MediaWeek is reporting (but see updates below) that Facebook will soon add “sponsored stories” or banner ads to the news feed on users’ front pages. The addition of those feeds in the first place caused a big uproar around privacy concerns. The mere addition of advertisements doesn’t seem like a big deal to me - everyone knows it’s a moneymaking operation - but one reported feature could kick off another storm of anger if it’s not implemented carefully.
When one user clicks on an advertisement in their feeds, all of that user’s friends will be notified that the ad was clicked on and will be given an opportunity to join a group led by the advertiser, apparently. Mike Murphy, Facebook’s chief revenue officer, told MediaWeek the following: “Up until now, most advertising on social network sites hasn’t leveraged social networking behavior…This offers a viral opportunity that is unique for advertisers that is not disruptive.”
The write up says “The new Sponsor Stories ad unit will initially be placed in the third position within each user’s News Feed - as either a small banner-like placements or video clip.” If this is the Microsoft/Facebook advertising deal coming to life, this looks like a big gamble for both companies.
Best case scenario: your preexisting ad space will simply contain an additional note that says “your friend clicked on THIS ad, would you like to as well?” Any extra notification for every friend’s click would be terrible - it’s easy to assume that a friend’s ad click would be considered an “event” that you’d be notified of just like so many other actions, but it doesn’t have to be that way. If done well this could be a great move by Facebook - it’s just hard to see the words viral and advertisement in the same sentence and not cringe. It’s largely a knee-jerk reaction, but it’s real.
We reported on the launch of the news feeds as an issue largely of poor communication around a potentially beneficial feature addition. Though advertising in feeds is a logical and fair thing to do, making each ad a spammy social cluster bomb is sure to backfire.
LinkedIn has told me they are likely to do something much more tasteful around ad placement in social networking; focusing on friend recommendations, context and making receipt of ad pitches completely optional. There are certainly good ways to monetize social networking behavior but there are also many ways that could be bad.
Update: Melanie Deitch, Facebook’s Director of Marketing, emailed to tell us that the MediaWeek story we linked to below was incorrect and that in fact, no unsolicited notices will be sent. Only users who have elected to join a sponsored group will be notified when friends in that group click one of the group’s ads.
Update 2 Deitch wrote back to clarify that no one will ever be notified of your ad clicks and the ads will either be for sponsored groups or link directly to an advertiser’s page. Sounds like the MediaWeek story was almost entirely wrong.
looks like a great way of generating more unrelated clicks and hence adsense fraud …
@Mike - Except they don’t use adsense… They just signed a deal with Microsoft to serve their ads.
Its hard to make real money and continue of being not evil.
I was listening to a podcast a while back with Tim Oreilly asking teenagers questions about technology and their needs. The one kid said, “stop putting all those stupid ads in front of everything - we just want to use the service”.
Interesting. The ads are an annoyance to nearly everyone. How many of you watch tv ads? I surf to see if I can find other info during the breaks. To me this seems lame, intrusive and unimaginative.
Also, is a Chief Revenue Officer like a new corporate position? I never heard of that. Maybe you need a CRO when you’re not sure how the heck to make money with your service.
Mark
http://www.repliqa.com
This is something that I would find very irritating. I dislike ads on personal pages a lot. That is why I refuse to put any ad in my blog. To have viral ads in facebook will create a backlash that will go beyond the one for the news feed feature. That will indeed move it closer to the garish Myspace.
I am an avid facebook user and have been one since 2004 when it was introduced at my college. It is the ultimate college communication tool in our arsenal today.
The more moves Facebook makes, the more apparent it becomes that they were in the right place at the right time and simply got lucky. The increasingly short-sighted initiatives being rolled out demonstrate a lack of experience and wisdom on the part of management. This particular concept is naive and will not be well-received by most users. In fact, I personally would stop clicking on all ads if I knew that other users would be publicly informed that I clicked on them. It could make for some good entertainment when coupled with Mini Feeds though:
Saturday, 5:30 pm: Jake has RSVP’d for “Party at Delta Phi”
Saturday, 8:30 pm: Jake has clicked on an ad for “prophylactics”
Sunday, 5:30 am: Cindy has clicked on an ad for “next-day abortion pill”
Sunday, 5:45 am: Jake has joined the group “Alcoholics Anonymous”
Sunday, 9:30 am: Frank is now single
Sunday, 9:35 am: Cindy is now single
Sunday, 9:45 am: Frank has clicked on an ad for “guns”
Sunday, 10:00 am: Jake has clicked on an ad for “JetBlue Airlines”
Sunday, 5:00 pm: Frank has clicked on an ad for “defense attorneys”
Sunday, 7:30 pm: Aaron, Robert, Kim and Peter have joined the group “RIP Jake Smith”
Agree with mesttack that “Chief Revenue Officer” is a bogus title. Reminds me of Bubble 1.0 when we had Chief Evangelists. If this is the best a “Chief Revenue Officer” could come up with, they’re really reaching.
