These Businesses are MANIPULATING Facebook’s SECRET Ad Formula

Facebook (NASDAQ:FB) still appears to have some way to go before it masters its own advertising space, but using the social network as a marketing vehicle has clearly become a priority for brands.

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Facebook’s technology includes an algorithm, just as Google’s (NASDAQ:GOOG) Search does, that decides which posts appear on people’s news feeds and which ones don’t. Understanding this filter, called EdgeRank, is something of an industry by itself now, as is obvious from the recent high-profile mergers and acquisitions activity in the social media marketing management space. Oracle (NASDAQ:ORCL) recently paid $300 million to buy the company Vitrue, while salesforce.com (NYSE:CRM) bought Buddy Media for about $700 million and Radian6 for $330 million.

The EdgeRank formula is constantly being modified by Facebook, but it is said to base its calculations on the closeness of two people (or a person and a brand), how valuable an activity is, and how long ago it took place, according to Technology Review. But figuring out the algorithm’s little tweaks is important to marketers, and that’s why companies such as EdgeRank Checker are sprouting up.

EdgeRank Checker provides a score of Facebook pages based on how posts are performing, and claims to reverse-engineer the algorithm by analyzing posts from pages and their audience. “This is the future of Facebook marketing, understanding that algorithm,” EdgeRank Checker founder Chat Wittman tells Technology Review. “I dedicated myself to learning it and testing it.” Wittman says he has signed up 200,000 pages to his service, including some Fortune 500 companies such as Walgreen (NYSE:WAG).

There is much room for development in the field though, especially as the newly public social network tries hard to find new revenue streams and earn more advertising dollars.

According to estimates by PageLever, another Facebook analytics company, the average company page reaches fewer than 8 percent of its fans with updates. At the moment, Facebook is not benefiting from this new phenomenon that seeks to master its science, but eventually it may start asking for a fee that ensures a post rises to the top. It is already experimenting with “Reach Generator,” a way for companies to pay to reach more fans.

“News feed optimization is still at its early stages,” says Tim Chae, founder of PostRocket, a startup that analyzes Facebook page metrics. “I’d compare it to search in 2001,” he adds. But one thing is clear: The space is ripe for growth.

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Facebook shares are trading up 6.02 percent this afternoon, breaking above the $30 mark as they recover from their post-IPO plummet.