Thursday, February 18, 2010

Facebook to Begin Selling Its Own Ads

Facebook to Begin Selling Its Own Ads

The social media phenomenon Facebook continues to make major changes to its website and this time, it has to do with advertising. The company has announced it is taking full control of displaying ads. Originally, Microsoft handled the placement of ads. But that doesn't mean Microsoft and Facebook are parting ways. Quite the opposite, actually.

A new contract states that Microsoft will continue to sell text-based search ads on Facebook and Microsoft will continue to be the exclusive provider of Web search for Facebook. The two companies' original contracts were supposed to expire in 2011. While the contract has been extended beyond that year, neither company will say exactly how long they plan to work together or how much money was exchanged. Microsoft does say it plans to continuing integrating Bing into Facebook and hopefully extend its reach beyond the United States.

So why did Facebook make the decision? They say they can reach their 400 million users with their own ads, which feature interactive aspects and target viewers based on personal information. According to the company, their ads are more suited for social networking vs. the standard Microsoft web ads.

In a statement, a spokesperson for Facebook said, "Ad formats that feature social actions perform better and provide a better user experience since they are more consistent with the look and feel of Facebook. This combination of targeting and social relevance is the primary driver behind the shift in strategy."

The new ads have already been introduced in some international markets and the change in the United States is expected to take place over the next few weeks. Originally, Facebook had sold its own ads but began to let Microsoft do it in 2006.

As mentioned, Facebook has been making lots of changes recently, such as redesigning its home page. The company announced it had become free cash flow positive in September, which was sooner than expected. As a matter of fact, Facebook has been giving long-standing internet powerhouses such as Google and Yahoo a run for their money, as it becomes one of the most popular destinations for internet users. Since December, 2009, the company has gained about 50 million users.

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