Yesterday I had lunch with the developers of a top Facebook application. They were commenting on the poor performance of advertising on Facebook applications currently. This is a serious problem for developers, especially those that are making their living off of these applications. Earlier today VideoEgg announced a new advertising model that they would begin using for their general network: pay per view. The new advertisements can be dynamically resized to fit anywhere on a publisher’s website.

The argument behind this new model is that CPM advertising lacks accountability. You pay for eyeballs but there is no way of ensuring who’s viewing it. This is a similar case for application advertising networks. The current models don’t allow for demographically targeted advertising campaigns. Instead advertisers (who are entirely application developers currently) can pay on a cost per install (CPI) basis or a cost per click (CPC) basis. The CPC model isn’t very effective though because it doesn’t accurately measure a user’s intent as Google’s CPC solution, AdWords, currently does.

So what’s the solution? Currently there isn’t one but over the next few months I think we will begin to see more robust advertising services potentially starting with The UADA which will announce the details of their program on February 29th. Mainstream advertising agencies have kept away from application advertising. That may be in part due to the fact that Facebook has built a New York presence and is pressuring advertisers to use their SocialAds solution.

The fact remains that Facebook application advertising companies are going to need to focus on doing more business development activities and go head to head with Facebook SocialAds. So far nobody has developed a robust advertising solution for applications and as such the majority of advertisements are currently advertising other applications. If the Facebook application advertisers want to play with the big boys they are going to have to focus on business development with large advertisers because those relationships are what’s valuable to advertising companies.

So far VideoEgg appears to be the only company doing so but even for them it has been challenging to increase effective CPM rates for application developers. We will see a significant transition in this space over the next six months as more robust solutions become available. Have you had any luck with your advertising on Facebook?

Last week I brought up the issue of the effectiveness of social ads. The debate rages on with Joshua Porter providing insight as to why social advertising will never be as effective as search advertising. I have to agree with Joshua that search can actively track intent and thus is more effective. Users browsing through their friends’ profiles are not actively looking for something and are instead passively hanging out on the site waiting to find something of interest.

Read more on The Social Times

There has been an ongoing debate about the effectiveness of Facebook’s SocialAds. For the longest time, people have been claiming that Facebook’s ads receive a high number of views but rarely get any click-thrus as the content on Facebook is too engaging. When I was at the Web Community Forum in Seattle back in December, one of the attendees told me that her company had invested in Facebook SocialAds and while there were horrendously low click-thru rates, the number of conversions for each click was extremely high.

My friend Markus pinged me yesterday to tell me about a SocialAds experiment that he performed and the results are definitely not positive for Facebook. Let me first preface his results by saying that there was no perfect constant in this experiment so it was a slight skewed analysis but it is the most accurate one I’ve seen to date.

Markus performed a test for marketing Steven Colbert’s book. The test on Facebook targeted all individuals that listed “Colbert Report,” “Colbert,” or “the Daily Show” in their profile. Here are the statistics that Markus came up with for his Facebook ads:

• impressions: 225,875
• clicks: 178
• CTR: 0.08 %
• average CPC (cost per click): $0.22
• average CPM: $0.17
• total cost: $38.38

On his Google ads, Markus got the following results:

• impressions: 15,386
• clicks: 688
• CTR: 4.47 %
• total cost: $109.63

As is typically the result with Facebook advertisements the number of impressions are extremely high and the click-thru rate is extremely low. This should be expected with Facebook advertisements but the real comparison comes when you take a look at the number of conversions. Here are the conversion rates for Facebook and Google:

Facebook
• pages per visit: 1.22
• Bounce rate: 82.84%
• average time on site: 13 sec
• 3.92 % clicked to Amazon
• 7.84 % clicked to Audible
• total conversion rate (clicked on product links): 11.76 %

Google
• pages per visit: 1.61
• Bounce rate: 67.21%
• average time on site: 42 sec
• 12.31 % clicked to Amazon
• 9.94 % clicked to Audible
• total conversion rate (clicked on product links): 22.26 %

The conclusion is that Google in this instance had a high conversion rate. I wonder if selling education or an alternative product or service would yield similar results. This is only one example and from one person I spoke with they had extremely high conversion rates. It also depends on competition for keywords and a number of other factors. I think this is a great first study for testing the effectiveness of SocialAds but we need a few more comparisons. Have you tested out SocialAds? Send me data if you have!

Lately my friends in marketing and advertising have been asking me more and more about Facebook. Everybody knows they’re supposed to be using it, and a lot of people don’t know where to look to find consultants and developers. Their bosses ask them, and they ask me, and I recommend myself.. of course.

