Advertising on Facebook: UnlimitedPotential
With 800 million active members, Facebook is a global socialnetwork of unprecedented size—and untold potential revenue. Usersare familiar with the advertisements in the right-hand margins. Bignames, such as Walmart and PepsiCo, post ads, as do smallercompanies. What users may not realize is that advertisers can usepersonal information and connections within Facebook to refine thetargeting of ads. For example, women who change their relationshipstatus to “engaged” will suddenly start seeing ads from localcaterers, planners, wedding-gown stores, photographers, and soon.
Facebook recently surpassed Google as the most visited site inthe United States. Facebook's “self-service” ads consist of a smallphoto and some text. An advertiser establishes a daily budget—thereis no minimum—using Facebook's ad-creation tool. When theadvertiser has spent the day's entire budget, Facebook stopsrunning the ad. If money is left over, the advertiser can roll itover to the next day's budget. Advertisers pay either every time auser views the ad or every time a user actually clicks on the linkin the ad to open the company's Web site.
Facebook members can become “fans” of an advertiser's Facebookpage or can reply to an invitation to a company-sponsored eventthrough Facebook. But as with other media, consumers have a deepmistrust of Web advertising as a credible source of information.With ads on Facebook becoming omnipresent, click-through rates(CTRs) have fallen to about 0.3 percent from close to 3 percent.Some Facebook users find the ads off-putting—or worse—becauseadvertisers can target them so precisely. But Dan Rose, the vicepresident for business development at Facebook, predicted that thequality of the ads would improve as more companies use thesystem.
Facebook requires the text and photo in an ad to be relevant towhat is being advertised. However, Facebook does not review adsbefore they are posted. The only review system is user feedback. Ifa user reports an ad as misleading, offensive, uninteresting,irrelevant, repetitive, or “other,” Facebook deletes the ad fromthat user's page. The more people ask for an ad to be removed, theless likely Facebook is to allow it be posted on other people'spages.
Some observers predict that Facebook will transform Webadvertising and even the advertising industry itself. And just asin the real world, in the virtual world people are much more likelyto value the opinions of their friends more than those of people—oradvertisers—they don't know.
Questions for Critical Thinking
1. Why do advertisers continue to post ads on Facebook, eventhough the click-through response rate is so low?
2. How does Web advertising affect consumer behavior? Does ithelp build customer relationships or not?
