Facebook’s ill-fated Beacon failed to successfully solve the problem that has plagued advertisers on social networks – dismal results.

In fact, it became a legal liability for some of them.

Yet Facebook’s need to find a viable way to monetize its massive userbase has not gone away, and the company is preparing to launch a new set of advertising offerings that are designed to merge social networking with advertising.

The centerpiece of this is called Engagement Advertisements.

Forrester Research’s Jeremiah Owyang interviewed Facebook’s Director of Monetization, Tim Kendall, and provided the details:

“Engagement Ads…allow community members to interact with the ads in the profile and newsfeeds – without leaving the Facebook site, increasing interaction, social spread, and brand engagement.”

According to Owyang, Engagement Ads come in three flavors:

  • Comment Style Ads will allow users to comment on ads “much like wall posts” and these comments will be distributed via news feeds.
  • Virtual Gift Style Ads will give advertisers the ability to create branded virtual goods that consumers can be shared between friends.
  • Fan Style Ads will apparently work like Facebook pages, enabling consumers to demonstrate an affinity with an advertiser or advertisement.

Eric Eldon at VentureBeat has some screenshots.

The $15bn question, of course, is will Facebook users engage sufficiently with Engagement Ads in meaningful ways to make them worthwhile for advertisers?

Owyang, not surprisingly, is already reminding us that “brands may not be ready for these types of new ads, until they change how they measure success.

Unfortunately, I think any reasonable “success” is going to be challenging for advertisers to find with Engagement Ads.

While Engagement Ads are a logical experiment for Facebook, I simply fail to see how they’re going to provide scalable, meaningful benefit to advertisers.

As I have pointed out numerous times before, most Facebook pages for brands are ghost towns, highlighting the fact that most consumers on social networks are interested in socializing, not perusing ads or serving as brand zombies.

In other words, I believe that Facebook’s attempts to develop ad models that harness the characteristics of social networks will always be challenged by the very nature of their services and the way consumers use them.

The bottom line is that social networkers want to interact primarily with other social networkers – not ads and brands.

And the interactions they do have with brands (i.e. joining a Facebook page for a brand) tend to be short-lived as evidenced by the low participation evident on the vast majority of Facebook pages run by brands.

Furthermore, the backlash Facebook received from Beacon demonstrates that there’s a fine line between “interloping” and “intruding.

In addition to Engagement Ads, Facebook is rolling out some updates to its Social Ads program.

As Mark Walsh of MediaPost details, these updates essentially put consumers’ news feeds up for sale:

“Within Social Ads, Facebook is also rolling out a new program that would allow marketers to pay to expand the number of friends who learn about a user’s interaction with an application. Currently, Facebook uses an algorithm to figure out who among a user’s friends would be most interested in learning about a given activity.

“Under the new plan, marketers would have the option of sending a sponsored notification (marked as such) to all of a members’ friends. So if someone used a Fandango app to buy tickets to see ‘Pineapple Express,’ Fandango and Sony Pictures could pay to tell all of their friends on Facebook about it.”

Frankly, I don’t think is going to go over too well with consumers (provided that they know it’s taking place) and Facebook’s belief that this update to Social Ads will avoid ire “because it only relates to users’ activities within Facebook” seems naive.

Clearly, Facebook’s new offerings are likely to face some of the same challenges most advertising experiments on social networks have faced – both from the advertiser standpoint and the consumer standpoint.

What’s curious to me is that people like Owyang recognize this. Owyang writes:

“With horrible click through rates (I’ve heard cases of .04 percent CTR) of ads on social networks, some brands prefer to focus resources elsewhere. Why the low rates? Our research indicates that youth primarily exhibit behaviors of communication and self-expression – not searching for products, looking at ads, or hunting for information.”

“This youth data supports that social network behavior is in fact, ’social’ and these respondents are not seeking to find out about product information, nor learn about the latest products at a media site, product review, or a search engine like Google.”

Instead of taking this data and coming to the logical conclusion that social networks like Facebook are less-than-ideal advertising mediums (and that most consumers on them are at best indifferent to their presence), Owyang and social media proponents instruct advertisers to “become part of the community, interact and build real relationships.

The problem with this, of course, is that these things aren’t easy to do and they don’t scale well enough to produce the type of results needed to “move the needle.”

Perhaps most importantly, these things require significant investments – both in resources and time. This makes the social media an often expensive proposition despite the fact that it usually provides minimal tangible return.

While this is not to say that there isn’t opportunity in the world of social media, I’m very much a pragmatist (and a bit of a contrarian) so I would point out the following:

  • I don’t go where I know I’m probably not wanted. In other words, if I’m not invited to a party, I assume there’s a reason why and I don’t show up.

    Advertisers should consider that social networks are essentially parties that they haven’t been invited to. Consumers on social networks have made it clear that they’re not clicking on many ads and they’re probably not even looking at many of them so why try to sneak into this party through the back door?

  • In business, low-hanging fruit may not always appear to be the “ripest” but it’s usually responsible for keeping the bills paid. That is, instead of trying to crack the nut that is successful advertising on social networks, advertisers might want to consider that their energies (and dollars) are best spent reaching out to consumers in ways that they know deliver results even if the “potential” to reach consumers on social networks appears more promising. After all, appearances can be deceiving.

  • Consumers build their own “communities” around brands all the time without the help of those brands. Some “fans” of Louis Vuitton, for instance, already share their passion for Louis Vuitton products online.

    They share photos, they write reviews, they blog, they post on message boards, etc. Louis Vuitton really has no need (or ability) to keep track of all these “conversations” and definitely has no need to involve itself in them.

    As I’ve argued, if you sell detergent, don’t convince yourself otherwise. If, on the other hand, you sell more than detergent (i.e. luxury goods, etc.), chances are consumers are already “talking about you.”

At the end of the day, I’ll make a seemingly extreme recommendation – most advertisers can probably call off any engagements they may have with offerings such as Engagement Ads.

The reality is that there’s probably little room (or desirability) for intruding upon consumers’ social networking experience and if you focus on your product and how you market it through more traditional online and offline means, consumers will carry your “message” when and where they deem it appropriate.

That is real “word of mouth” and instead of trying to create it using Facebook’s new offerings, advertisers should focus on creating the conditions under which it’s more likely to occur naturally.