Peter Kafka

Recent Posts by Peter Kafka

Facebook Pitches Advertisers on a New Ad Model

Facebook sold $3 billion worth of ads last year, but it’s still feeling its way around the ad business.

And the ad business still isn’t sure what to make of Facebook: Grand new marketing paradigm, or a collection of 800 million people who don’t seem very interested in clicking on ads?

Keep that in mind during Facebook’s big marketing event today. Sheryl Sandberg and company have new stuff to show off, and we should pay attention to it.

But they’re also still selling the sellers, trying to convince them to send real money — Google-sized money, or better yet, TV-sized money — their way.

On to the new stuff. Most industry folks I’ve talked to are expecting two big reveals this afternoon:

  • New ads for Facebook’s mobile apps, which until now have been ad-free.
  • A change in the way ads show up on, which is supposed to make them bigger and more “social.”

Mobile ads are a big deal, for obvious reasons. Half of Facebook’s users access the site over phones, but to date that hasn’t made Facebook a dime. Mobile money has to come sooner than later, and it wouldn’t be a bad idea to talk about it before the company goes public.

Lots of smart ad people, though, are paying even more attention to the new ad strategy Facebook is rolling out for its Web site. This one doesn’t seem as sexy, in part because we’ve already heard about it, via a GigaOM leak last week.

And it’s also a little inside baseball, because it has to do as much with the way the ads are produced and distributed as the way they look.

The takeaway is that Facebook is encouraging advertisers to create ads based solely on the content they publish to their own Facebook pages — “Anything you can post on a page, you can turn into an ad.” One reward for advertisers who use the option: Facebook will make their stuff easier to see, if users like it.

And, of course, if users like it, some of them will spread it on their own, just as they do with everything else they like on Facebook. Even better.

If advertisers want to, they can still carpet-bomb Facebook users with ads that no one likes. And Facebook will continue to sell “direct response” ads — the Web industry’s equivalent of late-night infomercials.

But what Facebook really wants is for advertisers to spend time creating stuff that looks and acts just like the stuff Facebook users already like. (Worth noting that this is quite similar to Twitter’s ad strategy, which treats ads like tweets, and vice versa. Also worth noting: Just like Twitter’s ad strategy, this one should work very well on the limited real estate available on mobile phones.) It’s supposed to promote “earned” media — the industry’s name for promotion that fans/users/consumers end up doing for free, on their own.

The risk here is that Facebook will end up constraining some advertisers’ spends, because they’ll have a harder time shoving stuff in front of people who don’t want to see it — i.e., the traditional ad model.

If you’re a movie studio with a would-be blockbuster to promote, you’re not just going to bank on (really cool) viral videos. You need to jam your messages in front of as many eyeballs as you can. And if Facebook won’t let you do that effectively, you’ll just keep doing it on TV, like you always have.

If the new plan works, though, Facebook ends up with a lucrative virtuous cycle: Advertisers make stuff that users like, so they tell their friends about it, so the ads travel further, and more persuasively, and advertisers get more for their buck than they can anywhere else. Repeat — and turn that $3 billion a year number into something really big.

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