Facebook has figured out an ingenious way to capitalize on all that social sharing, finally giving its ad model the edge it needs to impress advertisers and prove the company is worth something.
You ready for this? Using some sort of auto-generation algorithm, Facebook lets advertisers put users' goofy smiling faces next to items they "liked." So, an example we get via The New York Times' Somini Sengupta, Facebook user Nick Bergus got his face and mocking "like" turned into an Amazon endorsement for... a 55 gallon tub of lube. This is what Facebook calls a Sponsored Story, which it introduced back in January. "They let advertisers take these word of mouth recommendations and promote them," the promotional video explains. But, as Sengupta details, the system hasn't played out as Facebook envisioned. People often "like" things not as endorsements, but as jokes or while drunk or by accident or with irony. So, instead of a person's face next to their favorite café, we get Bergus' face next to a monster tub of "Passion Natural" lube.
Considering Facebook's failing IPO has a lot to do with its not-so-trustworthy advertising model, this scheme seems like just the thing the social network needs to prove itself. Unlike Google or other Internet places where advertisers would put their money, Facebook can point to the personalized friend recommendations that happen via "likes." Sponsored stories capitalize on Facebook's unique "social value," operating under the theory that peer endorsements attract customers more than some anonymous ad on the side of the screen. In theory this makes sense. Facebook told investors users are 50 percent more likely to remember an ad if it comes through a friend, notes Sengupta.