Understanding Like-gate

Several prominent people are up in arms about Facebook charging for access to users who have already Liked their page.

I believe this debate is missing the big picture, and what we are in fact witnessing is the unfurling of the full-fledged Facebook business model. Facebook is showing us how they will cross the chasm from low-CTR low-CPM ad-units into what investors have been waiting for since the beginning: a Facebook analogue to Google Adwords.

The newsfeed optimizer

Picture the firehose of potential newsfeed stories that Facebook could show you. There are undoubtedly candidate stories that newsfeed never shows you originating from people that you have forgotten are on your friends list at all. Why is this? In reality, Facebook is already shipping a sophisticated real-time optimizer. Every time you post a story the algorithm attempts to quantify how interesting it is, and is constantly updating the interestingness score based on comments, likes and clicks.

If you only log into Facebook once every few days, the optimizer will go back over that timespan and show you the most interesting content it can during those few days. If you log in every 10 minutes it will show you the most interesting fresh content it can during those 10 minutes. Think about this for a moment: newsfeed is doing realtime engagement optimization that works well enough to be used by a large percentage of the world’s population. Newsfeed already has all of the properties of an ad-server… it’s just that it has been built to optimize on engagement rather than revenue.

The best ad is indistinguishable from content

We can expect to see Facebook deemphasizing traditional advertising units in favor of promoted news stories in your stream. The reason is that the very best advertising is content. Blurring the lines between advertising and content is one of the most ambitious goals a marketer could have.

Bringing earnings expectations into this, the key to Facebook “fixing” their mobile advertising problem is not to create a new ad-unit that performs better on mobile. Rather, it is for them to sell the placement of stories in the omnipresent single column newsfeed. If they are able to nail end-to-end promoted stories system, then their current monetization issues on mobile disappear.

Open Graph = candidate stories for paid promotion

The idea of Open Graph is that developers and marketers create new verbs and nouns that can be used to model different actions being taken. ie “Bob just watched a video on Socialcam” or “Jane just planned a trip on TripAdvisor”.

Facebook has been systematically testing the amount of virality and engagement of the newsstories created by Open Graph. (You should also note that a large percentage of them are related to ecommerce transactions.) Every single Open Graph action that occurs is a candidate for paid promotion.

Do you see where this is going? Open Graph outsourced the widespread creation of incredibly flexible ad-units that look like newstories… in fact they are newsstories. This provides a huge amount of potential ad inventory for Open Graph partners. For example, if person X bought a deal on Fab.com, it would make sense that Fab would be interested in paying extra for this story to be promoted to person X’s friends. Without Fab’s initial Open Graph integration, that newstory/ad-unit wouldn’t exist to begin with.

The thing to pay attention to here is the fact that Open Graph partners are creating billions of candidate ad-units every day. The vast majority of those stories will never be seen, but that doesn’t really matter, does it?

SEO/SEM = Fan Page Management/Paid placement

On Google.com, the ad-units are paid search results which show up at the top and side of search pages. (I recall reading a study that said that most casual Google users aren’t even aware that those are the result of paid placement.) From a marketers perspective, the best kind of Google traffic to get is “organic”, (ie free) that is the result of Googles algorithm ranking your page as highly relevant in search results. In addition to organic placement via SEO, a marketer will purchase paid placement to supplement and expand their reach and search-related revenue..

This is analogous to the Facebook playbook: Facebook users and Pages that create high value content which is algorithmically determined to be engaging will get organic visibility in the feed. Additionally, candidate stories that would not normally be placed into the feed by the engagement optimizer can be paid for wider newsfeed inclusion. Good marketers will implement Open Graph everywhere they possibly can: to get both free organic traffic and an ample supply of candidate stories for paid promotion.

Endgame

From a Facebook user perspective, we don’t really know how the algorithm works, and are already trained to understand that some things magically show up our newsfeed and some things don’t. If a normal user sees that one of their friends bought a LivingSocial deal at the top of their feed, they may/may not click on it, but they certainly won’t question how it got there.

Facebook newsfeed is an embodiment of our war on noise. We depend on the newsfeed optimizer to protect our limited attention span, and as a consequence, Facebook gets to choose what stories we do and don’t see, just as Google chooses which search results we do and don’t see. Conceptually, this seems very lucrative: Facebook is auctioning off our limited attention span to the highest bidder, as long as the bidder has a candidate newsstory to promote.

This is what Like-gate is about.

Welcome to the attention economy.

 
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