Facebook pushes for ad revenue transparency

Facebook is pushing advertising sales agencies to be more transparent about how they charge for their services, in an effort to protect companies who market on the social network.

Facebook believes that by improving transparency companies will have a clearer idea of what proportion of the money they give to agencies goes directly on ad spending, rather than on service fees.

Facebook advertising is still so new for companies, she said, that most of them were unable to negotiate effectively with the agencies representing them.

“The brands aren’t at a point where they’re smart enough to know the difference between the good guys and the hucksters.”

Facebook has been trying to bring more order to the social advertising market since bolstering its roster of advertising sales partners in August. Stepping up enforcement of its transparency rules could boost the social network’s revenues ahead of an initial public offering.

Grady Burnett, Facebook’s vice-president of global marketing, said: “The primary thing we care about is making sure people understand when they’re paying for media on Facebook and when they’re paying for something else.”

The different ways agencies charge has made it harder for brand-owners to assess the effectiveness of their social media advertising, according to critics.

For example, some agencies charge a direct percentage of the ad purchase, while others charge a fee for every time a user clicks “Like” on a fan page. Because a “Like” is such a new advertising metric with no settled market value, a company could charge a flat fee of $2 per Like, then spend $1 on a Facebook ad to drive the traffic that will generate the Like, keeping a hefty 50 per cent margin for itself.

Advertisers do not like these sales agencies “making loads of margin”, said Simon Mansell, chief executive of TBG Digital, one of Facebook’s ad sales partners, which charges clients a 15 per cent cut of ad spending on Facebook.

Advertisers would rather see more dollars go to Facebook, and so would Facebook, he said. Facebook’s transparency policy could facilitate that.

The rules require agencies to share their margins with clients up front, and to store Facebook account information for each client separately, so Facebook can see how much each company spends on Facebook ads.

“You have to tell Facebook your spread,” Mr Mansell said.

Facebook has been pushing agencies to comply with the policies in the last several months, according to agencies, after it began accepting applications from more of them to become advertising sales partners. So far, it has approved 25.