Friends of Friends: Inside the Advertising World of Facebook

Facebook describes its advertising strategy as “word-of-mouth marketing at scale”: a turn of phrase that sings an old tune of tupperware parties and unpaid advertising from customers to friends, but actually means neither of the two.

Founded in 2004, Facebook has nearly 1 billion monthly active users and garners 3.2 billion likes and comments every day.

Facebook client partner lead Nat Hampson describes the way people use Facebook as “heavy.” Between panels at Expion’s Racing Ahead 2012 social business summit, Hampson told SocialTimes that an increasing number of people are using Facebook to upload and share photos, despite easier methods for connecting with friends, like writing a status update or clicking the “like” button.

It’s an interesting observation from a company built on the leisure activity of keeping in touch with friends. Even Twitter considers itself to be more of a media company. Once a microblogging site, Twitter’s users are now spending more time looking at pictures, videos, and links from a core group of contributors than tweeting.

On Facebook, personal relationships drive the social network’s most successful ad campaigns, which are moving away from traditional banner ads. “When we took down banner ads and started coming up with social context ads, it was a big, bold move,” Hampson said, “but it was true to the brand.”

Of all the ad units the social network offers brands, it’s the Sponsored Stories that carry the most weight, according to Facebook ads API partner Spruce Media, which was recently named a Strategic Preferred Marketing Developer by the Facebook PMD Program.

Located on the right column of a user’s page, the Sponsored Stories show users which of their friends have already liked what’s being advertised. The personal touch has a profound effect on click-through rates (CTR), which average 1.2 percent for Sponsored Stories. By comparison, Page “Like” posts have a click-through-rate of 0.3 percent and classified ads on Facebook’s Marketplace have a CTR of 0.04 percent. Facebook users are better at selling products to each other when they don’t realize they’re doing it.

Facebook compiles data on its users like their ages, locations, genders, and people within their networks, but their conversations are an increasingly bigger part of the picture. Facebook can aggregate trending topics and keywords in a box that goes through the newsfeed. Explained Spruce Media COO Lucy Jacobs, it’s the social context that makes customers “more likely to engage” than those who are only targeted by age or gender. Ads tied to this information had twice as many click-throughs as other ads.

For all of these reasons, Facebook is becoming a forum for political advertising as well as for brands. Spruce Media estimates that Democrats and Republicans spent a combined $10 million in August on ads targeted to swing states like Ohio, Virginia, Florida, and Colorado and expects this to increase through November. “Mitt Romney and Barack Obama have very passionate and engaged supporters,” said Jacobs.

Mobile usage on Facebook is also on the rise. As of June 2012, Facebook counted 543 million monthly active mobile users. “Mobile is inherently social,” said Hamspon. “One hundred percent. You’re taking pictures and speaking.”

This is what distinguishes Facebook from a site like Tumblr, where the majority of members are reading or sharing blog posts rather than contributing their own. On mobile devices, consumption accounts for 80 percent of the activity.

Spruce Media found that although less than 10 percent of the money spent on the campaigns they reviewed on Facebook was allocated specifically to mobile, the click-through rate was three to four times higher than PC ads run during the same campaigns.

Outside Facebook’s walls, consumers are using their Facebook profiles as a virtual ID. Hampson couldn’t say whether Facebook would ever try to verify a person’s identity in the real world. However, another spokesperson recently confirmed that Facebook has been asking users to help them weed out fake accounts.

Travel rating site TripAdvisor joined Facebook’s Timeline in January, giving reviewers a chance to log in through Facebook to share their travels with their Facebook friends.

In the end, TripAdvisor’s site benefited from personalizing its 5-star ratings system. “At some point, everything is going to net out at three and a half stars,” said Hampson. “What TripAdvisor wisely did is to start pulling out reviews that your friends have done.”

Hampson argues that today’s web is built around people: around a person’s friends, around their interests, and around their friends’ interests. Facebook’s future is in utilizing discovery through friends rather than discovery through search. ”Marketing should be much more like a cocktail party,” said Hampson. “Make some introductions, pour the wine, and watch the conversations flow.”

Image by CREATISTA via Shutterstock. 

 

 

 

 

 

 

 

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