SAN JOSE, Calif. — Advertising on Facebook is about to gain a more prominent place, as the company works to boost revenues in advance of an initial public offering of stock.
With Facebook planning a major event on Wednesday — an invitation-only conference for marketers at the Museum of Natural History in New York — internal documents suggest the company will announce upgraded "premium ads" that will be more prominent on the social network.
The new ads also will have more of what Facebook calls "social context." That means friends of the people who are fans of a particular product that advertises on Facebook — not just those who have hit the "Like" button for that brand — will see an enlarged version of the product's advertising. Those ads will say the user's friend likes the brand, adding a social context that Facebook says will make the ads 80 percent more likely to be remembered.
Company officials declined to comment on the documents, which were obtained by the San Jose Mercury News. But analysts debated the implications of Facebook's plans to increasingly target ads by leveraging the connections among its 850 million users.
"It's really very important and very interesting, because it almost brings advertising into the realm of the testimonial and word of mouth," said Rebecca Lieb, an analyst with the Altimeter Group.
Ads produced $3.15 billion in revenue in 2011 — 85 percent of Facebook's total revenue and a 69 percent increase over 2010.
"Going into their IPO, they were going to have to be a lot more aggressive in terms of how they approach advertising," said Yoni Yadgaran, an analyst with Wedbush Securities. "Facebook in the past has always been user experience first, and careful not to make (advertising) more intrusive. The sense we're getting now is that Facebook is willing to sacrifice a little bit of that in order to ensure monetization."
One analyst warned that Facebook's making such big changes could indicate its revenue growth has weakened.
"These are the types of actions ad-supported companies save for a rainy day," said Sam Hamadeh, chief executive officer of PrivCo, which tracks financial data on private companies. "It should be a red flag for investors."