Facebook hired Gokul Rajaram in 2010, who once headed Google's AdSense engine, to run Facebook's advertising. He believes that advertisements should not feel like advertisements: "You would much rather hear a message from your friend than hear a message from a brand."
This is exactly what Facebook is trying to do in order to prove its ROI over other ad servers such as Google. They allow brands to pay to show up in news feeds whenever a friend "likes" the brand, and these are called "sponsored stories." This seems to be especially effective within Facebook's mobile app, according to AdParlor, a manager of Facebook ad campaigns for clients including American Express, Audi, and L'Oreal.
How Facebook plans to monetize its mobile app has been a concern for investors as users increasingly move to browsing Facebook on mobile devices. AdParlor addresses this concern by reporting that Facebook mobile ad click-through rates are between 11 and 15 times greater than traditional desktop. However, the conversion rate to becoming a fan is 16% lower than non-mobile advertising. The good news is that CPC rates cost 30% less for mobile ads than non-mobile ads, probably since mobile advertising has not really taken off yet because advertisers need more information on ROI.
So now we know the cost of acquiring a Facebook fan, but what is the value to the advertiser? And if conversion rates are low even though click-through rates are high, does this make mobile ads more or less effective than non-mobile? The jury is still out, but it will be very interesting to see how mobile advertising develops. Facebook is positioned to play a huge role.
You can see additional mobile stats from AdParlor here.
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