07 November 2007

Can Facebook get social advertising right?

Facebook is ratcheting up social commerce and wants to turn every member into a promoter for advertisers.

The New York Times reported overnight that Facebook founder Mark Zuckerberg announced the site would now feature what it describes as “social ads.”

On September 24 the company filed in the US to protect the trademark “SocialAds” in relation to “advertising and information distribution services, namely, providing advertising space via the global computer network”.

The new feature will be included in the news feed section of individual profiles and will enable advertisers to create their own profile pages and that will will let users identify themselves as fans of a particular product or service. For example, it might be that I might identify myself with Apple and so a newsfeed would be produced that says "Stephen Byrne is a fan of Apple". This message may also be featured in banner advertising which may include my picture or in single line text advertising that often runs as you load applications.

Facebook says it will initially offer social ads to advertisers for free but would continue to charge for banner advertising which could run with the endorsements.

“Nothing influences a person more than the recommendation of a trusted friend,” said Zuckerberg.

Facebook is also going allow advertisers to tap into the vast stores of data that its users provide, allowing advertisers to target users along geo, socio, demographic and psychographic.

In Australia Facebook has just over 1 million users (I checked) and is growing fast. Zukerberg was quoted as claiming it had 50 million global users with 25 million users visiting Facebook each day. It loads 65 billion pages on which advertisements can be displayed each month.

Zuckerberg is short on any projected ROI or effective measures of both the existing advertising and the proposed social ads but on the back of the recent $240m Microsoft investment, it's a direct threat to Google's highly successful AdSense network and surely competitor MySpace won't be far behind in developing a similar offer.

What's clear is that, as I noted in the previous DIFFUSIOBlog Intrusion vs seclusion, the move represents a new phase in the development of social exchanges. It will be interesting to see whether Facebook users will embrace it or whether it will be shunned.