09/15/11 Facebook “Social Ads” Are For Real

Facebook’s grand experiment to make advertising more social–and it hopes more effective–is an experiment no more. The company’s two kinds of social ads are now running on the majority of Facebook page views, according to Gokul Rajaram, product director for Facebook Ads.

Those ads include both “social ads,” which are messages from a marketer such as “John and three of your other friends like M&Ms,” and “sponsored stories,” in which marketers don’t create their own message but simply pay for natural Facebook posts mentioning the brand to be distributed to the poster’s friends.

The revelation that these ads are shown so widely is a sign that marketers are finding these newfangled ad formats to be effective. It’s also an indication that Facebook’s big bet on these ads could be paying off. That’s key if Facebook is to fulfill huge expectations underlying its $80 billion-plus private valuation and its initial public offering, now expected to be in late 2012 (if not earlier).

In an interview today at the TechCrunch Disrupt conference in San Francisco, Rajaram, a former Google ad executive whose subsequent startup Chai Labs was acquired by Facebook in late 2010, said the social ads produce 68% higher brand recall than than other kinds of Facebook display ads. They also make it about four times as likely that people will buy a product from the brand, he said. “For ads to work well, they should be told through the prism of your friends,” he said. “The more natural the ads look, the more successful they will be.”

Of course, there are still plenty of standard display ads running on Facebook. Anecdotally, in fact, it looks like they still constitute the majority of ads on Facebook pages, though Rajaram declined to reveal what percentage of Facebook ads are social. After all, by most accounts, these ads are very cheap and used by companies such as daily-deal services and local businesses to elicit a direct response such as a purchase.

Many people have speculated that Facebook would start an ad network like Google’s AdSense. But Rajaram, who ran AdSense at Google, said Facebook has no plans to do that in the near term.

Rajaram also said the viral nature of how messages and ads alike spread on Facebook isn’t just the “lottery ticket” that TechCrunch editor Erick Schonfeld suggested they were. “The best social ad campaigns have a strong organic component to them,” he said. “You need to figure out who are the people who will take the message and broadcast it to their friends, and then give them the tools to do that.”

M&Ms, for instance, launched chocolate-covered pretzels last year, giving out 40,000 samples to fans and also allowing those fans to give samples to friends–some 80,000 additional samples. “It’s turning your fans into loyalists that will tell their friends about the brand and the products,” said Rajaram.

Forbes – Robert Hof

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