More than 80 per cent of the largest US advertisers are using Facebook to promote themselves, suggesting that corporate America has embraced the social networking site as a mainstream promotional platform.
This marks a striking shift. Companies were initially hesitant to advertise on social networks because users appeared resistant to advertising and there were fears that corporate logos might appear alongside offensive content.
However, Facebook, which has 340m unique monthly visitors, says 83 of the top 100 advertising spenders in the US, as ranked by the research group AdAge, use its site. This group includes Johnson & Johnson, Nike and AT&T.
“Every client wants to talk about Facebook,” said Ed Montes, US managing director of Havas Digital, whose clients include Sears, Expedia and Air France. “I haven’t seen this kind of consistent fervour for a company since Google.”
Unlike previous big brand promotion on the web, the ads on Facebook are not splashy displays and banners but more discreet, blending into the overall design of the site.
They typically invite users to engage with companies, directing them to pages and applications where they can become fans of the company and receive regular updates.
“Facebook is trying to build a platform where consumers and marketers can interact in innovative ways,” said Mr Montes. “The personalised consumer relationships that you can develop on Facebook are the future of online marketing.”
This has triggered a strong consumer response: suggesting that Facebook users are comfortable using product allegiances to help define themselves. Starbucks has more than 3.7m fans on its Facebook page, while Coca-Cola has more than 3.5m.
“If you look at people’s profile pages, you’ll see a lot of commercial activity even without advertising,” said Sheryl Sandberg, Facebook chief operating officer.
Facebook does not charge companies to have a fan page or an application. Nor does it plan to take a cut of the increased e-commerce taking place on its applications.
However, Ms Sandberg said the effectiveness of these free services was prompting the big brands to advertise.
In the past year, more big advertisers have also begun to campaign on MySpace.
Engaging with customers might work for consumer products, but it is unclear whether it will be effective for business-to-business brands. The absence of display ads on Facebook may prevent them from launching large-scale campaigns.
As a private company, Facebook releases very little financial information. However, Mark Zuckerberg, Facebook chief executive, recently prediced revenue growth of 70 per cent this year and said Facebook would be cash-flow profitable next year.
But others are more liberal with their assessment of Facebook’s potential revenues. Facebook board member Marc Andreessen recently told the Financial Times that Facebook is “already doing more than $500m in revenue this year almost without trying. If Facebook was completely focused on monetisation it would be doing well over a $1bn this year,” he said.