For what it’s worth, I personally believe that traditional advertising (text ads, banner ads, etc.) on social networking sites are highly ineffective. Most users mentally block out these ads. Go and watch your kids on any of these sites and see if they pay any attention at all to any of the traditional ads. It’s an exercise any marketing executive that is considering spending money advertising on MySpace or Facebook should try. I have not advertised on Facebook, but I have seen numerous postings from people who have and they report extremely low clickthrough and conversion rates. Obviously, postings in response to blogs and articles should be taken with a grain of salt and don’t represent a statistically-relevant sampling, but the anecdotal evidence suggests that the success of campaigns on these services is less than optimal. And it makes sense. The inbalance between supply and demand, and quality, is certainly the primary reason that MySpace reportedly charges 10 cents CPM for RON ads.
The true revenue opportunity for social networks lies with integrated marketing. As much as I question whether Dogster is a business than needs a $1 million equity investment, some of the integrated promotions they’ve done with brands are fairly close to where I think the bulk of the money is eventually going to be spent on social network advertising.
In the last month, facebook has almost done a total overhaul. The newsfeeds, opening-up to everyone, and now the advertising. Basically, they lost all their appeal and exclusiveness that once made them great. Although I think the opening-up to the public is relatively harmless and the best move of the 3 mentioned above, I think the newsfeed backlash and now the advertisements are going to turn users in the wrong direction.
Also - I’m pretty sure Mark mentioned in his letter to users a few weeks ago that they will not be adding any more banner ads?….Can I get a quote on this?
I understand because they do need to make money from all that traffic somehow. But they have to figure out a way to do it without alienating the userbase. This new ad initiative may be risky given the furor that surrounded the newsfeed launch in the first place. They need to be careful how they implement this.
IMO, Facebook has to be careful not to go too fast. This may be easier said than done considering the type of financial growth pressures that come along with taking approximately $40 milllion in VC funding. Balancing the desires of their VCs and userbase could get tricky. Maybe Facebook would have less pressure to monetize so quickly if they took less VC money but I guess that is hindsight. With all the pressure from their VCs and 140 employees on the payroll, it’s all about the cash now. I just hope that in this process they don’t piss off the users that got them there in the first place.
Thanks for the laugh Drama 2.0
The only form of advertisement that would work on a social network is contextual advertisement.
@Steve
140 emplyees - did you must make up that number or is it for real?
What would 140 people do all day? Each one gets a button from the keyboard and then they team up?
Florian:
The 140 employees figure was mentioned in a job ad posted by Facebook on Craigslist a while ago. I also have a hard time comprehending why Facebook would need that many employees but they have to do something with all that boatloads of VC cash
I just joined Facebook today as it was just opened up to the general public, so I can’t speak to what it was like before, but I think it’s pretty darn slick now! And, the service is free, so I don’t mind them thinking of clever ways to make money, and you have to admit, that’s a pretty smart advertising concept. It’s only a matter of time before openID enables social networking on the real Web anyway, which means those with privacy concerns can opt not to join advertising based site networks.
Drama 2.0 — your posts are the best. Yep, Chief Revenue Officer is totally a fake title.
Facebook’s definitely trying to prove that they’re worth their asking price here. The opening up of registration to anyone, plus this new stream of advertising indicate that they’re not really going to stay idle for any period of time… while it’s true that many users don’t like change, it’s hard to see such a big entity as Facebook falling apart.
I agree that these are definitely moves to increase their asking price. I also agree that these moves are short sighted. Personally, I am a college student, and FB isn’t what it once was. Zuck wants out, and hes doing all that he can to create an attractive business model. Do you think a company like Yahoo, with declining revenues from ads, might be interested in a new revenue model…Facebook?
Yahoo is also searching for a chief revenue officer.
Just added this to the top of the story, fyi.
Update: Melanie Deitch, Facebook’s Director of Marketing, emailed to tell us that the MediaWeek story we linked to below was incorrect and that in fact, no unsolicited notices will be sent. Only users who have elected to join a sponsored group will be notified when friends in that group click one of the group’s ads.
Imagine getting a news feed on FaceBook about a friend breaking up with someone and then one line down, it shows an unwanted marketing message about how to get a hot date. Well, according to MediaWeek, that’s what FaceBook plans to launch a Sponsored Story Ad Unit where marketers can pry into your secret life and advertise you based on what’s happening to you and your friends around you. Eery? Yes. Lucrative. Potentially so.
