Facebook tests read/watch/listen Sponsored Stories — too soon?

Facebook is testing new types of Sponsored Stories based on Open Graph actions, a spokesperson from the company confirms. In the test, advertisers can pay to promote stories about a user listening to a particular artist, watching a particular video or reading an article, even if the advertiser does not own the app in which the action was taken.

It is important to note that this is a limited test with a small number of marketers. Facebook has not even involved its Ads API partners. There is no timetable for when these Sponsored Stories might be available to the public. The image to the right is the type of activity an advertiser could pay to promote, but we do not have a live example of the ads being tested.

This type of advertising seems to be part of a very long-term vision for the company. In fact, it is surprising that Facebook is testing it at all this early in the development of Open Graph. In its current state, there are few instances in which advertisers might find this sort of advertising worthwhile — both because of limited scale and unclear return on investment. However, the test shows the company continuing to think several years ahead. As brands’ content marketing efforts mature, these Open Graph Sponsored Stories could provide more value to advertisers and become a large source of revenue for Facebook.

Sponsored Stories are uniquely structured ads in that an advertiser does not have control over the creative and an advertiser cannot pay to show the unit to whomever they want. In order for a user to see a Sponsored Story, one of the user’s friends has to have taken a particular action. For example, if a user does not have a single friend that plays a particular social game, that user will never see a Sponsored Story from that game, even if the user otherwise fits the demographic a developer wants to reach. Facebook believes advertisements that include friend activity are more effective and less likely to be seen as a nuisance. Advertisers who want to reach consumers at scale and ensure their message is conveyed cannot yet depend on Sponsored Stories to do so.

Will advertisers see the value?

Another reason this test seems premature is that advertisers traditionally want to have more control and understand the outcome of their campaigns in ways that Sponsored Stories do not yet offer. We might abstractly see a benefit to this type of indirect promotion, but to rights holders like music labels, television networks and film studios, pushing consumers to streaming options is still not ideal. It makes little sense for labels to pay per click to promote Spotify listens when they cannot get any data from Facebook about whether users listened to the whole song or then listened to another song by the same artist. Worse, there’s nothing to drive people to buy the whole album, concert tickets or other merchandise. Similarly, networks have little incentive to pay Facebook to drive people to watch their shows on Hulu instead of on live TV where they can better monetize viewers.

As social reading applications grow in popularity, there could be an opportunity for brands to buy Sponsored Stories that relate to a positive article about them. But for this to become common, brands need to have more flexible budgets and be able to move more quickly. Even still, most advertisers are not likely to put much money toward ads they cannot customize or use to track conversions.

Facebook is developing a very interesting advertising model — one that could benefit retail companies, local businesses, consumer goods and other industries — but it could be years before the social network can convince companies of the value of these ads compared to more traditional ones.