Facebook Ad Rates Hold as Inventory Rises, Easing Price Concerns

Facebook Inc., the biggest social network, said advertising rates have held up even after it added new ways for marketers to promote products, allaying concern that prices would decline as inventory surged.

Rates for so-called self-serve ads, which are sold through an automated auction system and account for most of sales, are unchanged since March, when the company completed a redesign to add promotions under photos and increase the number of spots on some pages to as many as five from three, Facebook said.

“We have hundreds of thousands of advertisers around the world — that continues to grow,” said David Fischer, vice president, advertising and global operations. Without disclosing rates, he said, “We continue to feel good about where we are.”

Chief Executive Officer Mark Zuckerberg, seeking to profit from advertisers trying to reach his company’s 714 million users, needs to sustain ad prices amid competition from Google Inc. (GOOG) and Twitter Inc. Facebook must also avoid alienating users with a deluge of promotions, said Michael Gartenberg, an analyst at research firm Gartner Inc.

“There’s a certain point where you get a backlash, like watching a TV show with too many commercials,” Gartenberg said. “Right now we’re not seeing any backlash, but it’s something they’re going to have to keep tweaking in terms of design.”

Facebook’s Fischer says the company takes steps to ensure that new ad features don’t drive users away.

‘Constantly Testing’

“We’re constantly testing new ad formats,” Fischer said. “We’ve found, frankly, that users are getting value and advertisers getting value in putting more ads in.”

Facebook, which gets more of Web users’ time than any other site, will more than double global ad revenue to $4.05 billion this year, according to EMarketer Inc., an Internet research firm based in New York.

“Facebook is really offering advertising that can attract companies large and small,” said Debra Aho Williamson, an EMarketer analyst. “It’s really gunning on all fronts.”

About 60 percent of Facebook’s advertising revenue comes from self-serve ads, Williamson said. Companies bid for spots on user pages based on those people’s demographics or interests. These ads typically show up on profile pages or near photos.

The rest of revenue comes from ads placed on the home pages, where users typically begin sessions on the site. These spots are sold by Facebook’s in-house marketing staff.

Price Swings

As Facebook tested new features in recent months, some companies that help businesses buy ads on the site experienced price swings.

The average cost per click for self-serve ads dropped to 95 cents from $1.36 in June, said Hussein Fazal, CEO of AdParlor Inc., a Toronto-based promotion-placement company.

Another Internet advertising service, IgnitionOne Inc., said U.S. spending by repeat Facebook clients surged 22 percent in the second quarter.

Game developer Casual Collective Inc., doing business as Kixeye, has had prices increases of about 20 percent over the past six months as it has used more targeted ads, said CEO Will Harbin. He spends more than $1 million a month of Facebook and credits those promotions with a more than 10-fold increase in customers.

“It’s been profitable and we’ve grown our games, so it’s gone quite well,” Harbin said. “It’s much easier to target the correct demographic on Facebook.”

Via: Bloomberg

Twitter Unveils Plans to Draw Money From Ads

Twitter will unveil on Tuesday a much-anticipated plan for making money from advertising, finally answering the question of how the company expects to turn its exponential growth into revenue.

The advertising program, which Twitter calls Promoted Tweets, will show up when Twitter users search for keywords that the advertisers have bought to link to their ads. Later, Twitter plans to show promoted posts in the stream of Twitter posts, based on how relevant they might be to a particular user.

Several companies will run ads, including Best Buy, Virgin America, Starbucks and Bravo.

“The idea behind Promoted Tweets is that we want to enhance the communications that companies are already having with customers on Twitter,” said Dick Costolo, Twitter’s chief operating officer.

Since Twitter started in 2007, its growth has resembled a hockey stick, increasing almost in a vertical line. According to comScore, Twitter.com had 22.3 million unique visitors in March, up from 524,000 a year ago, and that does not include the millions more who use the service through third-party smartphone and Web applications like TweetDeck or Tweetie.

Yet Twitter has been slow to monetize those users. Its founders, Evan Williams, Jack Dorsey and Biz Stone, have said that it is following Google’s path — building a service that many people use, then figuring out how to make money. Though Twitter already has some revenue from deals to license its stream of posts to Google, Microsoft and Yahoo, Twitter’s announcement is the first significant step toward a business model.

The ads will let businesses insert themselves into the stream of real-time conversation on Twitter to ensure their posts do not get buried in the flow.

Starbucks, for instance, often publishes Twitter posts about its promotions, like free pastries. But the messages quickly get lost in the thousands of posts from users who happen to mention meeting at Starbucks.

“When people are searching on Starbucks, what we really want to show them is that something is happening at Starbucks right now, and Promoted Tweets will give us a chance to do that,” said Chris Bruzzo, vice president of brand, content and online at Starbucks.

When a Twitter user searches for a word an advertiser bought, the promoted message will show up at the top of the results, even if it was written much earlier. The posts say they are promoted by the company in small type, and when someone rolls over a promoted post with a cursor, it turns yellow.

The ads will also be a way for companies to enter the conversation when it turns negative. Several companies have created tools to measure sentiment on Twitter, but until now, businesses can do little with that information. Even if they write a post in response, it also quickly gets lost in a sea of complaints.

Companies will “be able to increase awareness in that instance when the iron is most malleable,” said Anamitra Banerji, who manages commercial products at Twitter.

If a new movie is getting negative reaction, the studio could use the ads to link to a positive review, for example.

Businesses have been eager to wade into conversations on social media, said Bernardo Huberman, senior fellow and director of the social computing lab at Hewlett-Packard’s research and development arm and co-author of a recent study that found that chatter on Twitter can forecast box-office revenue for movies. But he is not convinced that it can change people’s opinions.

Studios have already been writing Twitter posts about new movies. “Our study shows that the influence of those tweets was minimal compared to the conversation that people were having about those movies,” he said. “Media like Twitter and Facebook are so enormous that it’s very hard to imagine it would be easy to manipulate the conversation.”

Twitter will measure what it calls resonance, which takes into account nine factors, including the number of people who saw the post, the number of people who replied to it or passed it on to their followers, and the number of people who clicked on links.

If a post does not reach a certain resonance score, Twitter will no longer show it as a promoted post. That means that the company will not have to pay for it, and users will not see ads they do not find useful, Mr. Costolo said.

At first, companies will pay per thousand people who see promoted posts. Once Twitter figures out how people interact with the posts, it will figure out alternate ways to charge advertisers.

In the next phase of Twitter’s revenue plan, it will show promoted posts in a user’s Twitter stream, even if a user did not perform a search and does not follow the advertiser.

For example, if someone has been following people who write about travel, they could see a promoted post from Virgin America on holiday fare discounts.

Anyone who uses Google has grown accustomed to seeing ads alongside their search results, but Twitter users could resent seeing promoted posts in their personal content stream.

Twitter is aware of that risk. It is still figuring out how to determine which promoted posts should appear. It could be based on topics they are writing about, geographic location or shared interests of people they follow.

“One of the reasons we’re not rolling that out right now is because we only want to show tweets that help the user experience,” Mr. Costolo said.

Once Twitter figures out how to measure the number of people who read posts other than on Twitter.com, it will also allow third-party developers to show ads and share revenue.

Early on, Twitter’s founders said they wanted to avoid showing ads as other social networks do, displayed on the right side of the page. The new ad platform is different, Mr. Costolo said, because the promoted posts also exist in the organic Twitter stream.

“The ability of companies to engage with customers around this interest graph is more compelling than trying to wedge yourself into these social interactions,” he said.

Via: NYT