Facebook has been on a mission to finally monetize its site and user base. The pressure to do so effectively has grown tremendously since going public. It now looks like the company has a method for doing so through the use of sponsored stories. Sponsored stories use user posts and “likes” and lets marketers turn them into ads. Since sponsored stories were introduced, advertisers’ ad performances have improved significantly. Companies including Electronic Arts, 1-800-Flowers, and P&G have praised the format and have found it profitable and very cost effective. For instance, 1-800-Flowers implemented a Mother’s Day campaign and created Sponsored Stories by celebrities (eg. Justin Bieber, Jason Mraz, Yankees player Nick Swisher, Knicks Player Baron Davis etc…) who endorsed bouquets by the retailer on their own Facebook pages.
Because of this, 1-800-Flowers saw an increase from 4,000 to 12,000 purchases through Facebook. However, sponsored stories have not been a complete success story. Facebook was sued via a class action lawsuit for using people’s names and likenesses without their permission. As a result, it was forced to pay $10 million dollars to settle and also it had to agree to allow users to have more say in how their personal information can be used. Although I enjoy signing onto Facebook, it irks me when I “like” a page in order to receive potential discounts from companies and all my friends have to know about it. Even so, sponsored stories will still likely be extremely lucrative for Facebook as advertisers plan to devote a large portion of their ad budgets to social formats like sponsored stories. From a mobile stance I think this is effective in helping Facebook solve its mobile ad problem. While typical ads on the sides of a website may work well on PCs, they don’t lend themselves well to the smaller screens of smart phones. Sponsored stories however, can fit seamlessly into the newsfeed on mobile devices. With an increasing number of people logging into Facebook on their phone, the ability to advertise in this fashion is critical.
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