News Feed Is Facebook's New Jackpot

He didn't say the word "advertiser" once on Thursday, but Mark Zuckerberg may have made an historic step with Facebook's redesigned News Feed: The homepage for which he once apologized has transformed into a big, engaging platform that marketers already say they love.

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"Advertisers want really rich things like big pictures or videos," Mark Zuckerberg said on the last earnings call for his social network, "and we haven't provided those things historically." Well, even though he didn't say the word "advertiser" once on Thursday, Zuckerberg may have made an historic step in introducing Facebook's redesigned News Feed: The homepage feature for which he once publicly apologized has transformed into a big, engaging platform that marketers already say they love.

For the users trying today's rollout of the new News Feed, the bigger images all over the homepage are obvious, but it's the super-sized ads that are truly impossible to ignore. On a test this afternoon, the following sponsored post from Rosetta Stone popped up as the second item in my News Feed. It takes up massive real estate in the main feed, and when combined with the other right-rail ads, that's a full two-thirds of a computer screen of advertising, which accounted for 84 percent of Facebook's revenues last quarter:

In the outgoing iteration of News Feed, a sponsored story would blend in among a string of non-sponsored posts on your feed, easy to miss for its size and any standout content therein — it looked boring, with some text and an icon. Now, as the social network's new tagline goes, it's "Goodbye Clutter," as one photo post takes up the entire field of vision. And sponsored posts are the same size as photo posts, which is to say full-bleed and on equal footing, like some kind of vertical magazine. Here's some scale on old News Feed and new News Feed, via Facebook's sign-up page:

Advertisers are already liking the increased real estate. "Bigger is definitely better," Zach Newcomb, an executive director at the digital ad agency ROKKAN told The Atlantic Wire. "Especially on mobile and Web, where immersive imagery isn't just pretty, it's expected by the user." And more space might be part of the jump to higher CPM rates, Newcomb added, with Facebook automatically being able to charge more: "I mean, pixels are pixels; there's the argument that higher value is implied by the increase in visual real estate."

Importantly, as Newcomb and other advertising executives notes on Thursday afternoon, Facebook likely won't raise it's ad rates until it can prove that its big new ads are truly working. And that's why the other big News Feed development will excite marketers and ignite Facebook earnings: engagement is about to go way up.

As Zuckerberg explained during his brief remarks at the announcement, Facebook's users love photos so much that photo posts now take up some 50 percent of the current News Feed. He even had this handy chart:

It's a smart trick, making the ads look like photos posts in the new feed. Because not only do Facebook users look at photos and post photos more than they do anything else on Facebook, but the giant images also happen to increase the most engagement, a source told AllthingsD's Mike Issac. "Facebook News Feed engineers see the most engagement from users on photography and visuals that appear inside the News Feed," Isaac writes. "And every time Facebook tweaks the algorithm to show the best content that users engage with the most, photos still float to being the most prominent inside the feed — so much so that Facebook must tweak the algorithm to show more text-based status update content, even if that isn’t the stuff people want to look at the most."

Facebook photos: the key to likes, clicks, comments, and everything, more than anything — and the new key to Facebook's second consecutive year of making money off you.

Even if the social network won't quite admit it, ads matter. Besides being the predominant source of revenue for a company that needs to prove itself to the market and hang onto its user base — a company exec even called Instagram a "competitor" recently — they're also the biggest potential way to scare off users, with Sponsored Stories not going over so well and a full 20 percent of its 1 billion users leaving Facebook, according to one survey. The social network will roll out this version of News Feed slowly, in a nod to the product's launch debacle in 2006, when Zuckerberg was forced to very publicly react to user outrage over privacy concerns.

But Facebook is gambling that it knows enough about your data to make your News Feed an interesting extension of your interests and still spin it off as a metrics-packed product for advertisers. If a user interacts with a page — if you "like" a brand — it means there's reach. Extrapolating even more, it could also mean the ad touched that user in a more compelling way than someone just seeing and absorbing a message. These are big emotions Facebook is selling now, not just eyeballs and clicks — and that's valuable information than some passive rectangle ad.

That, of course, is what gave Facebook value even before it went public: Zuckerberg's social network knows things about people that other websites don't. If this News Feed redesign does, indeed, increase engagement, well, brands have all the more reason to pay Facebook to run their ads. For that Newcomb believes Facebook could charge higher CPM rates. "Brands would spend more of their advertising dollars if Facebook ads were becoming more effective, but we'd want to see that first," he said, adding that the News Feed's new strength was "not really about space so much as prominence and targeting."

And, of course, all of this applies to the mobile experience, in which Facebook has struggled to make money even as its massive user base migrates there in droves. The upgraded phone app (pictured at right) almost makes a standard post look like part of an Instagram feed, with more image and less text. Brands already see the potential in the user obsession with picture sharing apps. A recent study found the "top 59 percent of brands" have joined Instagram hoping to capitalize on all the addicted users. Because people like pictures so much, businesses can get people to subscribe to their feeds, which are just a stream of ads. Luxury retailers, in particular, have attracted huge followings. Burberry has over 700,000 people who want to see their ads, for example. Facebook's new design, with a larger focus on photos — and ads as photos — lends itself to that kind of marketing.

Of course, this could all go horribly wrong, if users don't, in fact, engage with those huge ads, the potential downside to larger visuals is perhaps a more pronounced negative knee-jerk reaction to poorly targeted ads. "If I'm served up an irrelevant ad, and it's even larger than it used to be, I'll probably be distracted by it and dislike it that much more," added Newcomb.

This article is from the archive of our partner The Wire.