Facebook to brands: Pay up

“I’m mad as hell, and I’m not going to take it anymore!”

Facebook users have expressed their annoyance at being bombarded by promotional posts in their newsfeed – and Facebook has started to do something about it. The social network is telling brands that they will have to pay to be featured as ads in Facebook users’ news feeds.

Facebook says the move is in response to the anger of its user base. Pardon us if we sound cynical, but the move seems less about the user base and more like Facebook is flexing its muscle. After all, why not get paid for what brands have been able to do for free?

For years, companies have received a lot of quality attention – for free – by users who “like” their brands on Facebook, then see all of the posts made by the brands in their news feed. So it’s no surprise that brands have embraced Facebook as a key marketing channel to drive awareness and engagement.

With well north of 1 billion active users, Facebook wants its piece of the pie. For brands, this means that they have to become smarter about how and what to advertise. Our research identified eight ways brand managers can increase likes for their posts receives and convert more consumers into brand advocates.

It is not going to be cheap – Facebook’s eyeballs are a premium category. And since it’s now is going to cost brands money, the age-old question of “What is the ROI?” becomes salient.

Brands have established deep relationships with their followers – their perfect demographic – with them through Facebook. Now is the time for brands to pony up – but, more importantly, think through what messages are most important to send to this quality group of brand lovers. With so much clutter in social media, brand managers know that content is king. Advertising is morphing into entertainment, and the old adage applies – quality over quantity!

We speculate that more traditional advertising messages, such as sales, contests and new product announcements, will also go the promoted path. Facebook won’t push them to the brand’s network for free much longer.

Bombarding consumers with traditional ads no longer works, so we think this change will benefit Facebook users. And when there is less clutter in the news feed, brands will get premium attention – either when they spend money on a promoted message or when one of their posts gains traction among fans of their brands.

Under continual pressure for more revenue generation, Facebook has a lot to gain from this change. It is monetizing its value, especially in enabling the direct communication path between businesses and consumers. In many ways, this change is a sign of Facebook maturing and a return to the roots of an ad-based revenue model.

Overall, the change is a win-win. Yet – no shocking news here – Facebook will be the biggest winner!

By Arvind Malhotra, H. Allen Andrew Professor of Entrepreneurial Education and professor of strategy and entrepreneurship, and Claudia Kubowicz Malhotra, clinical associate professor marketing