Read More
Updated again to clarify that the original report was apparently wrong to say that anyone would be notified of other users’ ad clicks at any time.
Oh Melanie - Have you been in communication with the Chief Revenue Officer, because he might really be pushing for these ads!
Journalists get things wrong, but it’s a little suspicious that Facebook is claiming everything in the article is inaccurate. It’s such a crazy, dumb idea that I’d be amazed if a reporter actually had the creativity to come up with it (unless they had prior experience working at the National Enquirer). Most reporters just aren’t that smart.
Maybe MediaWeek’s reporter was drunk at the time or perhaps Facebook is now leaking information on possible features to get feedback? It eliminates the costs of actually running focus groups and doing user research. After all, the following high-paid Facebook executives need to get their salaries:
Chief Executive Officer
Mark Zuckerberg is responsible for waking up by 1 pm three days a week to handle the afternoon-to-afternoon management of the company.
Chief Revenue Officer
Comes up with new ideas on how to generate revenue while completely alienating Facebook’s userbase.
Chief Idea Officer
Develops new ideas about features that can get massive press attention for Facebook. Works closely with the Chief Revenue Officer to develop monetization models for these features.
Chief Financial Officer
Manages the finances of the company. Personally tracks every ad click on the site and sends out an update to the Chief Poking Officer, who “pokes” all employees with the news that somebody has clicked on an ad. Responsible for ensuring that Facebook’s burn rate is growing at a faster clip than the industry average and for coming up with new accounting methodologies to justify a $2 billion valuation. Is the creator of the VIRAL (Valuation Is Really A Lie) accounting system.
Chief Marketing Officer
Handles marketing for Facebook. Works closely with the Chief Idea Officer to decide what horrible features will get Facebook the most press at major media outlets. Manages the Facebook Flyer Program. Facebook is the largest printer of flyers (and consequently toiletpaper) in the world.
Chief Damage Control Officer
Responsible for cleaning up the mess after Facebook launches a new feature that causes a backlash.
Chief Scheduling Officer
Has the duty of coordinating the schedules of key business meetings around Mark Zuckerberg’s sleep schedule and dates with his girlfriend(s).
Chief Acquisitions Officer
Informs major media and technology companies that Facebook is turning down their buyout offer. Works closely with the Chief Scheduling Officer to appologize for Mark Zuckerberg’s inability to participate in acquisition discussions because he is either sleeping, on a date with his girlfriend or planning his purchase of a small island in the Pacific to be the new Facebook headquarters.
Chief Catering Officer
Responsible for coordinating Facebook’s daily catered breakfast, lunch and dinner as well as the Friday Happy Hour and ensuring that all catering comes in over budget.
Chief Vacation Officer
Duties include assisting Facebook staff members take advantage of the 21 vacation days per year, plus 8 company holidays and 2 floating holidays. Offers travel advice and books reservations.
Chief Recreation Officer
Oversees the smooth operation of Facebook’s game room and subsidized gym membership program.
Chief Rivalry Officer
Responsible for managing the rivalry with Mark Zuckerberg’s arch nemesis, Aaron Greenspan.
Chief Dry Cleaning Officer
Because Facebook has dry cleaning services on site, the CDCO manages all dy cleaning operations to ensure that the complementary Armani suits given to all new hires are in tip-top shape.
Chief Pimping Officer
Does the hard work of browsing the Facebook network for hot college coeds and inviting them to special “beta testing” sessions at Facebook headquarters.
Chief Privacy Officer
Responsible for coming up with innovative campaigns that demonstrate to all Facebook users how much information the company collects on them and how it can be publicly broadcast to as many parties as possible.
Chief Stalking Officer
Works closely with the Chief Idea Officer and Chief Privacy Offer to develop new, more efficient ways of stalking Facebook users. Meets daily with the Chief Pimping Officer to assist him in implementing these new stalking methodologies to locate hot coeds to invite to the previously mentioned “beta testing” sessions.
Chief Memcached Officer
Not to be mistaken with the other CMO (Chief Marketing Officer) role, this CMO manages all of Facebook’s work with the Memcached system, which Facebook is the largest user of in the world.
Chief Chief Officer Officer
Manages and supervises all Chief Officers.
I’m sure I left about 10 other officers out, but these are really the ones that make the biggest contribution to Facebook’s success. For those of you who question Yahoo’s sanity for wanting to purchase Facebook for $900 million, I’d argue that Yahoo doesn’t care about the site - they want these talented people. With Yahoo’s ad revenues declining in key categories, it makes complete sense for them to buy a company with $50 million in ad revenues for $900 million with the assumption that collectively they’ll be able to figure out ways to get on track. That’s where Facebook’s Chief Revenue Officer excels. What could go wrong? Please don’t mention Broadcast.com, Geocities, eGroups, Arthas (which became Yahoo PayDirect). Yahoo learned from those mistakes and once the market sees the wisdom in buying every Web 2.0 company it can get its hands on (Flickr, del.icio.us, Jumpcut, etc.) their stock price will go from its current near 52-week low to over $100.
