Thursday, October 1, 2009 - The Progress & Freedom Foundation Blog

Social Advertising Is Just Around the Corner: Why A Facebook Ad Network Would Benefit Users

It seems the whole web is incorporating social networking functionality. Microsoft recently led the way in incorporating functionality to search, allowing users to share search results they like with their social networking contacts directly from the search results page through Twitter and Facebook. I've also noted that it's just a matter of time before the same thing happens with advertising--and that Facebook will likely lead the way.

Facebok Olive Garden AdWebsites have long used social networking buttons to encourage visitors to join their Facebook group, follow them on Twitter, etc. Facebook recently made this even easier by creating a widget for pages that can easily be embedded on any site. So why is Facebook blocking advertisers from including social networking functionality in ads like this one? Facebook's terms of service using the new Fan Box widget in ads. Facebook's spokesperson told

We want Page owners to have an easy way to connect with fans both on and off of Facebook. In order to protect the the Fan Box widget from being used for the wrong reasons, we do not allow it to be used in third party advertising. speculates:

it's safe to assume that Facebook wants to protect the "Become a Fan" experience from becoming too intertwined with aggressive online ads that it hasn't approved. One can imagine the variety of ways advertisers could (potentially misleadingly) push users to become a fan in an ad unit on a web site, then pollute their Facebook stream later. Facebook wants more control over that experience, even if it means partially restricting growth for Facebook Pages.

So why might policymakers be interested in this? Because, as Fred Vogelstein predicted in Wired this June, Facebook will likely someday soon expand beyond selling ads on its own site to selling ads on the wider Internet that incorporate social networking functionality like the "Become a fan" button above. There is a vast untapped market for online advertising, and if Facebook's going to get a piece of it, they'll have to offer something no other ad network can. If and when this happens, Facebook will likely get a lot of grief from the anti-advertising zealots, but this would actually be a good thing for consumers for five reasons:

  1. Facebook would prove a powerful competitor to Google. The ability to offer what Google can't is precisely the sort of "disruptive innovation" that could up-end Google's current dominance of online advertising. Those who fear that Google is the be-all-and-end-all of online advertising will likely find that Google can't "stay on top of the heap" forever because online services are so profoundly dynamic. Some likely complain that Facebook has an "unfair advantage" if it's the only ad network that can supply ads using Facebook buttons, but in the topsy-turvy world of Internet competition, you have to fight "fire with fire": The only way to unseat the current leaders is to find ways of exercising a bit of "market power." That term sets off alarm bells in the heads of many who can't bear the thought that competition should ever be "unfair" in any way. But competition, like life itself, is not fair: Denying Facebook the opportunity to sell ads would only retard innovation and reduce competition. Greater competition between ad networks would ultimately mean more revenue for publishers as well as increased pressure to compete for reputation among consumers in terms of better privacy practices.
  2. Increasing the effectiveness of online advertising means more revenue for the publishers who might sell ads through Facebook, which in turn will increase the quantity and quality of ad-supported online content. In fact, even publishers who don't sell their ad inventory through Facebook would benefit if overall ad prices go up.
  3. More revenue for Facebook would allow the company to continue to innovate in building better social networking functionality for its users. As I said in my response to Vogelstein, "Facebook can't keep losing money forever."
  4. For the same reasons that Facebook is so cautious today about allowing the use of their button in ads, they would likely provide very clear guidelines for any advertising they might sell on the wider web. Specifically, Facebook would have a strong incentive to policy for the kinds of deceptive uses InsideFacebook speculates about above.
  5. In addition to any direct oversight exercised by Facebook, the "Social-ification" of advertising would also change the incentives of advertisers: If your goal is to get someone to "become a fan," you have to be even more careful about the way you engage them. Annoying ads that flash or blink might build awareness of your brand by overcoming ad-blindness, but they're sure not going to be effective in getting people to "Fan" you! Facebook pages allow advertisers to build communities around their brands, which means engaging customers as, well, friends!
In short, we shouldn't fear the kind of change that Vogelstein warns about. If Facebook is really thinking about this, they're probably taking the time to do this correctly, which means coming up with clear policies for advertisers as well as explaining to users what this means for them.

posted by Berin Szoka @ 5:54 PM | Advertising & Marketing , Antitrust & Competition Policy