The Homa Files

Excerpted from WSJ “Facebook Tries to Woo Marketers” by Jessica Vascellaro, November 11, 2008

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Despite its surging Internet audience, Facebook has yet to prove it can wring steady revenue out of advertisers. Now it’s trying a new tactic to woo Madison Avenue.

The company is rolling out a new ad format called “engagement ads” that further blurs the line between marketing and social networking.

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.

Facebook has a lot to prove with the new ad format, which it began quietly testing in August and started making available to all advertisers this month. The company says 70 of the U.S.’s 100 largest advertisers have advertised on its site since 2007. But its share of total number of U.S. online display ad views was just 1.1%…MySpace.com, is the market leader with 15.9% of display-ad spending…

Facebook’s new push also comes as economic turbulence hits the online ad market…growth is expected to decelerate from 17% in 2008 to 14.5% next year…

Advertising on social-networking sites appears particularly vulnerable, analysts say, because advertisers are still searching for the right ways to measure the effectiveness of ads on those sites…

The new ads won’t appeal to all Facebook users. Heather Watson, 32, recently saw the engagement ad for “Project Runway.” Ms. Watson says such ads “detract from the [Facebook] experience,” and she clicked the “not attending” option to wipe the Bravo ad from her view…

Facebook has tried many ad efforts in the past, starting with basic “fliers,” the low-budget graphical ads users could buy to promote things like events….But many marketers stayed away, concerned advertising alongside user-generated content might tarnish their brands and that the site appealed only to college students.

As Facebook has widened its audience, it has run into another problem: users weren’t clicking on ads when they browsed each other’s profiles…the rate at which users click on Facebook’s display ads is less than 1% 

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Full article:
http://online.wsj.com/article/SB122637098500816351.html

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