People love Facebook. It’s a runaway success from a user perspective. I find it too “noisy” but I’m probably the only one. On the revenue side, it’s a bit of a different story.
The Wall Street Journal has a piece on the challenges Facebook faces on the advertising side of the house and its new bid for marketing dollars with “Engagement Ads”:
The new ads appear on the main screen when a person first logs in to Facebook. They prompt a user to do something within the ad, such as comment on a movie trailer or RSVP for the season finale of a TV show.
If the user completes the action, such as adding Bravo TV’s “Project Runway” show to a personal list of events, Facebook tries to get Bravo’s ad in front of more eyeballs by sharing a notice about what the user has done with their friends.
Later in the piece, the overall Facebook CTR is estimated to be less than 1%. G5 gets a “shout out” in the piece (kudos to them):
Online advertising agency G5 Search Marketing Inc. has used the system to buy ads for clients such as a California-based local storage company. The storage company in May found it ended up getting more visitors per dollar spent on Facebook than Google, says Dan Hobin, CEO of G5.
But he adds that only a handful of clients have tried Facebook, in part because Facebook offers to reach specific groups that are far smaller than the size of the audience his clients want to reach.
They’re probably getting a lot of calls this morning.
The “engagement ads” are a step in the right direction. What probably needs to happen is the creation of full-blown sponsored applications as the logical extension of this. Otherwise, Facebook really needs to be seen as a branding play by larger marketers seeking to reach specific audiences on Facebook (and not as a performance medium). Of course MSFT search ads are in a different category and it will be interesting to eventually see some data there.
In terms of “local,” enterprising SMBs can probably succeed using it as a CRM or blogging platform rather than an straight advertising vehicle. In other words, build a community around the business that can then leverage the alerts/feeds on the site for broader reach. Facebook would be wise to develop additional tools so that it could be used in this way by SMBs.
Over at LMS, I wrote about Facebook hitting 15 million mobile users.
Screenwerk 
November 11, 2008 at 7:54 pm
I always chuckle every time I hear about all the ‘advertisers’ t hat use Facebook and/or MySpace.
The dirty little secret is that most of these advertisers are CPA players pushing products such as teeth whitening, weight loss (green tea, acai, etc), dating (gay dating is absolutely massive), zip/email submits (eg Free iPhone), and so forth.
Just browse around on Facebook and see what ads prop up.
Yes it’s all legit money, and kudos that their traffic is converting for the advertisers. But that isn’t what people think when they think of ‘advertisers on Facebook’s platform’
November 11, 2008 at 8:04 pm
I avoid the ads entirely 🙂
November 11, 2008 at 11:43 pm
Just because they call them “engagement ads” doesn’t make them so.
November 12, 2008 at 12:19 am
I agree. Despite the so-called redesign, it’s still a total mess. Too many tabs, too many links.
I do know how they could make a ton of money with ads, but I’m not talking until they deposit $10M in my Swiss bank account 😉