Facebook ads move in focus on eve of earnings

By Duncan Craig | 26 July 2012

Facebook's second quarter earnings announcement in the US tonight will provide more intrigue about its ad platform strategy as the social network giant moves rapidly to bring game-changing products to market.

Mark Zuckerberg's online network is tipped to make a profit of around US$1.16 billion, but after revealing in its pre-IPO documents that earnings growth were at risk to the mobile web boom, investors will be looking for a clear strategy in that area.

Digital planners and strategists said their clients were keen to cut through the plethora of rumours surrounding Facebook's next moves in the ad space, as they are trying to understand how it will alter their social brand engagement campaigns.

Oliver Wilton, social media manager at Ikon, said he was most enthused about the expected imminent launch of Facebook's new analytical platform, called Connect, Engage, Integrate and Influence (CEII).

“We are excited about the development of CEII to analyse patterns in the back-end,” said Wilton. “The real beauty of the platform is that it will show the people who are coming to your brand page and what else they are doing on Facebook.”

That will enable brands to secure a "behind-the-scenes” look at Facebook surfing behaviour, otherwise known as post-click actions, such as whether a user likes a page or watches a video. Brands will be able to use that data to decide whether to serve a video, ad, or apps ad, and they will be able to group users together and create mass engagement opportunities.

Frank Media Managing Director Martyn Thomas said he is concerned that Facebook is simply looking to place more ads in different parts of the site.

“This is not a sustainable strategy as we know Facebook ads are already less effective,” Thomas said. “That's a tough nut to crack obviously but look for example at YouTube which lets you skip ads. That model seems to make a lot more sense for a user but also for advertisers.”

Thomas said he would like to see an advertising offering that focuses on content “rather than distracting Facebook users while they catch up with their friends, flick through photos or stalk their high school crush”.

Thomas also questioned why ad prices on Facebook are going up, while engagement and click-through rates are dropping, and said the company still needs to demonstrate a strong return on investment to advertisers.

Since its troubled IPO two months ago, Facebook has rolled out a slew of new features to convince marketers and advertisers of its worth as an ad platform. On Monday it announced new marketing tools for brand pages, its Apps Centre was unveiled in June, while its tipped to launch its own smartphone in tandem with handset maker HTC in the middle of next year.

“Their biggest challenge is monetising mobility,” said Lee Stephens, chief executive of Switch Digital. “You can talk about ad exchanges and third-party website strategies all you like, but the mobile situation is the critical one.”

Facebook is currently re-building its iPhone app to make it more social and its widely tipped that the next move will include sponsored ads and stories in the News Feed section.

“They could insert ads inside news feeds or do pop-over ads on entry,” Stephens said.

This week US website Business Insider speculated that Facebook would buy New York-based ad tech platform AppNexus to help it commercialise its Facebook Ad Exchange business, which was launched in beta mode in June.

Despite Facebook's challenge to convince investors that its share price should be supported, it is still reeling in strong brand support. A recent global advertising report by Adobe said brands had increased fan growth by 84% in the past year, and engagement had jumped 60% from the previous quarter.

"We surmise that increased engagement rates result from platform changes made in the last two quarters (e.g. Timeline), use of new acquisition and engagement metrics, and more effective social marketing by brands,” the Adobe report said. “Increases in engagement levels in future quarters would indicate that Facebook is becoming a more valuable advertising marketing channel than in the past.”

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