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Facebook Sweetens IPO with New Offerings, Ads

Thu, 03/01/2012 - 6:59am
Andrew Berg

Investors looking to get in on Facebook's forthcoming IPO are no doubt hungrier than ever today, as the social networking site yesterday announced a number of new marketing tools for businesses.

While the redesign of Pages will give businesses more control over how they address users on Facebook, new products called Offers and Sponsored Stories will have the biggest impact on Facebook revenue potential, as well as on user experience.

Premium ads can now be placed and seen on the log-out page, and Sponsored Stories can be seen in News Feed on mobile devices. Sponsored Stories are posts from friends or Pages on Facebook that a business, organization or individual has paid to highlight so there's a better chance people will see them.

Digital Advertising - CLICK TO ENLARGEOffers are a free new way for businesses to share discounts and promotions directly from a Facebook Page. They can be distributed through the News Feed or promoted as Sponsored Stories. People can redeem Offers via email or on a mobile device.

These are big changes and all of it will depend on the effectiveness of Facebook's underlying platform, Open Graph, a sophisticated algorithm that leverages users' behavioral patterns. It's on par with what Google does with its search engine.

Marco Veremis, president of Upstream, provider of a marketing technology platform, says that while these new products from Facebook are great from an IPO perspective, they also have their pitfalls if not played right.

Upstream recently conducted a survey, which found that one in five people in the US said they would stop using a social media site if they thought they were receiving too much advertising. Fully 11 percent in the US said they would actively protest social media sites that pushed too much advertising.

"We also found that 66 percent said mobile is the single worst medium on which to get advertising," Veremis said, noting that most preferred advertising on their desktops or laptops.

Still, Veremis said it was inevitable that Facebook would eventually have to address mobile, and he thinks the company has managed to do it in a responsible way. 

"There's an amount of self-regulation happening here by Facebook," Veremis said. "You're going to have less ads on your mobile than you will on your desktop. So they've paid attention to this."

He also said that there are checks and balances built into the system that will prevent advertisers from gratuitously pushing ads to all users.

"They've also taken care to ensure that ads that do appear in the new feed won't exactly look like advertising," Veremis said. "It will almost look like a recommendation from a friend."

In the end, Veremis said that the only way to actually judge whether Facebook has done a good job in implementing these new marketing tools and expanded advertising is to see how it works in real life. "I think the only way we'll be able to tell how this all works out is when we see whether Facebook can avoid polluting the news feed. The news feed is really personal for most people. If it starts getting flooded with advertising, it would be a disaster for Facebook, but I don't think they're going to allow that to happen."

As one of the most tenuous issues facing Facebook, Veremis flags the purchasing of goods. "There are certain purchasing decisions that consumers make that they're just not trained to know whether they should go public with it," Veremis said, citing as an example, a pregnancy test as one such purchase with which a user might unwittingly go public.

Reservations aside, Veremis says Facebook is on the right track. "If you look at the series of announcements that they've made—Open Graph, opening up mobile, Reach Generator, Insights, coupons on the newsfeed—anyone saying FB will never be able to monetize is probably wrong."

Veremis added that the timing of these announcements, corresponding as they do with the launch of Google's contentious new privacy policy, is probably a good thing and anything but coincidental.

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