Courtesy of Tech Crunch:
This fall, Sponsored Stories began appearing in the Ticker, the first time it had mixed ads with social content since 2008. Users didn’t actively protest having updates of their friends adulterated with ads, possibly bolstering Facebook’s confidence that it could show ads in the main news feed without ruining the user experience. After all, the ads are only showing content that could already appear in the feed.
Starting in January, when advertisers pay for these Sponsored Stories, they’ll be eligible to appear in the main news feed in addition to the ads sidebar. By mixing them in with social content on the site’s home page they’ll be much more noticeable and therefore more valuable to advertisers. The word “Sponsored” will appear in gray in the bottom right of the ad stories. If hovered over, it reads “This was already shared with you. A sponsor paid to feature it here”. Facebook tells me it will also be educating users about how Sponsored Stories work in other ways, such as sidebar ads that link to the Help Center’s Sponsored Stories section.
Given that Facebook has roughly 400 million daily users, half of which are on the web, Facebook could boost its daily ad inventory by up to 200 million impressions. This inventory expansion could reduce ad prices, though an increase in advertiser demand for Sponsored Stories could offset this. Facebook hasn’t finalized whether advertisers will have the option to specifically request placement in the news feed. Studies have shown sidebar Sponsored Stories have a 46% higher click through rate than traditional ads, and you can expect the CTR of news feed Sponsored Stories to be even higher.
If Facebook can weather the protest of users who want an ad-free news feed, it will have managed to open a significant new revenue stream. The launch of news feed Sponsored Stories could also be a big turning point for online advertising. With prominent placement on one of the world’s most visited sites and their appeal to viewers from including the faces and activity of friends, Sponsored Stories news feed ads could help Facebook steal ad spend from paid search and traditional display such as Google AdWords and AdSense.
Update: This article originally stated that Facebook had never shown ads in the news feed before. However, Facebook tested sponsored content in the news feed in 2006 to 2008, as this article now reflects.