Courtesy of The New York Times
Valentine’s Day, Nick Bergus came across a link to an odd product on Amazon.com: a 55-gallon barrel of … personal lubricant.
He found it irresistibly funny and, as one does in this age of instant sharing, he posted the link on Facebook, adding a comment: “For Valentine’s Day. And every day. For the rest of your life.”
Within days, friends of Mr. Bergus started seeing his post among the ads on Facebook pages, with his name and smiling mug shot. Facebook — or rather, one of its algorithms — had seen his post as an endorsement and transformed it into an advertisement, paid for by Amazon.
In Facebook parlance, it was a sponsored story, a potentially lucrative tool that turns a Facebook user’s affinity for something into an ad delivered to his friends.
Amazon is one of many companies that pay Facebook to generate these automated ads when a user clicks to “like” their brands or references them in some other way. Facebook users agree to participate in the ads halfway through the site’s 4,000-word terms of service, which they consent to when they sign up.
With heightened pressure to step up profits and live up to the promise of its gigantic public offering, Facebook is increasingly banking on this approach to generate more ad revenue. The company said it does not break down how much revenue comes from such ads. Its early stock market performance — down 22 percent from its offering price — is likely to increase the urgency.
But this new twist on advertising has already proved to be tricky. Users do not always realize that the links and “likes” they post on Facebook can be deployed for marketing purposes. And Facebook has already agreed in principle to settle out of court a class-action lawsuit over the practice in California.
Not least, its algorithms lack a sense of humor, which can lead to surprises, as in the case of Mr. Bergus.
“I was mildly annoyed, though not to the point of deleting my Facebook account or throwing a hissy fit,” said Mr. Bergus, 32, a multimedia producer in Iowa City, who wrote about the glitch on his blog. “I know the costs of using Facebook. It does not cost me money. It uses lots of my personal information.”
Wall Street is watching closely to see exactly how Facebook plans to use the information offered every day by its more than 900 million users. The company brought in $1 billion in revenue in the first quarter, the vast majority of it from advertising, but it has not disclosed what portion of that is from sponsored stories.
Facebook recently began to show sponsored stories in the site’s main news feed and in its mobile apps, where they appear a lot less like traditional ads, though they do bear a “Sponsored” label. It has told investors that consumers were 50 percent more likely to recall an ad if it came with a plug from a Facebook friend. And it has made clear to users that while they can change a privacy setting so their “likes” do not appear under ads in the most prominent advertising zone on Facebook pages, they cannot turn off other kinds of endorsements that show up elsewhere. “Because sponsored stories are just stories from the news feed, you cannot opt out of them,” Facebook explains in its help center.
A company spokesman said that users can choose not to click the “like” button next to something if they don’t want to be associated with it, and in general they can use the privacy settings to control who sees what they do.
Amit Shah, a marketing executive with 1-800-Flowers, said sponsored stories had been remarkably effective in drawing new eyes to the company’s Facebook page, especially on lucrative occasions like Mother’s Day. He said the company did not need to obtain permission from its fans to run such ads.
“The person has given their consent because they’re engaging with your brand page, and you’re boosting that engagement,” he said. “Our experience is that people love hearing stories of other customers.”
For marketers, sponsored stories save money. No creative work is involved. All they are doing is leveraging one user’s stated preference — whether for a lubricant or a political candidate — and spreading the word to that user’s friends. The most frequently used trigger for such ads in sponsored stories now is the vague, broad “like” button.
But people “like” things for different reasons. Sometimes it’s to cash in on goodies. “ ‘Like us’ on Facebook to enter to win a gift bag worth about $450,” read one recent promotion from the clothing chain Brooklyn Industries.
Mr. Bergus, a roller derby fan, “likes” a store called Sin City Skates, mainly to get updates on new products in his Facebook news feed. Peter Zaback, 32, a friend who originally alerted him to the ad in which Mr. Bergus appeared, “likes” President Obama’s page because he wants information from the campaign. Mr. Zaback said he did not know whether his endorsement had been used as a political ad.
Eric Goldman, an associate professor at the Santa Clara University School of Law, took aim at Facebook for, as he put it in a blog post, putting words in its users’ mouths. Facebook, he wrote, interprets a “like” as a statement of a user’s attitude and a “green light” to create an ad.
“So Sponsored Stories creates a zero-sum game,” Mr. Goldman wrote. “I as a user probably don’t get any value from the public presentation of my implicit endorsement (if anything, it might hurt my position with my friends), but Facebook and its advertisers benefit from it.”
Sponsored stories resulted in what initially seemed like a potentially damaging class-action lawsuit in California, though last month the company announced its intention to settle out of court.
In filing the case, in United States District Court, lawyers for the plaintiffs argued that the company had been unfair and deceptive in deploying users’ names and pictures in advertising without consent. In its defense, Facebook took a press-freedom approach, saying it did not need consent because sponsored stories were actually “news,” because all Facebook users were public figures to their friends. Details of the tentative settlement were not disclosed.
Angel Fraley, a Seattle costume designer who was the lead plaintiff in the case, said that she recalled clicking the “like” button for an online French course offered by Rosetta Stone. At the time, she said, she was considering moving to Paris, and she hoped that a “like” on Facebook might get her a discount on the course. It did not. Instead, several months later, she showed up in an ad for Rosetta Stone on her friends’ Facebook pages.
Ms. Fraley, 39, still “likes” many things on Facebook. But she said she resented being used for advertising. “When I signed up, that was not part of the deal,” she said.
In Ames, Iowa, Mr. Zaback came across a plug from another friend the other day. Steven Good’s name and face popped up on his news feed, with the announcement that Mr. Good “likes” American Airlines.
Mr. Good, 30, was not surprised. It would be naïve, he said, to count on an entirely free deal from Facebook. As the social media manager for Phi Delta Theta, a Christian college fraternity, he was experimenting with sponsored stories himself, hoping to leverage “likes.”
If you use the site, Mr. Good argued, you should be prepared to be used. “It’s the nature of the beast that is Facebook,” he said.