Facebook’s Social Ads: From Friends to Business Deals

In an increasingly crowded market for online advertising, Facebook intends to go a step further in making ads personal. How can this be done? If a friend gushes about a new play or books a vacation at a travel site, a ‘News Feed’ item indicating the friend’s activities will appear along with related or relevant ads on the user’s page. Nothing sells better than by word of mouth. The social ads could even appear with a friend’s photo marked ‘sponsored’.

External sites such as eBay and Fandago are embedded with coding, called a Beacon, which detect a friend’s activities. The biographical information of the user is used to channel the appropriate ads to the user’s site. For instance, advertisers can limit their target customers to a certain age level, gender, or leisure/interest. Companies can create pages and add Beacons for free. But companies which advertise in Facebook do not have access to individuals’ profiles the way their friends do.

Users can change their privacy setting to limit the number of ads received, though they cannot totally reject all ads. Worries about intrusion of privacy are real. A conversation with friends is silently scrutinised by companies for potential marketing. Online consumers are being manipulated and influenced to make purchases and help sell products without being fully aware of the process.

Can Facebook pull it off? It wants to turn a popular online hangout into a profitable online business district. While Google’s text-based ads are targeted to users’ search terms, Facebook wants to target ads through social networks or friends. It could be a fabulous idea, or it could be a flop. Facebook must now face its future.