Real Revolution Isn't Facebook's Ad Plan

Zuckerberg Makes Big Claims, but Future Lies in Power of Peer-to-Peer

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Facebook CEO Mark Zuckerberg last week unveiled the social network's new ad program to 250 marketers at a much-hyped Manhattan event with this bold proclamation: "The next hundred years will be different for advertising, and it starts today."

Total hype -- or at least hyperbole.
Mark Zuckerberg
Photo: Steve Maller

Facebook CEO Mark Zuckerberg has unveiled a new ad program that relies on user recommendations.

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Facebook's Plan
Recommendations Meet Targeting ... Meet Sales?

Like any new advertising venue, Facebook's ad system merits a look. But don't be fooled by the grandiose rhetoric around its revolutionary powers. In fact, out of everything Facebook unveiled last week, the part that's most interesting may not be the advertising at all. Instead, it's the way the site is amplifying the myriad unpaid user recommendations and brand affiliations that already go on inside the social network.

"The more you enable person-to-person communication, the more opportunities there are for individuals to influence each other," said Rob Norman, CEO of Group M Interaction. "This phenomenon already existed. [Mr. Zuckerberg] just poured gas on the fire."

Peer review
That "new way to advertise online," as the unveiling of the ad system was billed, is a user-recommendation system and hyper-targeted advertising play that, when combined, creates something Facebook is calling SocialAds. Under the system, actions users take when they're not on Facebook, such as renting movies on or selling products on eBay, can be broadcast to their Facebook friends. Brands also can create Facebook pages users can interact with, and those interactions are relayed to their networks.

Smart marketers are already starting to recognize the frequency with which people report their affinities for brands on social nets, blogs and personal web pages -- and they understand that consumer reviews and trusted recommendations are increasingly important marketing factors. (This has not been lost on the application developers who have been innovating on top of the social network; already there are Facebook applications devoted to displaying people's favorite brands, purchases and tastes.) And whether or not Facebook is the advertising game changer many thought it would be, its recent moves only amplify that trend.

Facebook has managed to "put the power of recommendation and referrals into a systematic environment," said Chamath Palihapitiya, VP-product marketing and operations at Facebook. That's a pretty interesting proposition for marketers but not one they have to purchase. (And that's perhaps worrisome for Facebook, which needs to prove it can make money through ads to justify its recent $15 billion valuation.)

Meanwhile Facebook's plans for hyper-targeting paid ads based on user interest and activities were received as, well, kind of obvious. MySpace is sorting its users into interest and activity categories marketers can buy. Both sites introduced self-serve ad systems last week that could greatly expand advertising to smaller, more local businesses. Unlike MySpace, Facebook plans to marry its targeted ads with user-initiated brand references.

Testing tolerance
Mr. Norman, like many marketers, raised the question of just how much consumers will tolerate advertisers co-opting personal product recommendations. Nick Carr, former executive editor of Harvard Business Review, wrote on his blog: "First you get your users to entrust their personal data to you, and then you not only sell that data to advertisers, but you get the users to be the vector for the ads."

Facebook execs shrugged off such concerns, explaining that there was initial reticence to the news feed, which broadcasts the activities of people in users' social networks, but that has worn off as people have gotten used to it and seen value in it.

"This is about putting advertising in the hands of people," said Mike Murphy, VP-sales. "It's the best scenario and best way for advertising to exist ... [and] it's only to people you're friends with."

Another risk for Facebook is the faith the site is putting in marketers to create opportunities that look more like useful services than an eruption of commercial crap that will only clutter the site's clean, fun, useful interface. Already some of the marketer-created content is eliciting pans. Sprite created a Facebook page featuring Sprite Sips, an animated character users can customize and add to their personal pages. The first thing a Facebook user wrote on Sprite's wall: "This sucks" (compliments of one Albert Chang in Facebook's MIT network).

'Changing the relationship'
Regardless of Facebook's ability to revolutionize Madison Avenue, it's hard to ignore the fact it's amassed 50 million members who, with or without a "systemic approach," are talking, and there's no reason they're not talking about brands.

"I don't know if this is changing media. I don't even think this is changing advertising," said Ian Schafer, CEO of Deep Focus. But it is, he said, "changing the relationship between a consumer and a brand" by giving consumers another way to endorse those brands. Brands have increasing reason to make consumers not just fans but advocates -- to give consumers something they want to tell their friends about.

"Combining what [Zuckerberg] calls social action with promotional messages is intriguing," said Jean-Philippe Maheu, chief digital officer at Ogilvy. "I don't think each piece is revolutionary, but the whole package is interesting, and the scale is intriguing."
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