How Can Facebook Crack its Advertising Problem?

Image by israelavila via Flickr
Why can’t Facebook monetize those users? New York Times writer Randall Stross recently wrote a piece about Proctor & Gamble’s foray into social networking advertising. The thrust of the story can be found in a quote from Seth Goldstein of SocialMedia Networks:

“Advertisers distract users; users ignore advertisers; advertisers distract better; users ignore better.”

Few people take the number of fans a company has on Facebook to be a serious indicator of social media advertising success. And as 24/7 Wall Street notes, advertising on social networks is simply not as relevant as search engine advertisements. Couple this with user blindness and you understand why click through rates are, well, abysmal.
So what are Facebook and the other social networks to do? How do you monetize those 130 million pairs of eyeballs in a consistent and long-term way?

Why consumers click

First, we have to understand that there are two major reasons consumers click on online ads:
Either consumers knows it is an ad and see it’s what they want, so they click - OR -
consumers don’t know it’s an ad and see it’s relevant, so they click.
The first scenario is targeted and relevant advertising. The second scenario is what I call “Internet Ignorant.” Essentially people don’t realize that when they search for Ford Ranger, the top link in the cake yellow box is an ad. Those of us who are technologically adept deal with this every day and are blind to the ads, but millions of people who use the Internet less frequently click on these types of ads, especially on well designed websites where content surrounds the ads.
Of course, this isn’t exactly why we want people to click on online ads. You’ll get conversions, but not as many as from the first scenario. And the “Internet Ignorant” scenario doesn’t work for Facebook anyway - its user base is Internet savvy, blind to ads, and Facebook isn’t about to throw some floating ads in the middle of our profiles.

What can we learn from Harry Potter?

So how does Facebook get people interested in its advertising? We have to look towards two of the most successful types of advertising around:

• Search Advertising
• Movie Trailers

As discussed earlier, search advertising is lucrative because it’s targeted and relevant to exactly what a person is looking for at the exact right time. So precision targeting is part of the equation.
But what about movie trailers? Why are they part of this puzzle? It’s simple: no other type of advertising is consistently sought after and watched over and over again like a movie trailer. Half the fun of a movie is the trailers themselves. Come on - how many times did you watch the trailer for The Dark Knight? And are you seriously not going to watch the next trailer for Harry Potter and the Half-Blood Prince? Movie trailers are extraordinarily interesting, visually appealing, and are often advertising a product that has already sold us, especially as it approaches the launch date.

Translating this into something that works

So am I suggesting that Facebook throw up video ads for The Day the Earth Stood Still? No, though they might actually get a lot of views with some sort of relevant video ad. No, here’s what I’m saying:

1) Relevancy is not enough in advertising. It’s about relevancy and timing. You must catch a person at the moment he or she most desires a product. Lucky for Facebook, they have status updates, which is a close approximation to what people are thinking about at a given moment. Advertising on social networks should focus on time-based actions and then factor in relevant interests (i.e. favorite music), based on when the consumer last added it to his or her profile. This is part of why I believe Twitter could be lucrative - it is nothing but time-based updates. Plus SMS advertising does pretty well, if Twitter so chooses to include it.
2) Facebook must find ways to convince users to seek advertising. Damn, I must be nuts, especially with the advertising blindness of the Facebook generation, but the best advertisements are simple in message, easy to remember, and desired by consumers. Almost all movie trailers and some select TV ads continue to rack up YouTube views. This only helps to enforce branding and slowly change the mindset of the consumer.

These lessons are not just for Facebook or social networks, but for all websites struggling to monetize their users (i.e. YouTube). It’s time to dramatically rethink how we serve and interact with our online advertising. Facebook and other social media websites need to be proactive in shaping the campaigns of their advertisers. Banner ads aren’t engaging or relevant. Text ads are only sometimes relevant and rarely engaging, so how do you target them better? Video ads can be both, but how do you serve them unobtrusively but still get enough views to be profitable? And how do you get enough inventory?
Relevancy, timing, and desire must all be present if social media advertising is to ever succeed. As I’m sure Goldstein already knows, you can’t distract users online and expect to make revenue. You have to make them want it.
Now while I rack my brain some more on this puzzle, I hope you’ll post some of your theories in the comments.
December 15, 2008 - 4:07 pm PDT - by Ben Parr