When Facebook filed for its IPO last month, I wrote that if it hoped to maintain its revenue growth it needed to adjust its advertising strategy to suit big ad buyers. I predicted it needed to change the way it sold ad inventory and add some glitzier formats. Last week, at its fMC event for marketers, it made some progress toward addressing those needs. Competitors and other players in the online advertising ecosystem should note what Facebook is doing right and where it still has holes.
GigaOM readers got an early preview of some of the new Facebook ad formats, but those aren’t going to be enough for Facebook to recognize a quick payoff. Those ads still depend on Facebook’s proving to traditional advertisers the value of social media marketing that hinges on user engagement and viral pass-along via a format it calls Sponsored Stories. Facebook needed to include the following:
Guaranteed reach. Previously, Facebook enabled advertisers to buy a guaranteed number of impressions, but its previewed Reach Generator service means Facebook will guarantee a marketer’s posts will be shown to 75 percent of the brand’s fans within a given month. There is no word on pricing, and this approach is hardly the daypart timing advertisers are used to on TV or online portals. Facebook should add some finer-grained controls or prepackaged slots to support timed releases. And it should build in frequency capping so these ads don’t risk overexposure.
Premium placement. Facebook display ads show up in a tiny, right-rail ghetto. And Sponsored Stories, while they are working their way into Facebook’s news feed, are strictly controlled by Facebook’s ranking algorithm rather than by advertiser needs. Facebook still won’t let advertisers do page takeovers or interstitials, but it introduced a new format that will show at log out. This will be a popular slot for brand advertisers, either for targeted audiences or full-day exclusive takeovers to reach everyone.
Flashier formats. That log-out ad supports video and rich media. Finally, Facebook can pitch an ad unit that is at least somewhat comparable to what portals like AOL and Yahoo and big online publishers like Forbes, the New York Times and ESPN have been selling for years. Facebook demoed an ad for the 3-D release of Titanic that was slick, but it can’t touch the effect of a day-before-opening-weekend Yahoo home page placement. If that spot commands a quarter of a million dollar price tag from Yahoo, think what Facebook could charge for an exclusive home page or photo interstitial.
Steady progress, far to go
At fMC, Facebook also announced that Sponsored Stories would work their way into the news feeds on mobile phones. While that is a step toward mobile monetization — a lack Facebook called out in its prospectus — it’s a small step. Like Twitter’s just-announced in-stream mobile ads, Facebook isn’t targeting by location, and it’s not even clear you can buy mobile separate from the desktop feed.
Facebook also reintroduced Offers, a coupon-sharing scheme; it had shuttered a prior experiment. And company pages will now use the Timeline format. That is getting mixed reactions from marketers, but I suppose as long as Facebook doesn’t explicitly charge for pages it can be pretty arbitrary in how it makes changes to them. Meanwhile, Facebook made some minor but much-needed improvements to its page management and analytics tools.
In my earlier post, I was skeptical that Facebook would make the changes in how and what it sells to advertisers quickly enough, and it would miss out on near-term revenue growth and market share gains. These new initiatives indicate that Facebook, while still focused on reinventing marketing with social techniques where it has competitive advantage, also has its eye on the here and now. It’s not completely ignoring conservative ad buyers.
Facebook won’t grow its ad revenue 69 percent in 2012 the way it did last year, but it could double the 24 percent rate projected for the U.S. online display ad market. That means it will gain share at the expense of companies like Yahoo, AOL and MSN. How about Google? Well, that would take an ad network that leverages Facebook’s social graph on third-party sites. Facebook hasn’t changed its story that is has no immediate plans for such a thing. We’ll see.