Social Endorsement Model Works Wonders for ad.ly

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adlyADOTAS – “How soon till Twitter users get sick of constant celebrity product-shilling in their streams?” is the question ad.ly CEO Arnie Gullov-Singh has heard over and over since the company launched its social media endorsement platform in 2009.

At the time, I cracked, “If our celebrity-obsessed culture can’t be monetized, how American is it?” However, I became one of the philistines after hearing about rival twtmob and proposed that “Soon Twitter Will Be Nothing But Endorsements.” I was very wrong.

Here’s how Gullov-Singh sees it: ad.ly served 21,000 endorsements in 2010, and there are 21,000 tweets in the U.S. every four seconds. Compared to the tsunami of tweets, endorsed ones are barely a wave — but they’re still quite effective. Last year a Toyota endorsement campaign garnered 2.8 million video views on YouTube.

Even more effective are Facebook Pages, where ad.ly recently ventured with six of its 150 advertisers. During the fourth quarter, advertisers saw an average of 49,000 visits per endorsement campaign run on a celebrity Facebook Pages, and an average of 500 comments and likes per endorsed posts.

“In hindsight, I shouldn’t have been surprised,” Gullov-Singh says. Facebook offers massive engagement compared to Twitter through commenting and likes, adding extra value for advertisers. In addition, celebrities know the social network well and are frequent users.

The results are quite impressive considering a Webtrends report released at the beginning of the week citing the average CTR for Facebook ads dropped from 0.063% in 2009 to 0.051% in 2010 (for a reference, DoubleClick reported average CTR of 0.1% in 2009). At the same time, average CPM rose from $0.17 in 2009 to $0.25 in 2010, while average CPC hopped from $0.27 to $0.49.

In addition, Gullov-Singh notes that it’s a great deal of work to produce the thousands of Facebook ads necessary for such pathetic results. Facebook suggests eight to 10 pieces of creative for each audience or demo, of which there could be 1,000. Hence the influx of new companies (or divisions of online advertising mainstays) such as EpicSocial that are building and deploying the huge amounts of Facebook creative — something along lines of SEM for Facebook, or “FEMs”

While Facebook had $1.8 billion in revenue in 2010, the social network won’t be able to multiply that revenue tenfold using its current advertising strategy, Gullov-Singh notes. Zuck and crew must use the stream, Luke! Hence why Gullov-Singh is encouraged by the new Sponsored Stories ad unit, which allows brands to highlight user recommendations and activities found in the Facebook news feed.

“Advertising needs to be organically integrated into the stream,” he comments. “The next challenge will be scale.” But his money is on Facebook as the social network has a “very talented team — unstoppable.”

ad.ly has been successful by starting with the influencers — and celebrities do make great influencers. Although Gullov-Singh said that interest in its Twitter and Facebook solutions is “snowballing.”

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