In its second-largest acquisition, Amazon buys the company for $970 million.
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The ads' placement next to the news feed is important because they appear to the right of the main area where most Facebook users spend their time. Indeed, users are up to 150 times more likely to consume branded content in the news feed than content on a brand's Facebook page, according to web measurement firm comScore Inc.
A new look
What's more, Facebook's September redesign makes those ads increasingly important, Forrester's Corcoran says. The social network added a Top Stories section to consumers' news feeds that shows a consumer the content that Facebook considers most important to that user based on activity on the social network, such as a post receiving a slew of Likes or comments. Getting into the Top Story spot becomes a marketing skill akin to appearing high in search engine results, Corcoran says. "Marketers need to find ways to get consumers to interact with their content."
That means finding ways to draw consumers' eyes to a marketer's posts, Corcoran says. Ads, both within and outside the news feed, are ways marketers can draw attention to their brands. "Facebook has made it so that businesses almost have to use ads to make their pages work well," Corcoran says.
And marketers have to keep on promoting their content to keep it in front of consumers because of the volume of posts on a typical Facebook user's news feed. The average post only stays in a consumer's news feed for 22 hours and 51 minutes before pushed out by other posts, according to Facebook page analytics vendor PageLever.
Along with the new page design and ad format, Facebook last month also revamped its analytics dashboard, Page Insights, in an effort to give marketers more information. One feature, the Weekly Total Reach, aggregates all the consumers who have been exposed to a brand's posts, including those who've interacted with a page's content or seen its ads. It also displays for a page's last 500 posts each post's total reach, engagement rate, viral reach through networked friends, and how many people interacted with it.
Facebook also gives marketers access to much of its data so they can craft their own analytics tools. For instance, web analytics firm Webtrends developed a metric it dubbed Hoverstats that assigns a score to individual Facebook page posts based on unique impressions."We want to enable marketers to be able to measure and understand how their posts can have more impact," Facebook's Diana says.
More insight into how Facebook ads resonate with consumers will help retailers like online-only jeweler Ice.com figure out how to target ads to attract new Likes. For instance, if Ice.com uses Page Insights to see that a particular demographic—say, women who Like the movie "The Notebook"—responded to a particular ad campaign, it can use that knowledge to target similar shoppers in its next campaign. "We continue to get better at optimizing our ads with every campaign," says Dave Haber, Ice.com senior director, marketing communications and social media. "We learn what works and what doesn't work and we apply that knowledge to drive better results."
Facebook's increased focus on leveraging social context in ads could transform advertising, says Lou Kerner, social media analyst at the institutional brokerage firm Liquidnet. "The idea of letting an advertiser show you an ad that your friend engaged with is one of the biggest steps forward in advertising ever," he says.
Facebook has long maintained that consumers value relevant ads; coupling relevancy with a friendly face could raise the effectiveness of online ads to a new level.