Facebook strategy: You’re the ad
Facebook Inc. wants to turn the members of its popular online hangout into champions of the brands that advertise there.
Trying to mine its commercial potential, the social networking site Tuesday unveiled an advertising strategy that piggybacks on one of its most powerful features: the news feed, which shows users a streaming list of what their friends are doing.
Facebook hopes the news feed also will help users promote its advertisers.
To do so, the company plans to follow users when they visit its partners’ websites. For example, Facebook users who add a movie to their rental queue on Blockbuster.com will see a message asking whether they want to tell their friends.
Users also can notify their online pals if they list items on EBay or buy movie tickets through Fandango. For an unspecified fee, advertisers can attach targeted messages to these news alerts.
The method might seem creepy to some people. But if done right, analysts said, it could make ads more relevant than ever on social networks, where young Internet users broadcast their every move.
“This could potentially be game-changing for online advertising,” said Debra Aho Williamson, an analyst with research firm EMarketer Inc.
Facebook promoted its strategy to Madison Avenue on Tuesday with big-name partners such as Coca-Cola Co., Sony Pictures and Verizon Wireless. The company is trying to boost its advertising revenue and prove its worth to investors.
Expectations rose last month when Microsoft Corp., the world’s largest software maker, agreed to buy a small stake in Facebook for $240 million. The deal valued Facebook at $15 billion, turning up the pressure on the Palo Alto-based company to better engage major advertisers.
Facebook, founded in a Harvard University dorm room in 2004, is expected to generate $150 million in revenue this year.
MySpace, the No. 1 social networking site, with 110 million users, on Monday showcased a new targeted advertising system that lets advertisers deliver banner ads based on data from users’ profiles, the groups they join and the messages they post for their friends. It also launched a service that makes it easier for small businesses to advertise on the site.
Social networking sites have amassed a wealth of data about users and their friends, who voluntarily disclose a lot of information through what they put on their profile pages and do on the site. Those finely detailed insights into users’ demographics and online behavior -- who they are, what they like and how they interact -- could be a boon for advertisers, who are expected to almost triple their online spending to $3.6 billion worldwide by 2011, according to EMarketer.
Facebook is attempting to move beyond targeting to harnessing the power of word of mouth among a circle of friends, Williamson said.
“This is not just banner ads flashing on top of Web pages,” she said. “This is tapping into the way people interact with each other.”
That’s a big selling point with advertisers.
“The most valuable marketing asset is a trusted referral by a friend,” said Dwight Caines, executive vice president of worldwide digital marketing strategy for Columbia TriStar Motion Picture Group. “We live and die by customer word of mouth.”
Facebook is letting marketers create profile pages and invite fans of their products to become their online friends -- something MySpace has done for years. But when people declare themselves fans of a particular product, Facebook will alert all their friends on the site.
The increasingly precise way marketers are aiming ads at users has raised some hackles. Jon Leibowitz, a member of the Federal Trade Commission, last week expressed concern about threats posed to consumer privacy by so-called behavioral targeting. Facebook says it plans to let users decide whether they want to alert friends about the brands and the bands they like.
The success of Facebook’s advertising scheme will depend on what its 52 million users -- who use the site to stay in touch with friends and virtually “poke” one another -- think of it, Williamson said.
“I don’t think I am going to poke Coca-Cola or extol the virtues of products directly,” said Alex Dempsey, a 23-year-old programmer who uses Facebook every day. He said he would have liked to have alerted his 250 Facebook friends recently when he bought plane tickets to visit his girlfriend in France. And he’s all for ads becoming more relevant to his interests.
“The other day I heard one of those ‘Congratulations, you have just won a free iPhone’ ads on Facebook and it really pissed me off,” Dempsey said. “If they keep doing that I think they are going to shoot themselves in the foot.”
As part of its new advertising system, Facebook also can target ads to people who share certain interests, educational background or location. No personally identifiable information will be shared with advertisers, Facebook said.
It did not say how much it would charge marketers for these services.