Facebook continues to introduce changes to its layout and advertising model as it inches closer to its goal IPO date in the spring of 2012.
Expected in January of 2012, Facebook will start displaying sponsored stories in the news feeds of users, rather than the sidebars and standard advertising columns.
Facebook tested whether advertisements could be incorporated in the news feed in 2006 and in 2008. This time, however, much like is being seen on Twitter, the “sponsored stories” will only appear if people you know (or you) interact with a product -- and users will see no more than one sponsored story in the feed per day.
According to Facebook, users won’t be able to opt out of seeing sponsored stories in the news feed will be given the option of clicking on an 'x' to close the story once a user sees it.
Essentially what users might see would be an entry at the top of their feed that a friend had checked into Starbucks recently or that their favorite TV show is running a promotion.
How do companies create sponsored stories?
Any business that already advertising on Facebook can easily adjust what type of content they would like to sponsor -- such as check-ins or 'like' actions -- so that users are only seeing things that their friends are doing, as opposed to being targets based on their demographics.
The ads look similar to standard news feed updates and are only marked in the bottom right corner with the word 'sponsored.'
This new action takes advertisers off 'the hook' since the actions more closely resemble a friend's action than a targeted advertisement, but they still drive traffic to the business pages and campaigns.
A recent 10-day, two billion impression test conducted for Facebook Ads API service provider TBG Digital revealed that the new sponsored stories ad units received a 46% higher click through rate, a 20% lower cost per click, and an 18% lower cost per fan than Facebook’s standard ad units.
This is music for the advertisers' ears. More effective advertising with little action required by the company.
What this will change
While Facebook has various ways to advertise their campaigns on the site, this new sponsored story option allows a new opportunity for revenue growth for the social network giant. With approximately 400 million daily users, Facebook might be able to boost its daily ad inventory by as much as 50% by pushing this new option.
Facebook hasn’t specified yet whether advertisers will have the option to specifically request placement of sponsored content within the news feed, though that seems like a likely extension.
But like most changes on social environments, especially Facebook, there will be some amount of outrage that advertisements are seeping into every corner of our lives, but it shouldn't be as drastic and disruptive of a change as when advertisements make it onto the Facebook application.
Entering the IPO marathon, it is key for Facebook to keep its fiscal strength as robust as it can so that the anticipated $100 billion public expectations stay consistant.