October 31, 2012, 11:34 AM

Facebook tests the impact of putting display-like ads in the news feed

The social network wants to determine which ads spur consumers to click.

Zak Stambor

Managing Editor

Lead Photo

Facebook Inc. will place display ads into consumers’ news feeds in a test. The news feed includes the latest posts from friends and companies that a consumer has Liked.

“We are currently running a small test that makes other ad units eligible to appear in news feed,” says a spokeswoman for the social network. The effort is part of Facebook’s on-going testing to gauge feedback on which types of ads spur consumers to click.

While the ads look like Facebook’s display ads, which the social network calls marketplace ads, the spokeswoman says Facebook is not calling the new ads marketplace ads. However, both ad formats have a headline such as “Hopsack Chukkas” that appears above a small image and brief caption like “Retro kicks with a signature blend of comfort and spare-yet-chic aesthetics, today on Fab.” Below the caption appears a count of how many consumers Like the advertiser’s page.

By placing the ads in the news feed, the ads will reach Facebook’s 604 million active mobile users who do not normally see Facebook’s display ads. That’s because mobile users do not see marketplace ads, which appear only on the right side of Facebook.com pages.

The test thus addresses two of Facebook’s main concerns—figuring out how to better monetize both its display ads and its mobile traffic. The social network in September began enabling marketers to buy marketplace ads using the Facebook Exchange, its real-time bidding system. Facebook Exchange enables ad brokers, via cookies on consumers’ computers, to target consumers based on their off-Facebook browsing. For instance, a shopper who visited an apparel retailer but did not make a purchase might be retargeted with an ad presenting her with an image of the T-shirt she looked at, along with a free shipping offer for that retailer. It is important to note, however, that Facebook Exchange ads are not part of the current test.

Facebook also introduced this year multiple mobile ad units that appear in consumers’ news feeds. Reaching consumers in their news feeds is essential, says Facebook, because that is where they spend 40% of their time on the social network.

Even though the social network has rolled out several new ad formats that appear in a user’s news feed, Facebook has been careful to limit the number of ads any individual sees to minimize any adverse impact to the experience of using Facebook, said Sheryl Sandberg, the social network’s chief operating officer, in a conference call with analysts last week. “We’re carefully monitoring user engagement and sentiment, and we’re pleased with the results so far,” she said. “We look at how users are engaging on our platform. And as we’ve increased the number of ads in news feed, we’ve been carefully monitoring that engagement.”

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