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Facebook's Beacon Casts Light On Future Of Web Ads

Facebook's new social advertising program and, in particular, the inclusion of users' interactions with sites outside of Facebook through its Project Beacon, is the latest shot fired in the battle to reach even more discrete groups of consumers with Web advertising targeted to their particular interests.

The trend, called behavioral targeting or "hypertargeting," leverages the way social networks work in a new and potentially revolutionary way by extending the reach of social networks into consumers' daily Web-based lives and, perhaps, in ways that may disturb them.

Facebook's new program introduces a way for advertisers to set up their own profile pages and can be “friended” by users much like they already do on MySpace. But Facebook is also inserting advertisements into its social graph—the feed of activities from friends—attaching ads related to activity information from them.

And with Project Beacon, a program for partner sites, Facebook can now inject information about purchases users make elsewhere on the Web into the feed.

"There are some things here that are radically new," said Andrew Frank, analyst at Gartner Research. "Pages for brands is nothing new. [But] the behavioral targeting with Beacon, that's a new and experimental idea that could change a lot of the way we think about behavioral targeting."

“Facebook…evolves advertisements to endorsements, and encourages members to subscribe to a brand in what we are calling ‘Fan-Sumers,'” wrote Jeremiah Owyang, senior analyst at Forrester Research, in a blog entry discussing the launch. "As consumers share their affinities, brands can advertise using trusted social relationships.”

Facebook gave at least a cursory nod to privacy advocates by allowing users to opt not to allow purchase information show up as a “story” in their personal news feeds.

“On the plus side, there seems to be some user opt out if they don't want that story showing up on their Facebook profile,” Frank said. “But on the other side, there are some things that don't seem clear in terms of how much a Facebook user can opt out of.”

However, the limitations that Facebook has placed on its social ads, and the requirements the company has placed on vetting businesses, may limit the impact of the program. Facebook will only serve two “social ads” to users per day.

“Facebook users can opt to turn off social ads,” wrote Owyang, “and friends of that user can ‘dial down’ endorsements they see using preferences. We believe that Facebook is attempting to respect the rights of users by giving control to members to ‘opt-in’ to become a Fan-Sumer.”

MySpace introduced its own hypertargeting program in July, allowing advertisers to pick "enthusiast" audiences in 10 categories of interests: music, movies, personal finance, gaming, consumer electronics, sports, travel, auto, fashion and fitness.

On Monday, the company announced that it had expanded the program to include more than 100 subcategories within those 10, narrowing the focus from, for example, fans of movies in general to horror film enthusiasts.

“The sheer size of MySpace’s member base, as well as the thriving local business membership will lead to success,” Owyang said.

“MySpace’s approach is based on the more well understood idea of being able to use profile data to create micro segments," Frank said. “They can deliver an enthusiast audience of pretty good scale that advertisers can purchase. It’s much less of an experimental approach.”

Facebook’s business profiles are much more exclusive than MySpace’s, which have been an attractive marketing platform for many small and local businesses. Facebook executives have said that only “real businesses” will be allowed to have profile pages on their site.

Owyang said that businesses should “expect an entire team to be crawling and dealing with this qualifying the issue" and potentially disabling business profiles they find suspicious.

Between the restrictions on social advertisements delivered and the nature of how Facebook is delivering endorsements, Facebook’s approach could run into initial problems because of a lack of advertising inventory.

However, Owyang believes that the work that marketers will have to go through to obtain “fans” will pay off with more trusted marketing.

“This highly targeted system isn’t just about web advertising,” he wrote, “but about brand affinity and hooks into what’s really important: trusted endorsements from people in a network. This truly is the next generation of advertising.”

Frank was more circumspect.

“I think that anyone who makes a definitive prediction on that has a better crystal ball than I do,” he said. “This is a new frontier of mass consumer behavior that hasn't been tested before.”