"The stream on both Facebook and Twitter is where the really
meaningful dollars are being spent by brands, since it allows them
to be in the social conversation," said SocialCode's CEO Laura
O'Shaughnessy. The right-rail is now largely the domain of direct
response advertisers and heavy retargeters which buy them on the
cheap out of Facebook's exchange.
The little right-rail boxes, mostly unnoticed by Facebook users
and not at all social by anyone's standard, still account for a big
percentage of Facebook's ad revenue -- 53% versus 47% pitched in by
news-feed ads on both desktop and mobile, according to J.P. Morgan
analyst Douglas Anmuth.
While their share is slipping as appetite for news-feed ads
grows; they'll still account for 43% of Facebook's revenue in the
fourth quarter, according to the projection. While most expect
Facebook to do away with them someday, it's not happening soon.
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In an interview with Ad Age last month, VP-global
marketing solutions Carolyn Everson said that they still serve a
purpose in allowing small- and medium-sized advertisers to afford
to advertise on Facebook. The company touted last week that it had
a million advertisers on the platform, which wouldn't have happened
without them.
"The right-hand side...is still serving a significant purpose,"
she said. "I'll start with small and medium businesses, which
actually rely on that advertising unit a lot, all the way up to big
brands that use it particularly for Facebook exchange and
retargeting."
However, Facebook ad partner companies are seeing a dramatic
shift in their business that strongly suggests that right-rail ads
are falling out of favor with marketers -- despite the fact that
they're sold at a much lower CPM, or cost per thousand impressions.
(The consistent case for news feed ads is that the click-through
rates are substantially higher, which makes the cost per
conversion, like a click, effectively much lower.)
SocialCode's O'Shaughnessy said that 80% of Facebook spend
currently being managed by her company is being applied to the news
feed.
But the sheer volume of impressions Facebook can offer on the
right rail is bound to make it a hard habit to break, even as it's
pitching in an increasingly small share of ad revenue. Ms.
O'Shaughnessy estimated there are 10-times as many ad impressions
surfaced on the right rail as there are in news feed, which will
continue to host a constrained number of ads so as not to disrupt
users.
"Before the right-hand rail would go away, Facebook would want
to have something that would provide additional inventory
possibilities," said Rob Leathern, CEO of the social-ads company
Optimal, which now has more than 50% of Facebook spend under its
management dedicated to the news feed, up from 30% earlier in the
year. He pointed to the much-speculated-of Facebook ad network as a
means to open up new ad real estate.
While Mr. Leathern thinks the cull of right-rail ads is a
possibility, he sees it happening a year from now, at soonest.
There's also a case to be made that right-rail ads are
irreplaceable for the small and medium-sized businesses that
Facebook has been clear about courting, in terms of both cost and
ease of use, as well as in emerging markets where the company is
trying to get a foothold in the local ad market.
"Facebook, like most media companies, needs to have ad products
that meet the needs of many types of advertisers, large and small,
and not every advertiser can afford to be in the news feed," said
eMarketer's VP-communications Clark
Fredricksen.
