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Tuesday, November 6, 2007

Facebook Ad Platform Announced - why I'm skeptical

Facebook made their formal announcement today of how their new ad platform will work. Founder Mark Zuckerberg made an enthusiastic presentation at ad:tech in New York, outlining several new sets of functionality.

Facebook Ads --

This is the primary advertising vehicle. As described in the press release:

Today, Facebook Ads launched with three parts: a way for businesses to build pages on Facebook to connect with their audiences; an ad system that facilitates the spread of brand messages virally through Facebook Social Ads™; and an interface to gather insights into people’s activity on Facebook that marketers care about.

Advertisers can design custom pages with information, content, and custom applications--"any application that was written for users on the Facebook Platform," Zuckerberg explained. Facebook users can sign up as "fans" of that brand, install branded applications (games, etc.), that will all show up in their profiles' "mini feeds" and on the "news feeds" that are broadcast to their friends lists. Once an advertiser has built a page, Facebook users can become a fan of a business and can share information about that business with their friends and act as a trusted referral. This is the viral and social aspect that Zuckerberg touted as one of the marketing breakthroughs of the new system.

Another quote from the press release that further emphasizes the social and viral aspect:

Facebook’s ad system serves Social Ads that combine social actions from your friends – such as a purchase of a product or review of a restaurant – with an advertiser’s message. This enables advertisers to deliver more tailored and relevant ads to Facebook users that now include information from their friends so they can make more informed decisions.

The third component is called Insights. This analytics functionality gives marketers metrics about their presence and promotion on Facebook, provides access to data on activity, fan demographics, ad performance and trends that better equip marketers to improve custom content on Facebook and adjust ad targeting. It is expected that this is where Facebook will let marketers see all the ways they can slice and dice user demographics, interests and activities.

Beacons --

Beacons allow users to share their actions on 44 participating sites with their friends on Facebook. The websites participating in Beacon can determine the most relevant and appropriate set of actions from their sites that users can distribute on Facebook. These actions can include posting an item for sale on eBay, completing a purchase, viewing of video, buying movie tickets on Fandango or buying airline tickets on Travelocity. When users who are logged into Facebook visit a participating site, they receive a prompt asking whether to they want to share those activities with their friends on Facebook. If they do, those friends can now view those actions through News Feeds or Mini-Feed stories. These actions were touted as brand endorsements by Zuckerberg.

Partners --

Facebook also announced that 60 companies have immediately committed to using Facebook Ads. Partners joining Zuckerberg on the stage today included senior executives from Blockbuster, CBS, Chase, The Coca-Cola Company, Sony Pictures and Verizon.

What was not announced --

There was speculation in the blogosphere that Facebook would announce the creation of an ad network. No reference was made to anything that ambitious. For now, it seems clear that the Facebook site itself will be the focus of the initiatives announced today.

Time for the Facebook backlash?

Call me grumpy, but from my point of view the company has identified some great ways to annoy users with a constant barrage of ads and, in the process of so doing, create plenty of reasons for privacy advocates to begin targeting the site.

Zuckerberg is convinced that advertising messages can be spread virally. I am sure that some can, if they are humorous enough or otherwise entertaining. To me, though, it just seems like this is just a good line to attract advertisers to the site. After all, how often have you ever wanted to share an ad with your friends or been moved to endorse a brand in a communication to a friend?

The improvement in precise ad targeting based on the use of Facebook user data should initially increase click-through rates. I suspect advertisers will flock to Facebook to try to take advantage of it. Still, I would not be surprised to see Facebook users eventually begin to ignore these ads as energetically as they currently ignore ads on the site. When users begin to see the increase in number and types of ad material being presented it will reduce the overall impact of the ads.

As for the privacy issues, it appears that Facebook is lagging the financial industry, for example, in protecting users privacy. It has been discussed on ValleyWag and other blogs that Facebook developers have access to production data, ie, the personal profiles of all those users. The company is supposedly scrambling now to tighten its controls. Today's announcement indicates that all that data will now be presented to advertisers, supposedly scrubbed of personally identifiable information (PII), in an aggregated manner. Still, I find it hard to believe that every user will be comfortable allowing all their information to be shared with advertisers. This is an issue the Google OpenSocial initiative, and the various partners involved in it, will have to face, as well.

Sources: Press releases for Facebook Ads and Facebook Beacons

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