This month -- and for the first time -- Facebook started to mine real-time conversations to target ads. The delivery model is being tested by only 1% of Facebook users worldwide. On Facebook, that's a focus group 6 million people strong.
The closest Facebook has come to real-time advertising has been with its most recent ad offering, known as sponsored stories, which repost users' brand interactions as an ad on the side bar. But for the 6 million users involved in this test, any utterance will become fodder for real-time targeted ads.
For example: Users who update their status with "Mmm, I could go for some pizza tonight," could get an ad or a coupon from Domino's, Papa John's or Pizza Hut.
To be clear, Facebook has been delivering targeted ads based on wall posts and status updates for some time, but never on a real-time basis. In general, users' posts and updates are collected in an aggregate format, adding them to target audiences based on the data collected over time. Keywords are a small part of that equation, but Facebook says sometimes keywords aren't even used. The company said delivering ads based on user conversations is a complex algorithm continuously perfected and changed. The real aim of this test is to figure out if those kinds of ads can be served at split-second speed, as soon as the user makes a statement that is a match for an ad in the system.
With real-time delivery, the mere mention of having a baby, running a marathon, buying a power drill or wearing high-heeled shoes is transformed into an opportunity to serve immediate ads, expanding the target audience exponentially beyond usual targeting methods such as stated preferences through "likes" or user profiles. Facebook didn't have to create new ads for this test and no particular advertiser has been tapped to participate -- the inventory remains as is.
A user may not have liked any soccer pages or indicated that soccer is an interest, but by sharing his trip to the pub for the World Cup, that user is now part of the Adidas target audience. The moment between a potential customer expressing a desire and deciding on how to fulfill that desire is an advertiser sweet spot, and the real-time ad model puts advertisers in front of a user at that very delicate, decisive moment.
"The long-held promise of local is to deliver timely, relevant and measurable ads which drive actions such as commerce, so if Facebook is moving in this direction, it's brilliant," said Reggie Bradford, CEO of Facebook software and marketing company Vitrue. "This is a massive market shift everyone is pivoting toward, led by services such as Groupon. Facebook has the power of the graph of me and my friends placing them in the position to dominate this medium."
Users often express the sentiment that they "don't even notice the ads," so engrossed are they in their Facebook activities. Those that do notice the ads complain they are not relevant to their interests. "All the ads I get are military-related, for building muscle or for big busty Asians in Florida who want men over 45," said Facebook user and Florida-based marketing student Mike Hanby, adding that he was not a target for any of those topics. "I hope that doesn't say anything bad about me."
The new feature being tested does not alter this algorithm other than speeding it up, so ads are served immediately after a status is posted, getting the brand in front of the user much faster, hopefully during decision-making time.
It's up to the quality of the algorithm to determine whether there is any commercial intent behind the statement. "You might have the potential of seeing some unfortunate ads if not targeted correctly," said eMarketer social-media analyst Debra Aho Williamson. "If I'm talking generally about Starbucks -- 'my latte was cold' -- would it be weird to then see an ad from Peet's?"
But real-time targeting means marketers could tap broad swells of sentiment, much like advertisers are attempting to do through Twitter.
This real-time test could make a huge difference in how Facebook ads perform, as well as how they are perceived by users. Facebook campaigns have been extremely successful for big brands such as Ford and Kia, but some analytics firms claim that the Facebook display ad click-through rate is abysmally low -- 0.051% in 2010, or about half the industry average, according to Webtrends.
EMarketer estimates Facebook sold $1.86 billion in ads in 2010, about 60% or $1.12 billion of which was self-serve, meaning advertisers that buy directly using Facebook's targeting tools.
A spokesman for Facebook said the test will go on indefinitely, but declined to comment further or discuss the results.