Brilliant, absolutely brilliant!
Surely that has to win the best comment on Techcrunch award
How can one follow a post like #20?! Apologies for the more serious tone …
Chief Revenue Officer isn’t all that uncommon in the field of advertising. Whether it’s a “chief” role, VP or Director, companies that generate a lot of inventory need someone in charge of optimizing the value of that inventory, and balancing revenue generation, ad frequency and relevance.
Click-thru rates for standard ad units on social networks are indeed horrible, worse than the standard .4-.6% you can usually get with non-targeted (run-of-network) advertising.
Studies have shown that people much prefer relevant online advertising — targeted to their interests. Relevance also results in a superior revenue model for the publisher, because it results in the best click-thru for advertisers.
Just as spyware served as the revenue model for peer-to-peer file sharing, I think contextual/behavioral advertising platforms (albeit oriented towards privacy and respect of users) will ultimately serve as the revenue model for the rather broad social networking category.
Drama 2.0:
I’m cracking up
this Chief Revenue Officer is going to be relegated to Chief Meteorologist soon if they can’t figure out how to make more money.
Drama,
you need your own blog. that was some great stuff today.
Thanks for the kind words on the posts.
I think traditional contextual advertising (AdWords, etc.) will still be ineffective for most social networks. People use social networks to socialize. They’re not there to consume. If you have AdWords, for instance, placed in a standard position on the site, it really doesn’t matter if the ad is contextual/relevant. It’s ignored by most users. Again, a great exercise is to actually watch users as they browse MySpace and Facebook. I haven’t spent 100s of hours doing this, but even with several different users, I’ve yet to see a single one stop and click on an ad. Clearly it happens, but that’s inevitable given the number of pageviews they serve up. The ratios, however, are horrible. The problem is probably amplified because of the demographics of MySpace and Facebook. Today’s kids aren’t dumb and they’ve become highly adept at ignoring advertising that doesn’t interest them.
Again, I believe the successful model for social network advertising will be highly integrated promotions that make brands/advertisers part of the experience and offer some tangible value to the user for this type of interaction. MySpace is leaning towards this model, and they have opportunities they’re not yet tapping. As previously noted, Dogster has done some interesting integrated promotions. Xuqa has apparently found a way to get its users to engage in activity advertisers want by awarding “peanuts” for participation in offers. Even Facebook’s iTunes promo was a step in the right direction.
Online advertising is hot, and there’s a lot of interest in testing out advertising on social networks because that’s where the users are. But in the long run, if the results from campaigns are not in line with the costs, advertisers will put their money elsewhere. Thus, these social networks must find more innovative models that deliver results or they’ll be forced to continue selling ads at heavily discounted rates. They should be focused on increasing the success of their advertisers’ campaigns, not on simply selling more ads at higher cost.
This is one of the reasons I’m a big critic of Yahoo’s $900 million Facebook buyout offer. I doubt whether Yahoo has the ability to increase advertising sales enough to recoup a $900 million investment on a $50 million/year company in the time that would be satisfactory to shareholders. News Corp. has done an incredible job with MySpace, but I think they’re the exception rather than the rule. Most major acquisitions end up destroying shareholder value, and right now the stock market is not placing a vote of confidence in Yahoo’s management. They have had some major bombs in the past (Broadcast.com - $5+ billion) and their purchase of companies like Flickr (which has low overall marketshare) is negative in the minds of many investors because it highlights how they missed the opportunity to build these services themselves. The $20-$30 million they’ve reportedly paid for many of these young startups created on shoestring budgets is not materially affecting the company’s finances, but it isn’t very encouraging that they’re having to do this. It demonstrates that, as an organization, they’ve lost their innovative culture and ability to compete in a highly-competitive, fast-paced market. A Facebook acquisition would be a major sign that they’ve reached a certain level of desepration.
god i’m sick of ads…i’m feeling saturated by them. having a news reader is one way of not being bombarded by the blinking, flashing annoyances.
so here’s the deal: if there’s only a summary on the story; no ads. i’ll follow the link to the site and see your ads there.
if the whole article comes thru, fine, then i can handle an ad at the bottom. otherwise F.O.!! i’m already getting just headlines AND ads.
not to mention flash ads that march across the text as your reading or obscure the article all together. much more of this and you can take your articles and shove it. i’d rather be ignorant of the story.
thanks for letting me vent.