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Rob Valerio
Marketing and Business Consultant
Los Angeles, California
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How to Use Facebook's Sponsored Stories

Facebook now has sponsored stories that may end up in individual's newsfeeds.
Written Mar 06, 2012, read 1625 times since then.
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Facebook is becoming the go-to advertising network on the internet.  The main reason is that with 800 million users and 405 minutes per active user of engagement per month, that is where the eyeballs are.  Secondly, with facebook’s deep demographic database, ads can be targeted to very specific niches.  In exchange, Facebook is reconfiguring their interface to feature advertising.

Facebook has two primary ad vehicles for businesses now:  business pages and sponsored stories.  Business pages are free, but will be enhanced by sponsored stories.  Mobile viewing accounts for about 40% of the facebook traffic, but ads were not shown until now because of the mobile facebook layout.

Display ads have a .1% to .5% click through rate.  At the other end of the spectrum, the highest conversion rate is actual friend’s recommendations.  This is where facebook sponsored stories come in to create ads that appear to be friend’s advice.

Sponsored Stories

Businesses need users to “like” or interact with a business on facebook pages at some point in their prior history in order to advertise to the user’s friends.  If a business pays for an ad in sponsored stories, facebook will use any actions the individual business fans have had with the company in future advertisements.  Past interactions may be a like, a comment, or a check in at a business.  A sponsored story is an ad that is “featured” either directly in the newsfeed or under the Sponsored banner on the right hand side of facebook.

The two levels of sponsored stories are marketplace ads and premium ads.  Marketplace ads are self serve, in that the business creates their own ad and it is placed in the sponsored column that is always on the right hand side of the facebook page (non-mobile).  If there are no premium ads being served, these marketplace ads move to the top of the sponsored column and get better conversion.

Premium ads are for companies that deal with a facebook ad rep, and companies that make larger ad commitments for broader ad coverage and views.  Facebook has not given any hard numbers at this point, but marketing people say it starts around $10,000 and may be up to $50,000 in ad commitments for premium placements.

Facebook will move all business pages to Timeline on March 30, 2012.  Businesses can migrate to the new look now.  Individual pages are already on Timeline, which sorts the newsfeed by facebook’s decision on relevance by default.  It is through the use of timeline that facebook can prioritize ads into the top of the newsfeed.

Facebook has just announced Reach Generator, which is for premium ad customers.  With Reach Generator, facebook will guarantee a sponsored story ad to reach at least 75% of a business’s existing fans.  In addition, sponsored stories using Reach Generator can be featured at the top of fan’s friends newsfeed, effectively putting ads as sponsored content on mobile and the homepage.

A typical example of a sponsored link will take a photo from the individual’s photo album and place it with a caption for the company that is sponsoring the advertisement.  Facebook has found a 4x to 6x larger interaction rate with these types of display ads than to typical messaging stock photo display ads. 

Timeline will allow businesses that pay for sponsored stories to get their featured ads put in the top part of individual user’s timeline newsfeed, pushing down the newsfeed of more recent but non-paying entries by friends or other businesses.

An additional bonus for sponsored ads is that now businesses can advertise on mobile directly in the newsfeed layout common on smart phones.  This will dramatically increase facebook ad revenues and further delineate between companies that pay for premium sponsored stories and those that rely on free business pages only for social media interaction.

Because of the demographic ad targeting available via facebook, more and more advertisers are using the platform.  Search and Pay per Click (PPC) is still an important ad format online, but these new style ads that appear as if they are friend recommendations will have higher response rates, and ultimately higher goal completions.  Companies that don’t pay for sponsored ads will see their free marketing efforts diluted down the timeline with the other non-paying user generated content.

Learn more about the author, Rob Valerio.

Comment on this article

  • Independent Film & Video Producer/Creative Director 
Seattle, Washington 
James Goldsmith
    Posted by James Goldsmith, Seattle, Washington | Mar 10, 2012

    Wow, thank you Rob for the very relevant info.

  • Marketing and Business Consultant 
Los Angeles, California 
Rob Valerio
    Posted by Rob Valerio, Los Angeles, California | Mar 10, 2012

    Thanks for the positive feedback.

    One thing I meant to emphasize more is that small businesses right now have the opportunity to get viral marketplace ads in their business fan's friend's newsfeeds by just having good copy in their ads. Facebook has said relevant content is important and especially here at the beginning of Sponsored Stories facebook will be promoting catchy stuff off of small business facebook pages.