As we predicted back in its pre-IPO days in May, Facebook would need to give up on its current model of minimal and oddly placed ad units if it wanted to survive as a publicly traded company with a value anywhere near what it wants the stock market to think it’s worth. And as that stock price continues to hover at half of the IPO value, the company appears to have taken the first big step toward more traditional advertising, by testing a way for businesses to pay for ads that pop up in the streams of users who did not necessarily “like” that particular advertiser.
Until now, the only way for such spots to end up in a users feed would be if the user subscribed that company’s page. Otherwise, paid advertisement was stuck in the margins in either miniscule ad units or the controversial “sponsored stories” that turn one’s friends’ “likes” into paid ads.
According to TechCrunch, Facebook swears this just a “very small test,” but we don’t see how it could be any worse than the ads Facebook has now.
For years, businesses have spent untold amounts of cash trying to cajole, entice and occasionally outright buy Facebook “likes” from users. If this new ad model proves successful, it would inevitably — and no doubt instantly — shift advertisers’ focus from gaining “likes” to a more straightforward way of simply paying X amount of money to have your ad show up in Y number of user feeds.
The question is: Will all these companies that have invested so heavily in Facebook marketing be annoyed that all their work is for nothing now that anyone can buy their way into a user’s feed?
The Wall Street Journal looks at Facebook’s slow growth in the online ad business, where in 2011 it made 13% of what market leader Google earned in ad revenue, in spite of having around half a billion registered users.
Part of the reason, say analysts and ad buyers, that advertisers haven’t gone whole-hog with Facebook is that the value of a “like” is nearly impossible to quantify. And given that “like” is the only measure interaction users have with a company’s page, it doesn’t necessarily mean that the user actually enjoys or is interested in that product or brand. It could actually mean that the user dislikes the product so much that they “liked” the page merely to comment on the company’s Facebook wall.
As for you, the Facebook user (assuming you are one, which you may not be… in which case, sorry), the site promises it won’t flood your stream with paid ads (yet).
“We want to be thoughtful about how we introduce ads in news feed,” a rep tells TechCrunch, “so we have limits in place to ensure that people’s news feeds are not filled with advertising, but we don’t have specific numbers to share.”
As for Facebook’s bottom line, these in-feed ads would instantly boost the site’s revenue from mobile users, who currently see a minimum of ads on their devices. By pushing paid ads straight in with all the baby photos and inspirational quote posters, Facebook doesn’t have to worry about creating any sort of special unit specifically for its mobile sites.