Monday, November 17, 2008

Coloring Facebook Green

This morning we've got two angles on Facebook's problem of making money. First, from the venerable Wall Street Journal, comes word of a new approach to ads on that social networking platform, namely "engagement ads":

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.

This is clearly a step in the right direction. Engagement ads place the onus on the advertiser to find a marketing angle that is intrinsically social, and thus at home within the context of Facebook and other similar web destinations. Rather than simply putting ads in front of users and hoping for the best, these ads should, in theory at least, make the ads part of the social experience.

Still, they're asking a lot of their users. They're basically requesting that viewers opt-in to their marketing campaign, and you have to wonder what sort of adoption rate they're going to see. If they're advertising something cool and fun -- like the "Project Runway" episode -- I expect they'll get pretty good numbers. If, though, the payoff is lame ("Sign up here to get an exclusive MSN Messenger icon" or something like that) they can't expect many people to take them up on the offer, let alone do so in full knowledge that all their online friends will be pinged with the fact that they have done so.

Meanwhile, Facebook whiz kid Mark Zuckerburg is not concerned:
In public appearances, Facebook's 24-year-old Chief Executive Mark Zuckerberg insists that his company remains more focused on expanding its user base than its revenues. The right business model for the site will emerge over time, he has said.
So traffic is the new profits, after all.

On the other side of the coin, web development house Razorfish has weighed in with their Consumer Experience Report for 2008. (They've published the report in Flash, regrettably enough, but there is a PDF download link.) Things actually look pretty good for Facebook and other social platforms. In Razorfish's survey, three fourths of respondents said they didn't mind seeing ads on social networking services, and nearly half reported that they had purchased a product based on an online ad or the recommendation of an online social connection. On the face of it, this is hard to line up with the estimate in the WSJ article that less than 1% of Facebook's visitors click on an ad, but perhaps with that sort of destination -- where you tend to come back repeatedly, even obsessively, to fine-tune your profile and check on your friends' status -- sooner or later you'll end up clicking on one ad or another.

When it comes to engagement ads, of course only time will tell whether visitors will click on them enough to save Facebook's bacon. But for now they certainly seem to be a step in the right direction; if nothing else, engagement ads force marketers to try to think of ads that are actually engaging, rather than merely distracting.