While Facebook CEO Mark Zuckerberg has always publicly reiterated that he's focused on his social network's long term success and not short-term profit, with his company's shares down 50% since its disastrous IPO, there are reports that the twenty-something billionaire is waking up to the harsh realities of running a publicly-traded company.
With insiders dumping their stocks and billions of FB shares becoming available as employee lock-up periods end, one thing is clear: if Facebook doesn't show Wall Street something in the short-term, the world's largest social network could have big, big problems.
So it's no surprise that Facebook is rolling out revenue-generating experiments at a seemingly more rapid pace. The latest example of that: sponsored search ads.
While Facebook is no Google when it comes to search, the social network's search box is, for its hundreds of millions of users, an ubiquitous tool used countless times daily. And that means that the results displayed in real-time as users type their search queries are a potentially valuable piece of real estate.
According to AdWeek's Tim Peterson, Facebook is currently testing sponsored results with a number of advertisers, including Disney, Zynga and Match.com. Peterson explains:
The paid listings look like regular search listings, with the exception of an ‘X’ that appears in the upper right corner of each ad, which users can click on to close the ad. In the instances Adweek encountered, the Sponsored category most often showed up atop the organic categories, such as Pages, Apps and People, though in one instance the paid category was below People but above Apps and Pages. Facebook has no plans to roll out the Sponsored category to search results pages, the spokesperson said.
Whether sponsored results move beyond the experiment phase, and possibly even to the actual search results pages, only time will tell, but as Peterson notes, Facebook's test is yet another indication that the social network is moving toward "more traditional ads."
In some respects, that may be a good thing. Facebook arguably has numerous opportunities to create ad inventory that advertisers will immediately understand and feel comfortable with. From an adoption standpoint, that will probably help Facebook.
At the same time, in pursuing a more traditional path, Facebook may be signaling that it's holding out increasingly less hope it will be able to deliver new and innovative ad formats that effectively take advantage of the social graph and all the supposedly valuable data that is contained within it. For advertisers counting on the social network to discover the holy grail of social advertising, that would be bad news.
Right now, everything boils down to ROI, regardless of the nature of the ad formats Facebook delivers. The two big questions around sponsored search results are:
- Will they users be turned off by them? Facebook must walk a fine line in its monetization push. Go too far with ads and it will eventually have an effect on user engagement and overall usage. The risks are particularly high where core functionality like search is implicated.
- Can these ads deliver ROI? For many advertisers, one of the biggest challenges Facebook ads create is driving meaningful action. Unlike Google AdWords ads which drive users to external websites, for instance, many Facebook ads seek to drive action on the social network. Calculating the return on Facebook activity has proven especially difficult for many brands.
If Facebook can insert more traditional advertising into the social networking experience without upsetting users and give advertisers reason to believe that they're effective (and doing so in less than a year), it could help solidify the company's future. If traditional ads don't do the trick, however, Mark Zuckerberg may have even greater headaches ahead.