Yahoo and Google grads: (from left) Murphy, Fischer, Sandberg, and Burnett lead Facebook's ad team Misha Gravenor
There were two obvious winners at the FIFA World Cup this summer. Spain took home the 13-pound, 18-carat-gold trophy for its achievement on the field. Nike (NKE) won the branding championship, thanks largely to a three-minute commercial called "Write the Future," in which its stable of soccer endorsers fantasize about the glory or disgrace that might result from their play in the tournament. Hundreds of millions of people saw "Write the Future" on television. Before it blanketed traditional media, however, Nike launched the video on Facebook, the Web's dominant social network.
The video started as an ad on the site. Then it was passed from friend to friend, often with comments and members recommending it. In the resulting discussions, the clip was played and commented on more than 9 million times by Facebook users—and helped Nike double its number of Facebook fans from 1.6 million to 3.1 million over a single weekend. Getting the ad onto Facebook cost a few million dollars, according to the companies. All that passing around was free. Davide Grasso, Nike's chief marketing officer, says Facebook "is the equivalent for us to what TV was for marketers back in the 1960s. It's an integral part of what we do now."
Marketers have long hoped to turn the Web into the perfect advertising medium. Pop-ups on AOL (AOL), banners on Yahoo! (YHOO), and search ads on Google (GOOG) were steps along that journey. But it's Facebook, the Palo Alto (Calif.)-based social network whose life as a moneymaking business is only now beginning, that may be best positioned to deliver on the Web's promise.
The company has developed a potentially powerful kind of advertising that's more personal—more "social," in Facebook's parlance—than anything that's come before. Ads on the site sit on the far right of the page and are such a visual afterthought that most users never click them. These ads can evolve, though, from useless little billboards into content, migrating into casual conversations between friends, colleagues, and family members—exactly where advertisers have always sought to be.
"The whole premise of the site is that everything is more valuable when you have context about what your friends are doing," says Facebook co-founder and Chief Executive Officer Mark Zuckerberg, who started accepting ads on Facebook as a Harvard sophomore in 2004 in an attempt to cover server costs. "That's true for ads as well. An advertiser can produce the best creative ad in the world, but knowing your friends really love drinking Coke is the best endorsement for Coke you can possibly get."
All this is cause for concern to Facebook's critics—and their numbers among privacy advocates and politicians grow every time the social network pushes the boundaries of the service beyond what its users originally signed up for. People join Facebook to share their lives with friends, yet the information they reveal "is being used by strangers for completely unrelated commercial purposes," says Marc Rotenberg, executive director of the Electronic Privacy Information Center, which filed a complaint with the Federal Trade Commission earlier this year over changes to the social network's privacy policies. "That is a little unsettling."
For now, Facebook's appeal to large brand advertisers such as Nike is at least partly a function of its size. Facebook has around 550 million members around the world, about 165 million in the U.S. alone. In contrast, about 106 million people watched this year's Super Bowl—the most watched TV program ever. According to Nielsen, Facebook users average about six hours a month on the site, dwarfing the time spent on old-line portals such as Yahoo and AOL (each about two hours). Speaking at the Cannes Lions International Advertising Festival this summer, Zuckerberg said that reaching a billion members is "almost a guarantee."
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