Big Spenders Push Ad Line, But Facebook Holds Ground

Can Newly Public Company Withstand Demands for Ads That Interrupt User Experience?

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GM wanted to brand Facebook. And Facebook wasn't selling.

In a now-notorious meeting between General Motors Global CMO Joel Ewanick and other top marketing brass and Facebook sales executives, the automaker's team asked whether it was possible to run bigger, higher-impact ad units than the current offering, according to people familiar with the discussion. Advertising on Facebook has always been subtle. But GM wanted to do something bigger. To GM, Facebook's audience was interesting; its ad formats were not.

Rather than run sponsored stories, which look like Facebook posts, or smaller units on the right side of the pages, GM asked if it could take over a page. It was told no.

The rebuff says a lot not just about why the country's third-largest advertiser yanked its ads from the social network, but also underscores the continuing tension between Facebook and some of the country's deepest-pocketed marketers. As Facebook looks to tap bigger budgets and integrate brands and a commercial model into its platform, an impasse is forming between the platform folks, who are as concerned as ever about user experience, and major marketers used to getting their way.

GM and Facebook both declined to comment on their meeting.

Facebook has shown remarkable restraint in what it will sell marketers over the years -- too much restraint, some advertisers grumble. It has always put the user experience first, and that 's helped drive the social network to 901 million global users. But that has also meant turning down advertisers.

Which is all well and good for a private company, but now that Facebook has shareholders to answer to, the question may be how long it can hold its ground. "For the considerable future [Facebook] will sacrifice short-term revenue gains for the consumer experience," said Brian Wieser, principal analyst at Pivotal Research.

Executives of agencies and research firms working with packaged goods and retail marketers said Facebook tends to resist new ad models, efforts to help the appearance and impact of display ads, and efforts to tag user profiles for use in a segmentation system. On the last point, one research executive characterized Facebook's response like so: "The only thing that goes into a Facebook profile is what a user puts there."

Facebook CEO Mark Zuckerberg has been unequivocal in his stance on the paramount importance of consumer experience, even explaining to potential investors in Facebook's IPO filing: "We don't build services to make money; we make money to build better services."

But if Facebook won't allow brands to stand out on the platform for fear of disrupting users, can it still convince advertisers of the value of the relatively new and untested socially enhanced ads it's pitching and scale its revenue to meet shareholder expectations?

Facebook's VP-Global Marketing Solutions Carolyn Everson said she doesn't see anything like a traditional home-page takeover in Facebook's future. Facebook's value as a marketing platform is in social ads, where brands get their fans to spread the word among friends and brands pay to extend the reach of those endorsements.

"Marketers that don't quite get that those are the two fundamental pillars that make us different often will refer back to the formats that they've been used to over the last couple decades," she said.

Unlike most publishers, Facebook is more focused on ads feeling native to the platform than standing out, which can be at odds with a marketer's goal -- and is certainly different than what most marketers are used to.

"We have 900+ million people on the platform and our job is to make the advertising on the platform as good and as compelling as content from [users'] parents or their friends or their boyfriends or girlfriends," said Ms. Everson. "So when a marketer asks for something like that , that 's just not what works on Facebook, so we would say no." She said Facebook rarely fields requests for bigger ad units.

To create a way for brands to buy space for splashy creative on the platform, Facebook in February unveiled logout ads, which can be video-enabled and have been used by Ford Mustang, Subway and the "Titanic" movie rerelease. They aren't disruptive to users, since they appear upon exiting the platform, Ms. Everson said.

But marketers argue that most people never log out of Facebook, and those who do tend to access it from public computers -- not the audience marketers are trying to reach.

There are brands that accept Facebook's value proposition and ad formats. Intuit VP-Global Media and Digital Marketing Seth Greenberg said that for him, Facebook is about customer engagement at scale.

According to Nigel Morris, CEO of Aegis Media Americas, the scaled platform is a tremendous opportunity for brands, but demonstrating the ROI of it is Facebook's ongoing challenge. "The issue fundamentally [is ]: Within the confines of the platform, will it be able to grow advertising as fast as it needs to?" he said. "And it'll depend, as it does in all media, on showing how effective the platform is and demonstrating the ROI, especially in a world where more and more options exist for brands to engage with consumers. There are more options but fewer scalable ones."

Mr. Morris is one of 17 members of Facebook's invitation-only client council, which gives input into ad products Facebook is developing, such as the log-out ad. Since the council's spring meeting at Facebook's Menlo Park, Calif., campus, it's added four members: Universal McCann's Jacki Kelley, AT&T Wireless' David Christopher, Verizon Wireless's John Harrobin and Mr. Ewanick's crosstown counterpart, Ford's Jim Farley. "They give us feedback around creative and how to bring that to life in the context of how Facebook works," said Ms. Everson.

Until he recused himself six to eight weeks ago, Mr. Ewanick was one of those council members.

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