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Facebook and performance marketers’ growing pains

Written on
Aug 19, 2009 
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DM Confidential  |
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Facebook and performance marketers’ growing pains

affiliate11.jpgDM CONFIDENTIAL — Once a hobby and perhaps source of revenue, Facebook has emerged as a real competitor in the quest for advertising dollars.

The site, which depending on the day has a valuation ranging from $6 billion to $15 billion (compared with Google and Apple’s roughly $150 billion or Yahoo’s $20 billion), will have us looking back one day in less than two years thinking a) I can’t believe it’s worth $80 billion already, b) I always knew it would be, and c) I really hate those people who were allowed to invest $40k as friends / luminaries and now made $10 million.

A key component in Facebook’s ascension relies on the relationship the company has with not just its users but its advertisers. And, as we saw with Yahoo, the relationship with the advertisers involves their attracting the right advertisers and not pissing off those advertisers, let alone the users. Unlike Google, when Facebook entered the self-service platform space, a relatively mature ad ecosystem, in particular, a mature performance marketing ecosystem existed. More importantly, they had some sense of what to watch out and prepare for. Luckily for affiliate marketers, rather than focus solely on premium advertisers, they started off with a relatively affiliate friendly attitude.

Facebook’s relatively affiliate friendly attitude shows perhaps most notably by their presence at tradeshows such as Affiliate Summit. For two shows in a row, they have had a table at the Meet Market. Not surprisingly, Facebook has found their friendliness tested by the continued cleverness of some of these same affiliates. How were they to know the impact that Obama might have on government grants or that there would be a proliferation of google ebooks? They couldn’t, and they have found themselves adjusting, like a pit boss or chief of security at a casino trying to keep an eye on the house’s winnings.

The house’s learning, in this case Facebook, are reflected in the evolving Ad Guidelines. Unlike other company’s that rely on advertisers, Facebook has more than one place where advertisers can market to users. The first is their self-service flyer’s program, inventory owned and operated by Facebook. The second is the wild west of the applications, inventory created by Facebook users interacting with embedded third-party applications but with ad inventory that doesn’t monetarily benefit Facebook (for now).

The Ad Guidelines, “…apply to all ads appearing on Facebook, including ads within canvas pages of Facebook Platform applications.” Think of what it is like trying to set up guidelines. For many in our space, it usually means finding a similar company’s terms and conditions and then doing some quick find and replace to make it their own. Here, it has become more of a living / breathing thing. They can’t just set it and forget it as Mr. Popeil would say.

Scanning through the guidelines, it’s easy to see where affiliates have left their mark. Take for example Section 5, Prohibited Content. Included in the list, “Get rich quick and other money making opportunities that offer compensation for little or no investment, including money making schemes positioned as alternatives to part-time or full-time employment”, as well as “Adult friend finders or dating sites with a sexual emphasis”, and “Uncertified pharmaceutical products.”

Section 8 is also of interest. It reads, “If an ad includes a price, discount, or ‘free’ offer, “1.the destination URL for the ad must link to a page that clearly and accurately offers the exact deal the ad has displayed”, and “2. the ad must clearly state what action or set of actions is required to qualify for the offer.” But, it’s Section 9 that is the most interesting. Section 9 deals with Subscription Services, and “may include sites that promote downloading ringtones, wallpaper, or text messages for predictions, love life advice, news, personality quizzes, or other entertainment services or any site that induces a user to sign up for recurring billing of a product or service.”

Facebook doesn’t say they are prohibited. Nowhere do they suggest that subscription services shouldn’t be advertised. Instead, they seem to understand the internet ecosystem’s reliance on them. Many of these services apply less to the flyer’s program and more to the application inventory. Targeting on Facebook flyer’s is good, but targeting on the applications is your ads on crack. On the regular site, you can narrow / refine your audience based on parameters, but with application inventory, you can actually pass in parameters to make the ads more personalized.

There, you not just target men between certain ages, but say , your friend says . Just imagine an ad that says, “Can you beat today’s top score?” compared with one that says, “John, Jim thinks you’re stupid.” The latter, especially when applied to subscription text message services for mobile phones worked a little too well and precipitated the “Good Ads Make For A Good Ecosystem” post by Facebook. It’s a good read, and this part should sound familiar to any that track the mobile subscription space. They saw “ads that undermine trust, abuse users, or otherwise violate policy” and took “action to stop them.” They “prohibited entire advertising networks from providing services to applications, because the networks weren’t compliant with our policies and failed to correct their practices.”

What we are really talking about in both Facebook and Yahoo is not so much whether affiliate marketing is good or bad for their business but the growing pains that come with owning lots of inventory. Facebook had such a grand vision of combining personalization and advertising, but it hasn’t worked either when it launched Beacon or when savvy marketers create a similar experience by working with the application developers. Yahoo has always wanted to be the premier brand spend.

But with so much inventory, each has had to modify their business due to those in the performance marketing space. Facebook has started out more amenable, whereas Yahoo only recently with the media recession became accessible to a wider array of performance advertisers. The next phase of each’s growth is critical not just for them but for performance marketers as we must watch and see just how open, if at all, they continue to be.

Courtesy of DM Confidential editor





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