Facebook Premium

Experts had predicted this would happen when Facebook kick-started the process of filing their IPO. Mobile was identified as a point of risk and this new service is a step towards mitigating that risk and  generating as much revenue as possible.

The new service is called Premium.

Premium ads will be seen in the news feed of a user if for instance, a friend has ‘Liked’ the ad. In other words, only social ads in the form of sponsored stories will initially be placed in the main news feed.

Facebook Premium illustration. Image courtesy of Facebook.

Advertisers will be able to start using Premium in April. The announcement was made during a marketing conference held in the auditorium of Manhattan’s American Museum of Natural History on Wednesday.

This is the first time that the mobile version of Facebook and its apps will be used as a source for revenue generation. However, Facebook will have to be careful with the way in which they offer this service as they will have to safeguard the user’s privacy while at the same time allowing advertisers to reach their target audience.

Reach Generator

Until now, marketers were allowed to use Facebook Pages as a free marketing tool. Premium ads will only appear in the news feed and the Facebook algorithm will determine whether or not an ad will appear in a particular user’s news feed.

Reach Generator takes news feed ads a step further. The service allows advertisers to pay Facebook on an ongoing basis, as opposed to a CPC or CPM basis, to sponsor one page post every day, and guarantees a 75% reach of the page’s fanbase over a month-long period.

The service is always on and advertisers don’t need to do anything other than generate interesting content once a day within less than 90 characters for their fans. Facebook guarantees that brands will reach a large percentage of their audience and estimates that the volume of engagement with the brand will double.

Unlike Premium Facebook advertising, the Reach Generator service will only be available to a limited group of qualifying advertisers. At present, qualification requirements have not been released, but are likely to consider advertiser budget and fan volumes.

Pages with Timeline

All Facebook Pages will be moved to the Timeline format, just like personal profiles, by 30 March 2012. The new format will allow pages to show richer content, create a history for the brand and engage directly with Fans via Likes, comments, shares and now even via direct messages.

One of the biggest criticisms of the timeline format for brand pages, however, is that it eliminates custom landing pages for brands, which were a very commonly used tool by most marketers. From April, users will always be taken to the main Facebook Page Wall and page  owners will not have the option to redirect users to any other tab.

Moreover, the cover image on the new profiles is not allowed to call out user actions such as Liking the page nor include any sales or contact information.

AccuraCast’s Facebook Page updated to timeline format

Level Playing Field?

In some ways, the new changes level the playing field for all advertisers and page owners. Brands will no longer be able to create doorway pages pushing users to Like the page. However, brands with deeper pockets will be able to pay their way for higher engagement.

Sponsored stories and social ads have shown better results on Facebook since they were launched. Now, these ads will become the norm, making the user experience better. However, ads will now show up in the main news feed, which is Facebook’s prime property. This alone is very likely to cause a severe backlash as users will most definitely protest the invasion of their personal feed by ads. Here too, brands with more resources will be able to post a lot more to the news feed and those who relied on the free promotion of news feed stories are likely to be quickly left out.

The new service being provided will be called Nielsen BrandLift.

Sheryl Sandberg, COO of Facebook says, “Nielsen is the leader in measurement and is an excellent partner for us as we look to provide marketers with richer ad effective data”.

BrandLift will make use of opt-in polls on the Facebook homepage. The poll will help marketers to understand the opinion users have of a particular brand and thus the likelihood of purchase intent.

According to John Burbank, the CEO of Nielsen’s online division, Facebook has now become a vital link between consumers and brands, and with this partnership Nielsen will be able to add tot heir knowledge of media measurement. He further says, “we will be able to provide the missing elements to clients seeking better understanding of how web content and online advertising affect consumer behavior.”

This survey will help marketers to receive better market data and it will be made available to them sooner which is a great plus point for them.

Facebook will take care to see that individual users are not flooded with too many polls at once. Also no personal identification will be gathered through this poll, thus maintaining user privacy, which should please users.

The survey will consist of two questions put forward to consumers in standard ad positions. The survey will help advertisers to measure brand awareness, ad recall, message association, brand favorability and purchase consideration.

The service has already been used by a few brands such as Proctor & Gambol, and Sony Pictures on a trial basis. They have reported encouraging findings.

The service will be made available to all marketers in due course.

Several advertisers have admitted that of late, the results they get from advertising on Facebook are better than those achieved from advertising on Google, and that is in spite of spending less on Facebook than on Google.

According to several advertisers and marketers, the response they have been getting from Facebook has improved substantially in the last 6 months, and due to this, more and more businesses are buying ad space on Facebook.

Tim Kendall, director of monetization at Facebook, however, maintains that the advertising growth curve at Facebook has maintained a steady pace and there has been no sudden jump in the demand for ad space on their site. It is true, though, that the number of advertisers on Facebook has tripled over the last three years.

One important factor for this growth surge at Facebook is the ability of advertisers to find their target audiences accurately from the profile data available about Facebook users. Facebook has always been very strict about users using real names and information on the site, and has often deleted profiles that posted false information. As a result, demographic data on Facebook is more reliable than on other networks.

When a Facebook user likes a product they are likely to recommend it to most of their friends, who are already on Facebook. This feature has certainly attracted a lot of marketers to Facebook.

