Facebook Offers Brands, Flush With Fans, New Ways to Spend Money

On Eve of IPO, New Capabilities for Facebook's Big Spenders

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Brands expend time and resources on Facebook, but not a lot of advertising dollars given how many hours consumers spend there. So, on the eve of an expected IPO, Facebook essentially relaunched its ad business at an event today in New York. The goal: Make advertising, or "stories" in Facebook parlance, a more appealing sell for brands.

One key part of this is serving ads Facebook's 425 million mobile users, a long-awaited step to monetize a key revenue source.

Another is the ability to place ads in more places on Facebook with a tool called "Reach Generator," which lets marketers put ads in users' news feeds on both desktop and mobile, but only if the posts would have been eligible to appear in the feed anyway (i.e., if they were already fans of the brand).

Posts chosen to be packaged as ads can also appear in the traditional premium slots on the right rail of the home page (where news feeds appear) and will start showing up in April in inventory being created on the log-out page to target the 37 million U.S. users who sign out of Facebook daily. (The latter two placements can be targeted to friends of fans and other coveted demographics.)

Pricing will be based on a brand's fan base, but Facebook executives didn't say what the minimum fan requirement is .

At his presentation during Facebook's marketer conference to a packed auditorium today, Mike Hofflinger, director-global business marketing, said that internal research had shown that only 16% of a brand's fans would see any given piece of content posted to their page. In a test with beta advertiser Ben & Jerry 's, content had reached 98% of fans, he said.

Leo Burnett's chief innovation officer, Mark Renshaw, said the agency had been testing the package for several clients and that he believes a brand should have a minimum of 250,000 fans to move forward.

"Once you have that fan base, that 's when you start to get the advantage of these new platforms," said Mr. Renshaw.

Mobile news-feed ads and log-out ads will be available only through the new premium package, though advertisers have been able to place sponsored stories in desktop news feeds since January.

Carolyn Everson, Facebook's VP-global marketing solutions, said the goal is to expose users to no more than one "sponsored" news-feed ad a day, and the mobile and desktop experiences are being considered together.

The focus for the premium package is on "page-post" ads, which are built out of fan-page content, such as photos, videos, status updates, events, polls and links, and are larger than traditional Facebook display ads. Facebook's pitch to marketers is that an average of just 16% of fans see pieces of content posted to a fan page, but click-through rates can improve by a factor of five to 10 through adoption of the new premium package, which incorporates page-post ads and sponsored stories delivered to desktop and mobile news feeds.

Premium ads will still include the format linking to destinations outside of Facebook's walled garden. Page-post ads have already been an option for both premium and marketplace (nonhome page) ads but will replace current premium offerings such as the popular "like" ads, where advertisers could include a photo or a video along with a blurb.

The fact that some major marketers are still pouring resources into building experiences on Facebook without making corresponding advertising outlays is a source of concern at the company. But its revamped premium ads are designed to re-educate marketers about when to buy advertising by setting up every piece of organic content posted to a fan page to potentially become an ad.

The emphasis on page-post ads could push marketers to invest more in development so that they can package apps and other unique content into their ads, according to Simon Mansell, CEO of TBG Digital, a Facebook-advertising company. It's akin to telling marketers "you'll have to build experiences on Facebook to advertise in Facebook," he said.

But urging marketers to source advertising with their organic content also confronts a structural problem for Facebook: that earned- and paid-media strategy are often siloed with separate agencies charged with handling community management and media buying. Aside from major events such as the Oscars, where there's a high level of cooperation, it can be difficult for community managers to get approval quickly enough to promote a piece of content that 's trending, according to Bryan Wiener, CEO of 360i.

Mr. Wiener thinks the bent of recent Facebook product announcements, including the new premium ads, will spur integration of the two functions.

Look for more companies to offer solutions to bring together Facebook ad buying and community management. Buddy Media announced Monday that it had purchased Brighter Option, a London-based Facebook ads API partner, which will enable clients using Buddy's technology to manage their social-media pages to build an ad out of a piece of content while working in the tool. CEO Michael Lazerow said that he's been in contact with several clients who plan to allocate paid-advertising budgets to the community-management teams and PR firms managing their Facebook presence within the next month.

Facebook (as well as Twitter) has sent a clear message to marketers about how it sees its ad ecosystem developing, according to Mr. Lazerow. "The engagement with the posts you make and the applications that you build are the front-end of our ad system, so the content you put out there is the creative unit for the ads," he said.

In other Facebook announcements:

  • Facebook unveiled its Timeline-enabled pages for a beta group of marketers like Coca-Cola, Starbucks and Macy's .
  • It rolled out a new "story" -- or fan-page post -- for marketers called "Offers." It would enable a marketer like Macy's (used in a demo to illustrate how the new premium package using page-post ads will work) to create an "Offer" around an item for sale, which a user could potentially redeem from the retailer after clicking on the story to receive an email with the offer inside.
  • Real-time "Insights" were announced, meaning a marketer can see how the "People Talking About This" and organic, paid and viral reach metric are trending immediately instead of with a 48-hour delay. This could spur marketers to think about making an ad out of a piece of content that 's already trending organically.

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