Facebook crashes advertising industry party

Fri Jul 1, 2011 5:29am EDT
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By Kate Holton and Leila Abboud

LONDON/PARIS (Reuters)- While traditional advertising groups jostled for awards at a recent annual industry gathering in Cannes, the year's biggest star was a newcomer to the beaches: the social network Facebook.

The company has gone from nowhere a few years ago to become the biggest single seller of online display advertising in the United States with more than $2 billion in revenues this year, according to research firm eMarketer.

Online ad sales have boomed in recent years largely because they finely target consumers in a way that print media and TV cannot match. Google and Amazon initially pioneered the trend by analyzing Web surfing and internet searches to target customers' tastes.

Now Facebook has brought a new level of sophistication to the game: mining data from its social network about users' likes and dislikes as well as those of friends to better target ads.

The 'social ad' approach can be seen in a current Facebook campaign run by tennis racket maker Head. Users who link to Andy Murray's page get updates from the player himself mixed in with ads for his sponsor and jokey YouTube videos.

However there are risks involved for Facebook and other online ad players as they develop ever more sophisticated ways to track people's behavior online.

Some regulators see such tracking as a violation of privacy even when it is done anonymously. The Europe Union recently required that web surfers be notified if the sites they visit are collecting information about them, prompting howls from industry.

The stakes are high: industry insiders and analysts say brands are willing to pay more for such 'social ads' than they would for traditional online ads since they see them as more effective.   Continued...