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Facebook's Impending IPO and its New Approach to Advertising

Facebook’s initial public offering (IPO) has been determined to have a possible date in May of 2012. With the date nearing closer, the importance of bringing in revenue for its shareholders is becoming clear. With advertising as its primary source of revenue, the company has begun to focus on new ways to make advertising on Facebook more effective in order to increase advertising revenue.

The new platform for Facebook advertising is known as “Facebook Premium” and it offers a number of new ways to reach users through advertisements. Any advertisement bought through Facebook Premium can now be placed on both mobile and desktop and will be displayed in new places on Facebook pages. On January 11th Facebook began to share advertisements on desktop News Feeds, and on February 29th the News Feed advertisements began to appear on mobile devices as well.  Then, beginning in April, ads became available on the logout screen through both mobile and desktops. These logout ads are able to target all Facebook users rather than just fans of the brand. With over half of its users on mobile devices, the mobile advertisements are highly valuable to Facebook. Another change brought about in April was that all brands and businesses were changed to the Timeline format. These new “pages” are where you control your business, and through this format, all activity such as status updates or posts can be made into an advertisement and shown on both desktop and mobile News Feeds. Companies also have the option of using Facebook Offers, which allow businesses to share discounts and promotions with its fans that will appear as a News Feed post.

The strategy behind the new method of advertising on Facebook is based on the goal of making ads equal to content. The goal is to make the ads more organic and less obtrusive to viewers. Through Facebook Premium, ads are now shared as stories, meaning Facebook activity is communication rather than being a traditional advertisement. The company pays for their stories to be featured to people who have liked their page. Users can also see featured stories from companies their friends have liked and if someone likes a page, checks into a location, or the company shares a post it will show up on their friend’s page as a sponsored story, increasing your reach and visibility. Through this new method, ads can be seen by 75% of fans per month and about 50% of fans per week whereas a typical post only reached 16% of fans.

There are a number of formats that will be used for these new advertisements, and each has its own purpose and features. The first type is a Premium Like Ad. This type of ad shows a user how many of their friends have liked a page and if none of their friends have, it shows the number of fans who like the page. This type of advertisement encourages users to take action because of the trust that is built though seeing a friend’s name associated with the ad, it makes them seem more like an update or organic content, rather than a paid advertisement. The second type of ad is a Premium Poll Ad. This ad asks the user a question and provides 2 or 3 options for a response. Once a user votes, they can see the results from other voters including how their friends voted. If they have liked the brand this ad may show up in their news Feed. The next type is called a Premium Event Ad. Through this ad, a company can invite users to events, and if the user responds they can then invite their friends and include a personal message. The act of them RSVP’ing to an event will show up on the News Feeds of their friends, which again encourages further action from a wider audience. Another typed of ad is the Premium Sampling Ad. This is a simple advertisement that provides a call to action. The user simply provides shipping information and will then receive a free sample, offering an easy way for a brand to encourage action from its audience. The last type of ad is a Premium Video Comment Ad. This advertisement allows companies to share videos that viewers can then like or comment on. Users can share the video and their comments or likes may appear in the News Feed of their friends.

Targeting features are now being tested with a small number of advertisers, allowing them to specify objectives, such as obtaining likes or clicks, as well as specifying both precise and general interests along with age, gender, and location in order to try to reach the target audience. News Feed ads have a 5-10x higher click through rate than standard ads, so with the additional ability to target as much or as little as needed, the new Facebook advertising options could be highly beneficial to companies.

Facebook says these forms of advertisement will help to double engagement and create twice as much value for brands. All paid ads are labeled as “Sponsored” but are designed to appear to look like all other content. The goal of these advertisements is to increase the number of people interacting with the company. It works for companies because it creates trust, and ads feel more like a suggestion from a friend rather than a paid advertisement. In the end, the new forms of advertising available on Facebook will help to effectively reach target audiences and increase visibility among users.

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Posted in Facebook Optimization, Internet Marketing, Social Media Optimization
One comment on “Facebook's Impending IPO and its New Approach to Advertising
  1. Vitamin B says:

    Hey, I just stopped by to visit your website and thought I’d say I had a great visit.

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