companies can arrive at a standard for what form this social network advertising will take.

However, as I’ve noted in the past, new forms of advertising are hard. Before the ad market can really grow rapidly, there needs to be a standard for advertising across the social networking industry. When such standards exist, ad salespeople only negotiate price. When they do not, they also have to explain and negotiate the ad unit itself. That means that you’re doing business development, not ad sales, and making each ad campaign custom simply isn’t scalable.

Facebook’s new ad platform announcements will be a great step forward for the social networking advertising market, but they are only a first step. Only if and when the rest of the social networks embrace these ad formats (in the same way that they are embracing Google’s Open Social standard) will we start to see real scalable ad sales growth. Facebook, as important as it is, is only one player in the social network ad sales market.

Comments»

1. Alex Iskold - November 3, 2007

I am wondering if this will work in the long term. Socializing is fundamentally not about shopping. Seeing ads all the time on these sites is not what people are there for.

Another bit on this. Google is per click advertising. So far social networks are CPM only. Its hard to imagine people (particularly early adopters) clicking on the ads on SN. So if they are going to stay as CPM its kind of exciting to advertizers but not super exciting.

Finally, the moment they bring in product ads and people start buying, people might stop coming because they will suddenly find themselves spending more money on SN.

Perhaps this is too pessimistic of a view, but let me know what you think.

2. Rob Leathern - November 4, 2007

Good post. The only ads that are going to work in the short term on true social networks like Facebook are ones that don’t look much like advertising at all, are tightly integrated. And one of the keys to success in the online ad market I think we’ll see playing out here too is a robust self-service platform that lets a wide range of advertisers target around elements that matter to them, that have some a priori expectation of working well. Keyword-based PPC advertising took off via Overture and Google because it was simple both on the creative (text ads) AND the targeting side (keywords) and ROI was easily apprehendable. Don’t discount the power of reporting either. Display ads are still hampered by some decided lacks here. You’ll see some money being thrown at Facebook, but it may be a while before it’s smart and is producing some valuable metrics for brands.

3. Facebooks new project “beacon” and data privacy. at Web Jungle - November 4, 2007

[...] There is Information about Facebooks new ad plattform. Especially interesting: the “beacon project”. If you purchase anything on third party sites (e.g. Amazon), it could be listed on your newsfeed. Of course you’re asked in advance, whether you want this data transferred across to Facebook. Nevertheless, I wonder how this will be taken up by users. Particularly in Germany, where users are rather careful with their data privacy, I think this feature will not be successful. Techcrunch has some more information on this. [...]

4. VentureBeat » Predictions for the consumer internet in 2008 - December 3, 2007

[...] for (i) social media (it could be behavioral targeting, content targeting, demographic targeting or social ads) (ii) online video (contextual targeting, overlays or pre-roll) and (iii) in game advertising (rich [...]


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