How Facebook’s latest monetization efforts may take shape in 2013

After eight years focused on user growth and building the foundations of its platform — News Feed, location and Open Graph, among others — Facebook went into 2012 prepared to go public and become more serious about monetization.

The social network launched several new ad types and opened a number of other potential revenue streams. Here’s a look at Facebook’s monetization efforts last year and how they might evolve in 2013.

News Feed/Mobile Ads

News Feed ads, starting with Sponsored Stories, launched in January. These same ad types came to the mobile feed in March, and over time, the social network began allowing page post units and other non-social ads. Mobile app installs came to the feed in August. Facebook previously allowed feed-based ads in 2007 but it had never shown ads on mobile devices until this year. Now, the social network is earning $4 million a day from News Feed ads, with three-fourths of that from the mobile feed. Advertisers themselves are pleased to have more prominent inventory, which generally leads to higher clickthrough rates and lower costs per click. In 2013, Facebook is likely to put more ads in the feed and continue to tinker with their design to optimize performance and improve user experience. We’ve heard a new video ad unit is already in the works, and believe more interactive and immersive experiences could be on the horizon.

Facebook Exchange

Facebook introduced its Facebook Exchange, a real-time bidding system that allows third-party platforms to place retargeting ads on the social network after users visit external websites marked with cookies. FBX came out of beta in September, but only a limited number of partners have access to the exchange. Expect this number to grow in 2013. Early partners are reporting lower costs per acquisition than on other exchanges, and many advertisers are pleased that their ads appear above the fold and on brand-safe pages, which is not always the case with other exchanges where advertisers can’t be sure where their ads are being placed or how many others they’re competing against. The Facebook environment is much more controlled. Retargeting data cannot yet be combined with Facebook’s demographic and psychographic targeting options — nor can it be used for social ads like Sponsored Stories or page post ads in News Feed, but many expect these will become features of FBX in the future. TechCrunch recently reported that Facebook may be looking to bring FBX to mobile.

Facebook Gifts

Two years after Facebook shuttered its virtual gift shop, the company unveiled Facebook Gifts, a desktop and mobile feature that allows U.S. users to buy physical and digital goods for their friends. Because the recipient enters their mailing information, the sender doesn’t need to know a friend’s address. Companies like Starbucks, Apple, Gap, Brookstone, Mondavi Wines and Fab.com are already selling items through the platform, but 2013 will likely see even more high-profile retailers signing on. We can also envision the Gifts platform eventually opening to third-party developers so Facebook could power the gift-giving flow and payments experience on other sites and apps. Currently, Facebook is curating its catalogue, taking photographs, writing copy, designing packaging materials and other activities that could require a lot more manpower as it scales its offering. A platform approach might be more lucrative in the future, though perhaps not as soon as this year. In 2013, look for Facebook to improve its recommendation engine and begin promoting gifts based on users’ status updates, not just birthdays and life events.

Promoted Posts

In May, Facebook began testing Promoted Posts as a way for page owners to reach more of their fans and friends of fans through News Feed posts without having to create campaigns in the main ad dashboard. Instead, page owners can click the Promote button on their posts before or after they make them. This has since rolled out to most pages on the social network and replaced the Reach Generator program. Facebook announced that more than 300,000 pages promoted 2.5 million posts between June and December.