While traditional advertising groups jostled for awards at a recent annual industry gathering in Cannes, the year’s biggest star was a newcomer to the beaches: the social network Facebook.
The company has gone from nowhere a few years ago to become the biggest single seller of online display advertising in the United States with more than $2 billion in revenues this year, according to research firm eMarketer.
Online ad sales have boomed in recent years largely because they finely target consumers in a way that print media and TV cannot match. Google and Amazon initially pioneered the trend by analyzing Web surfing and internet searches to target customers’ tastes.
Now Facebook has brought a new level of sophistication to the game: mining data from its social network about users’ likes and dislikes as well as those of friends to better target ads.
The stakes are high: industry insiders and analysts say brands are willing to pay more for such ‘social ads’ than they would for traditional online ads since they see them as more effective.
Mykim Chikli from Performics, a division of Publicis, which helps big companies with online advertising placement and strategy said, “You can target people who like golf, cars, and watches and you can start to push ads to that profile of person.”
In a demonstration of Facebook’s current advertising power, Google recently launched a social network dubbed Google+ in its boldest attempt yet to crack the medium and tap the advertising dollars it brings.
The move toward social ads shows how the Internet is transforming the whole industry.
Major companies from Nestle to Ford are increasing the proportion of their ad spend on the Internet to the detriment of traditional press ads and big ad agencies are scrambling to evolve.
Facebook’s influence is also spreading beyond its own site as more web pages allow people to use their log in details from Facebook to enter instead of a separate password.
Users can then share content and post messages within those sites as they would do on their social network, which in turn allows the website to access their profile and determine the user’s likes and dislikes. Twitter has a similar system.
Beyond more sophisticated targeting, Facebook also serves to amplify traditional word of mouth on everything from new movies to the latest smartphone.
“If I have a good experience with a brand I’ll tell a person offline — I might tell my friend — but if I do it on Facebook the average person is telling 130 people,” said Facebook Chief Operating Officer Sheryl Sandberg. “We think that explains the very healthy growth of our advertising business.“