Socializing Advertising

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The Social Network is set to hit the theaters this Friday and it has already cast the spotlight on Facebook. While most media are focused on whether or not the film is factually based, which is a pretty fascinating debate (see this article in New York Magazine for more info), it was refreshing to read an article in this week’s Bloomberg Businessweek about how Facebook is changing they way advertising is done on the internet.

We’ve all heard about the importance of search engine optimization (SEO), but Facebook’s advertising model is changing the game.

An Overview of Advertising on Facebook.

Ads on Facebook begin as little boxes off to the right side of the screen. They are highly targeted based on your “likes” and other demographic information about such as your gender, age, location, and even relationship status. Some of Facebook’s ads are “engagement advertisements,” meaning that they encourage you to interact with them by clicking a “like” button, responding to a poll or RSVPing to an event. If your friends “like” the ad, you will see their names underneath it, signaling that they endorse that message and recommend it to all. When a certain number of people have indicated that they “like” the ad, it can migrate from the right hand column into your news feed; it becomes more of a conversation than an advertisement. When you indicate that you “like” an ad, you may be opting into further advertising messages from that company.

Facebook’s socialization of advertisements is making advertisers very happy. They know that personal recommendations from friends are far more powerful than marketing messages from their company.

Knowing your friends really love drinking coke is the best endorsement for coke you can possibly get.
– Mark Zuckerberg, CEO of Facebook

Clearly, Facebook is well aware of the advertising advantages it has built into its social network. The Bloomberg Businessweek article points out that Facebook has “walked the line between providing a service to members and a platform to advertisers.” They’ve done it very successfully too; it is projected that Facebook will bring in $1.4 billion in revenue from advertisers in 2010.

For a quick comparison of how different Facebook’s ad system is, let’s take a look at Google’s advertising model of “sponsored links.”

“Sponsored Links” on Google

When you perform a search using Google, you see results that advertisers have paid for by bidding on key words. They are clearly marked as ads because they only show up in the right side column or at the top of the list with a colored background. They also only show up based on the search terms you entered, not based on your interests and demographics. You won’t see endorsements by your friends and these ads won’t morph into news feed conversations.

What does this mean?

Certainly, these changes in advertising bring with them a whole range of questions. It is ethical for advertisers to engage members of a social network in this way? If we’re using Facebook for free, do we have a choice in how advertising is integrated? In what ways will we see social media pushing the envelope in the future?

These are some of the questions that I will be searching to answer. I’ll also be looking into Facebook’s Open Graph technology. You’ve probably seen it on a variety of websites, especially shopping sites like Amazon.com and Zappos.com. Open Graph allows anyone to embed a Facebook “like” button on their website. But I’m curious to know what Facebook is doing with that information.

Be sure to check out the article in Bloomberg Businessweek for lots more information.

What are your thoughts?

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