While Google has not commented on this topic, Facebook has announced that they have logged annual sales to the tune of $500 million. Coupled with Facebook’s fast growing user base, it may only be just a matter of time before the social networking leader out performs Google on the advertising front.

According to comScore research, the total number of ad impressions on all social sites put together accounts for 21.1% of the total online ad displays in the U.S.

The most popular social sites, MySpace and Facebook, together received the vast majority of ad impressions. Individually, MySpace received 9.2% and Facebook received 8.2% of all online ad impressions.

Less popular sites like Tagged.com, Hi5, Bebo, Classmates.com and many others account for the remaining 3.7% of all online ad impressions. Each of them receives about 0.1% of the total, with the exception of Tagged.com which has 0.6% and MocoSpace.com which has 0.2%.

The popularity of social networks has increased rapidly in the last few years, so it is quite natural that advertisers would try and make use of this medium to reach the maximum possible target audience. Another motivating factor for using the social networks is the high reach and frequency of usage among target segments against low costs .

Jeff Hackett, Senior VP at comScore, says, “Social media is becoming an increasingly attractive vehicle for major advertisers seeking to optimise campaign reach and frequency, and small advertisers desiring to reach a highly targeted audience.”

One should, however, note the fact that although the number of ad impressions on social sites is over 20%, the actual number of clicks and conversions received from social networks could be significantly lower. If that is the case, social networks are no more than excellent branding channels.

comScore and DunnHumby recently conducted a study on the effects of online advertising versus television advertising, across 200,000 consumers, recording their behaviour through the use of supermarket loyalty cards.

Their research showed that the boost given by online advertising to offline sales was not only higher but also faster than the boost provided by TV advertising.

The comparative study showed that the sales lift achieved by TV ads was 8% over a period of 12 months, while the lift from online ads was 9% over just 3 months. In parallel terms, the percentage of sales lift achieved through TV ads was 36% and that through online ads was 80%.

In 2008, Google had commissioned Harris Interactive to conduct a study among 3 consumer packaged goods (CPG) brands, in order to study the effects of traditional TV ads versus the effects of online platforms.

Accordingly, the study was carried out by running identical ads on TV, on a computer screen replicating a YouTube video environment, and on a computer screen replicating a click-to-play video embedded in the content. The results revealed that all the platforms were equally effective in the ability to convey their message about the brand and its strength, and thereby encourage users to go ahead and make a purchase.

While these findings should encourage marketers to shift their ad spend towards online advertising, TNS Media Intelligence has found that the ad spend for TV ads remains static at 58% since 2005, while ad spend on online ads has grown in 2009 from 2% to 4%. And that additional 2% has come through relocation of funds from radio and newspaper ads, but not from TV.

Gian Fulgoni, the executive chairman of comScore says, “these early results confirm the ability of online advertising to successfully build retail sales of CPG brands on par with the impact of television advertising. It is likely that the more precise targeting ability of the Internet – especially in terms of accurately reaching the desired demographic segment – is a key reason for its effectiveness.”

Facebook plans to grow as much as possible, in spite of the financial crisis. While most companies are cutting costs and laying off staff, Facebook has increased its employee headcount from 800 to almost 1,000 since the beginning of 2009. They are also not desperate to raise capital as they have about $500 million in reserve, which is quite enough for now. Hence they can afford not to be too focused on monetisation through ads.

Twitter has also grown significantly – from 800,000 unique users last year to over 6 million at present. The micro-blogging platform, though, does not generate any revenue, making it difficult to peg a real, meaningful value on it.

The plans to acquire Twitter fit in well with Facebook’s strategy of laying more stress on user growth and product innovation over profits.

When Facebook suggested a sum of $500 million to buy Twitter, it was obvious that they would have to pay in Facebook stock. The point in question was how much Facebook stock was worth. Since Facebook is a private company, its shares are not listed on the stock market.

In 2007, values ranged between $3.7 billion to $15 billion. With the current financial meltdown, though, the stocks of several companies have fallen.

According to sources, while Facebook claimed that their stock was worth between $8 billion and $9 billion, Twitter claimed that Facebook was worth only $2-4 billion. This was the main reason why the discussions fell apart.

Peter Thiel maintains that Facebook stock “is worth more than people think it is”. They also remain open to the possibility of acquiring other companies.

Facebook and Twitter still continue to have talks with each other but there are no serious acquisition considerations at present.

It is highly likely that the creators of Twitter plan to start monetise the fast-growing and already popular social media platform by displaying ads on a commercial scale and what users have seen may be the initial preparations for doing so.

Since its inception in March 2006, Twitter has followed the policy of ‘build an audience first’. Due to this Twitter has developed a very loyal fan following, as a social networking site, but is yet to make any money. So far Twitter has provided its services free of cost, and if they are to continue doing so, they may have to monetise it in some way, shape or form.

Running ads within the twitter streams is the most obvious way for them to monetise the service. Another idea for monetisation would be to charge users who wish to include links within their Tweets.

Twitterific, a desktop application built to interface with Twitter from Macs, already includes ads in the Twitter timeline in its free version. Biz Stone of Twitter however, denied that Twitter has been testing ads, when asked by Silicon Alley Insider. He said, “We’re not putting ads on Twitter.com. As far as I can tell, a customised background image had some folks confused and speculating.”

Conceptualisation of a Twitter stream with ads