Facebook is a Lean Mean Advertising Machine


The cycle of expansive experimentation at Facebook (NASDAQ:FB) is winding down. On Thursday, the social network reported that it will be closing down more than half of its 27 ad units over the next six months as part of an effort to “simplify our offerings.”

“Over the past year, we have been gathering feedback from marketers about our ads products,” the company commented. “One point we heard loud and clear is that we need to simplify our product offering. As the services we provide to marketers have grown, so have our new products; while each product may be good on its own, we realized that many of them accomplish the same goals.”

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Ostensibly, streamlining the process does two things: it decreases costs, and increases quality. Decreasing the cost necessary to serve advertisers is an obvious advantage to Facebook that could ultimately have a direct impact on the company’s bottom line. What’s less clear is how the quality improvements will impact the effectiveness of the ads. Lowering the barrier to entry for advertisers and increasing user engagement could both theoretically grow ad revenue.

One of the biggest changes is happening with sponsored stories. According to the release: “Previously, to get the best social context available, advertisers had to purchase sponsored stories in addition to ads. In the future, for example, when you create a Page post photo ad, we will automatically add social context to boost performance and eliminate the extra step of creating sponsored stories. We know social enhances ad resonance; people are influenced by this type of word-of-mouth marketing. Research from Nielsen, comScore, and Datalogix shows that social context can drive awareness and return on ad spend, so we want to make it easier to add it to our ads.”

The push comes at an interesting time for Facebook and its users. Reports have surfaced exploring the ways that the U.S. National Security Agency monitors various forms of digital communication, including Facebook activity. Privacy has historically been a top concern for Facebook users, with many users petitioning the network’s use of personal information for ad targeting the past.

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The market reaction has been been pretty muted. Facebook stock advanced in early trading on Friday, but the movement was as much participation in general market euphoria as anything.

Facebook, Inc. Stock Chart - FB Interactive Chart - Yahoo! Finance

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