Facebook has solved this problem while sharing a piece of the pie with its devoted developers. They have set up a special marketplace for Facebook Platform developers to advertise their services, and they have pledged to send all potential development clients in that direction.

To be clear, this is no small opportunity for developers. It’s a massive market.

According to Dave Morin, Senior Platform Manager at Facebook, “Everyday the team here at Facebook talks with thousands of people, businesses, and some of the biggest brands worldwide who are looking to find contract development services, or developers to join their team. We’re planning on sending every single one of them to the Facebook Platform Marketplace, so the opportunity is huge!”

Those who realize just how important it is for brands to have a presence on Facebook will understand just how incredible it is that Facebook has setup an area for anybody to post ads for free, and that it plans to send customers there.

It will be very exciting for developers and potential clients alike, as it was pretty difficult to find a reputable coder if you were new to the game before. I would really like to see some sort of rating system and some requirements of legitimacy. I would absolutely hate to see it turn into a free, unregulated, unorganized freelance site with no individual accountability.

The only problem so far is that people looking for work seem to be posting in both categories (”developers wanted”, and “developers available”). Come on people.. play fair.

Kudos to Morin and the Facebook team. I’m sure I speak for the whole development community when I say “thanks!”

- Jonathan Kleiman

I’ve said it a million times: the best way to make money with Facebook applications is through branded partnerships. Jeremiah Owyang has posted a case study about Sony using the Vampires application for generating buzz about their movie 30 days and 30 nights. The statistics are impressive yet not surprising considering the Vampires application is one of the top 30 applications on the platform.

Sony pictures was looking to have at least 10,000 users register for their sweepstakes in which a 4 wheel ATV was given out and $1500. The application ended up registering almost 60,000 users. This was way more than they expected to register and as a result the client was happy. So what are the suggestions that Jeremiah came up with after speaking with Rock You? Jeremiah came up with the following three things that worked:

1. Fishing where the fish are: Sony figured out where the already existing community was (remember to fish where the fish are) and rather than trying to rebuild something completely by scratch, they leveraged an existing successful application.
2. Rely on specialists for new arenas: In my many briefings with vendors and clients, specialized firms often provide something a general interactive firm or corporate web marketing team can’t. They have experience, know their area, and in this case, they knew to rely on someone that already knew Facebook (such as Social Interactive.
3. Compliment the existing user experience: Sony didn’t beat the 3 million existing users with heavy advertising (and I’m sure RockYou wouldn’t have let them) over the head, instead offered value by giving away prizes, and tied in a movie that already existed.

The main conclusion of Jeremiah’s post was that this individual campaign was highly successful and leveraging social applications for branding can be extremely effective. For Facebook application developers, you should be specifically targeting brands and looking for opportunities to forge new relationships. Do you have any examples of other applications that have used this tactic?

There has been considerable buzz on the Facebook Developer’s Forum about the best way to advertise applications. For a while some people were getting paid terribly low amounts for their clicks, and some of the services have apparently been buggy.

Since the best way to find out which one is the best service is to conduct empirical tests, I was hoping some of our readers who subscribe to them could provide some insight. I’m sure there are also some cool ideas out there that are outside of the box.

Since some cities are so heavily saturated with Facebook users, perhaps it’s even time to start considering advertising applications through other means.

I recently came across one of the most effective things I’ve ever seen a company do to market its product. My pizza box had an advertisement on it! Not some ugly ad… but a beautiful, high resolution, sexy advertisement for Tag. When I first saw it, I thought “wow.”

It wasn’t until after 1 week of it staring at me from my fridge and 2 weeks of it sitting in a recycling pile that I realized just how brilliant it was.

Kudos to Fresh Tracks Media for coming up with a novel marketing idea!

Leave a comment if you have something to say about the best way to market an application, within Facebook or otherwise.

- Jonathan Kleiman writes for the blawg LegalIntellects.com

You are sitting in the conference room with the rest of your company’s executives brainstorming about what is the next product your company should launch. Given that you have already launched a few relatively successful Facebook applications you decide that now is a good time to launch another product. “I got it,” you think to yourself. We’ll build an ad network for Facebook applications! It has only taken you 7 months and the launch of 12 competitors to realize that this might be a lucrative business.

Unfortunately, this is what AdBlade has done. They have launched yet another ad network on Facebook at the wrong time. There are now well established leaders in this market and attempting to become the next leader is extremely challenging unless you have a comparable active user base within your applications. AdBlade was launched by the people over at Congoo.com. Congoo has gone through many revisions in their business plan over the past couple years.

