Facebook: Now open for business

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Of the hundreds of press releases and pitches made during Ad:tech, none were as anticipated as Facebook's announcement regarding its new advertising solution. It includes Facebook Pages for products, businesses, bands and celebrities; social ads, based on related actions users' Facebook friends have taken on the site; and Facebook Beacon, a means of sharing actions from other sites via Facebook's News Feed, such as eBay listings or movie ticket purchases on Fandango.

In a similar vein, Google recently announced OpenSocial, a common set of APIs with the same aim. Web sites currently employing these APIs include Engage.com, Friendster, Hi5, LinkedIn, MySpace, Oracle, Orkut, Plaxo, Salesforce.com and Six Apart.

Matt Sanchez, CEO of videoegg.com acknowledges that this new paradigm will raise privacy concerns.

“Facebook will have to address the obvious privacy discussions and the issue of media performance,” he said. “For brand-building, demographic targeting will be far more valuable within inventory where users are more likely to engage with brand messages.”

Toby Daniels, VP of business development for Mint Digital concurred. “Fundamentally, how does this benefit the consumer?” he asked, going on to say, “The role that the advertiser plays is critical to the success of social ads.”

To reassure users, Leah Pealman, the product manager for Facebook Ads, added this note to the firm's blog post-announcement: “Facebook will always stay clutter-free and clean. Facebook will never sell any of your information. You will always have control over your information and your Facebook experience. You will not see any more ads than you did before this.”

The investment community eagerly awaits what is presented as a trial run.

“This will be a fascinating experiment in trying advertising that moves way beyond the banner, said Jed Katz, managing director of DFJ Gotham, a venture capital firm focused on early stage technology companies.

“I expect some great success stories but also some massive flops,” he continued. “Will people change their buying habits based on what they see their friends doing, or will they ignore the ever-growing and increasingly boring ‘newsfeed' stream? Only time will tell. I'm betting that once this concept gets refined a bit, it will bring a better ROI to advertisers.”

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