Not Surprisingly, Facebook Spawns a Cottage Industry

When the historical significance of Facebook is finally analyzed someday, it will not only include the enormous global user base the site has managed to attract, it will also attest to Facebook’s ability to` create new businesses.

Much as the popularity of eBay and Amazon led to legions of online marketers who launched businesses that fed off of those sites, Facebook has had the same kind of halo effect on business segments, one of which is ad agencies. Facebook has created a kind of secondary ad market that is burgeoning; in fact, more than one-third of all online display advertising in the U.S. appeared on Facebook in February, according to data from comScore.

Still, major advertisers are slow to make big commitments, and that’s where a whole new kind of agency is stepping in – the Facebook ad agency. More than a dozen agencies now specialize in placing ads on Facebook, reports the Wall Street Journal. That’s because placing Facebook ads is a complex, sophisticated process that often involves creating ad versions in the thousands, targeting very diverse audience segments.

Despite the site’s cutting edge reputation, Facebook ads are sold in basically two ways – by a sales force that deals directly with large advertisers, or via a self-service tool that is less than adequate for the multi-versioned, highly targeted ads that interest major marketers. Facebook has “hard-to-navigate in-house systems for buying ads” reports the Journal.

That’s why firms like Blinq Media help make it easier to version ads that target consumer segments based on demographic information like age and location, as well as psychographic information, such as interests and beliefs. Blinq Media, says the Journal, applied its technology to help Buffalo Wild Wings, a restaurant chain, reach beyond its core audience with a campaign that tripled the campaign’s ROI. Some of these little agencies are so good at what they’re doing that bigger agencies are buying ads through them for their large clients.

You might even attribute a portion of Groupon’s blistering growth to Facebook ads. According to the Journal, Groupon used to place Facebook ads manually but found Facebook’s self-service tool too limiting. Now the daily deal service uses AdParlor to “churn out thousands of ads a day targeting narrow-niche demographics…”

David Fischer, Facebook’s Vice President of Advertising and Global Operations, told the Journal that Facebook embraces the new agencies, as long as they can add to Facebook’s advertiser base: “The ecosystem that these third parties are developing and building on Facebook is healthy and of benefit to everyone,” he says.

Well of course – why shouldn’t Facebook favor a whole cottage industry that is galvanizing advertiser interest in the social media site? If it sounds familiar, it should. Conceptually, this isn’t all that different from Amazon affiliates and sellers feeding business to and generating revenue for Amazon, or eBay sellers opening stores, or app developers feeding off of and fueling the popularity of smartphones and tablets.

This is the beautiful bottom-feeder phenomenon associated with massively successful online products and services. They create cottage industries and after-markets that can extend well beyond the original core product. Now it is happening with Facebook, and that’s no surprise.

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

  • YOMANWESELL

    Great article – thanks for sharing – Manwesell