Two years ago, Pete Cashmore gave a fairly negative review. At the time, Congoo’s vision appeared to be somewhat blurred.  I think they are following the wrong path yet again with the launch of AdBlade.

Update
Ash Nashed, CEO of Congoo, reached out to me following this less than positive review of AdBlade. Ash accused me of not offering them a fair chance. I’ll be honest in regards to Congoo, I didn’t give them a fair chance and went to the first review of the site I could find for reference. I have since done a little more digging. Congoo provides a tool that enables users to view “premium content” on sites for free while providing the paid content owners with marketing information for each user.

The tool makes a lot of sense but I have to be honest, I don’t agree with paid content on the web except for Consumer Reports which strives to avoid a bias. Regardless, the tool works well, I just wouldn’t use it. The only tool I need to view content on the web is my internet browser and that’s it. Aside from their tool though I failed to give a complete review of AdBlade and just dismissed them right away. While I still think they are too late to the game I am open to demoing their service. I’m still waiting on a login to test it out. I’ll let you know if this changes my thoughts!

Mediaweek has published an article describing Facebook as being forgiven by advertisers. This is definitely good for Facebook even though some people are up in arms over privacy policies being blatently violated. According to the article, “Buyers say they are generally satisfied with the way Facebook has responded to the recent storm of controversy generated by Beacon.” Apparently it wasn’t as big of a PR disaster as many bloggers made it out to be.

Not only was it not a disaster but “many buyers credit Facebook for its willingness to be daring in this still-nascent space, where the rules of advertising are still being written.” Mike Shields, author of the Mediaweek article, spoke with a number of advertisers and it appears that the backlash against Facebook may have been overblown. This is why this morning I suggested that Facebook’s decision to let users completely opt-out of the service may have been a poor business decision.

Regardless, Facebook has a ton of momentum and is still only at the early phase of their growth. Facebook would be in the tornado phase as described by Geoffrey Moore in the book, “Chrossing the Chasm.” As such, advertisers are going to want to get a piece of the action and a little slip up by Facebook is not going to stop them. Brands will definitely be hesitant though when joining the new Beacon program. Do you think the drama surrounding Beacon is over or is will it soon flare up again?

Michael Learmonth is reporting that ABCNews.com didn’t get much help from advertising via Facebook. The one thing that Michael fails to mention is what form of advertising he is referencing. It appears that he is referencing an ABCNews.com Facebook application that has not performed very well over the past couple months. That’s not as much of a result of a poor performing advertising campaign as it is a result of a poorly designed Facebook application.

Whether or not ABCNews.com has experienced a poor performing Facebook ad campaign, Facebook’s performance as an advertising channel is still under debate. I have previously reported that Facebook has horrendously low click-thru rates. That is still the case but perhaps click-thru rates are not what should be measured. One advertiser that I spoke with while at the Web Community Forum in Seattle, siad that she had tested out SocialAds and the performance was great.

While the click-thru rates were still poor for this indiividual, she argued that she was able to generate more click-thrus through targeted advertising on Facebook in a short time frame than she was able to generate via competing advertising channels including Google and Yahoo. Unfortunately I don’t have data from other advertisers to substantiate this argument but if you have had a great experience with Facebook advertising, please let us know!

Federated Media Publishing has announced their expansion into Facebook through partnerships with the owners of the Grafitti application and Watercooler. The initial sponsors launching on Facebook are Hewlett-Packard and Wacom. These two companies mesh perfectly with the Grafitti application which enables users to draw on the grafitti walls displayed on their friends’ profiles. Grafitti has over 300,000 active daily users and Watercooler Inc. has over 500,000 active daily users.

This announcement provides legitimacy to the Facebook application advertising space and serves a massive blow to existing Facebook advertisers. One of the main issues facing large Facebook developers is the difficulty to connect with the companies (and brands) best fit to integrate advertising campaigns into applications. Federated Media will help bridge this gap for larger application developers and existing Federated Media partners.

Federated Media is now the largest advertising network to join the Facebook platform. This is a monumental step that will surely legitimize the platform’s potential. I have spoken with a number of other large ad networks (including ones larger than Federated Media) that have stated their intention to enter the Facebook application advertising space. Look for more announcements to follow in the coming months of large ad networks deciding to participate in this highly competitive and highly volatile space.

Federated Media stated that the new partnerships have helped their network to expand beyond 1 billion monthly page views. Other significant players in the Facebook marketing space include RockYou, SocialMedia, Cubics and VideoEgg. Looks like competition just got tougher in the Facebook ad space.