Facebook Found an Easy New Way to Make Money
In a post-IPO effort to prove it can still engage its users with advertising, Facebook has started selling ad space that it used to give away for free. The update comes to Facebook Offers, which is the social network's version of daily deals. Before, merchants could post virtual coupons for their followers for the low price of zero dollars. Starting today, however, Facebook will charge "at least $5 on related ads to promote each Facebook Offer to a targeted audience of fans and friends of fans," report Reuters's Alistair Barr and Alexei Oreskovic. Facebook did a clever thing here: They lured in businesses to the power of Offers when the program launched last February and will now start charging to push those ads into News Feeds — the most valuable of Facebook's real estate.
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In the face of the IPO fallout, though, this is more a cover-up than a makeover for Facebook's ad woes. Unlike with other ads on Facebook, the Offers feature allows companies see how their promotions convert into dollars. And with advertisers having complained about wanting to see the value of Facebook ads measured in terms of sales, Offers kind of does that. For example, Facebook notes, the ARIA resort and casino in Las Vegas got "nearly 5X [return on investment] after running Offers on Facebook." That kind of thing is more valuable than an ad in the abyss, or at least valuable enough that Facebook thinks they will they pay for it. Also, part of the new revamped offers includes barcodes to track what people redeem and when. As one of the most requested features, says TechCrunch, this should help convince companies, which always want more information about buyers. to get on board. Overall, the deal works for Facebook, which gets money, and for advertisers, which get results. And that should appease Wall Street. (Though it hasn't yet, the stock is currently trading down.)
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Still, many of the underlying issues with Facebook's ad set-up remain. The ad endgame is still quite dependent on Facebook's engagement, which doesn't look as strong as it used to. Facebook has a lot of users, but many of them have stopped going to the site as much as they used to, which is what Pando Daily's Kevin Kelleher called it the "silent majority" problem. And the Offers system is still very dependent on likes — that "targeted audience of fans" are people who "like" a brand. Because people often "like" things for reasons other than brand loyalty, likers aren't always buyers, as we've seen before.
