Facebook Launches Social Ads, Starring Your Friends

Beginning tonight, Facebook will cast social networking users in ads viewed by their friends. The so-called Social Ads are part of a new ad creation and targeting system on Facebook that also includes brand-controlled pages, a reporting interface, and data-sharing relationships with external sites like eBay and NYTimes.com.

Speaking at an invite-only event attended by 200 or so agency and media execs, CEO Mark Zuckerberg called the Facebook Ads “a completely new way of thinking about advertising online.”

“A trusted referral is more effective at influencing someone than the best broadcast message,” he said. “It isn’t an ad system based on pushing messages out. It’s based on getting into the conversations that already happen between people.”

The Facebook Ads system has three basic components: Facebook Pages, Social Ads, and a reporting interface dubbed Insights. Just as users can do, brands will be able to create profile pages slathered with applications and content, for instance music sharing, discussion boards and widgets specific to the advertiser’s product or service. They can also define the actions users can take with their pages, for instance declaring oneself a fan of the brand or RSVPing for an event.

Page owners then have the option to use individual interactions with their pages as the foundation for Social Ads, which Facebook distributes to individual users’ friends and acquaintances based on various targeting criteria. Those criteria can include sets of demographic data people share in their profiles, including approximately 20 factors ranging from gender to geographic region to individual employer. Keyword-based targeting allows marketers also to reach people based on interests evinced by their profiles. These ads appear in end users’ news feeds as product and service referrals or recommendations. The news feed lists all recent Facebook activity performed by a person’s friends. Social Ads can also appear in ad placements adjacent to a person’s profile.

For instance, Zuckerberg suggested, friends of a hypothetical Facebook user and Saturn ASTRA owner named Ben might see in their news feed a sponsored ad with Ben’s photo and the ad copy “Ben is a fan of Saturn ASTRA.” Other interactions that may appear in ads include anyone who added content to a brand page.

Ads can be purchased on either a cost-per-click or CPM basis through an auction interface that will also traffic in non-Social Ads placements. In September Facebook began selling CPC ads for its Flyer placements using a similar auction-based platform.

“That’s one of the ways Social Ads are going to get flowing in the system,” said Zuckerberg. “People can buy non-social ads with the option of appending social actions to them. We expect that the amount of inventory running Social Ads will increase.”

Sixty consumer brands, including Chase, The Coca-Cola Company, Microsoft, Sony Pictures Television and Verizon Wireless, are participating in the launch of Facebook Ads.

An additional third party data sharing initiative, called Beacon, will lasso customer data from 44 Web partners into Facebook users’ news feeds and mini feeds. For instance, launch partner Fandango will let its customers who are on Facebook share their movie plans with their social network, and partner eBay will let sellers include their listings in their feeds. Other partners include Blockbuster, CBS Interactive, NYTimes.com, Joost, and Overstock.com. Facebook will obtain permission from end users to integrate their profiles with its partners’ customer data.

How will end users respond to appearing in ads served to their friends, and will they be able to opt out? At launch, Facebook will not provide a mechanism by which users can decline to endorse Facebook’s advertisers, other than to opt out of having their activities tracked via the news feed entirely. Zuckerberg said that policy could change as the company gathers feedback from users.

In comments after Zuckerberg’s address, Experian VP Partner Management Nick Roberts, an attendee at the event, said he was intrigued by the possibility of associating with the social connections of a person who had just requested one of its credit reports. But he expressed concern that the new ad system might not allow his firm the kind of audience scale it typically requires for ad campaigns.

“We kind of like mass,” he said. He also speculated Facebook might be forced to charge high sums for the SocialAds if they turn out to provide only narrow targeting and reach.

Some industry watchers had expected Facebook to announce an ad network of its own, or perhaps a data sharing arrangement with new partner Microsoft. However, the new Facebook Ads platform has no relationship to ads served elsewhere on the Web, and is completely unrelated to the company’s ad sales agreement with Microsoft. Zuckerberg said the Microsoft relationship will be unaffected, as Facebook Ads traffic solely in non-IAB standard ad placements.