- The Washington Times - Monday, May 11, 2009

Facebook Inc. is expanding amid the worst market for Internet advertising since the dot-com bust of 2000.

The company has sufficient funding to overcome the economic slump and is adding new forms of interactive advertising that will boost sales 70 percent this year, according to CEO Sheryl Sandberg.

“We could not be doing better financially,” Ms. Sandberg said in an interview last month.

Facebook is growing at a time when companies are still trying to figure out how to advertise on social-networking sites. While Facebook was “nervous” following the collapse of Lehman Brothers Holdings Inc. last year, its confidence for ad sales “grows every week,” Ms. Sandberg said.

“We’re on a path, a clear path, to be cash-flow positive next year,” said Ms. Sandberg, who joined Facebook from Google Inc. last year. She previously served as chief of staff for the Treasury Department under President Clinton.

The challenge for Facebook, the most popular social-networking site, is that people aren’t used to seeing ads on its pages, said Allen Weiner, an analyst at Gartner Inc. in Scottsdale, Arizona.

“It’s a very, very tough and discriminating audience,” Mr. Weiner said. “I also don’t think they’ve totally sold the vast array of potential advertisers and marketers on the value of Facebook.”

Founded in 2004, Facebook has raised more than $400 million in equity funding, including a $240 million investment from Microsoft Corp. Peter Thiel’s Founders Fund. Venture-capital firms Accel Partners, Greylock Partners and Meritech Capital Partners are among Facebook’s other investors. The company has more than 850 employees.

Ms. Sandberg, 39, said the company has improved its advertising offerings in the past year so they more closely resemble Facebook’s traditional look. In February, Honda Motor Co. allowed users to exchange heart-shaped virtual gifts — complete with a Honda logo — around Valentine’s Day. Four days after the campaign started, 1.5 million people had either given or received virtual gifts that promoted the 2009 Honda Fit vehicle.

“It raised awareness about the Honda Fit by bringing new fans to the Honda Fit fan page” on Facebook, said Chris Martin, a spokesman for the Tokyo-based automaker.

Facebook is also using information on users’ profile pages to target ads, Tim Kendall, the company’s director of monetization, said at a conference in San Francisco. Facebook helped an Asian airline promote airfares, for example, by identifying people who expressed an interest in Japan in their profile pages, he said.

Ms. Sandberg said Facebook is experimenting with targeting ads based on information on users’ virtual walls — without revealing any personal data.

Clients are spending more on Facebook than they did before the financial crisis, which contrasts industrywide declines reported by Yahoo! Inc. and Microsoft Corp., said Jordan Bitterman, a media buyer at New York-based Digitas, an online ad agency owned by Publicis Groupe SA.

Advertisers need to create more applications that work the same way Facebook does, Mr. Bitterman said. Travel site TripAdvisor LLC created an application called “Cities I’ve Visited” that lets users identify where they’ve traveled and share the map with their friends on Facebook.

Users will be much more likely to pay attention to those types of promotions than generic banner ads that run on Facebook, said Mr. Bitterman, adding that TripAdvisor isn’t one of his clients. Facebook also needs to find a way to charge advertisers for offering applications, he said.

Some companies have held off buying ads on Facebook because they worry about their brands being displayed next to pictures of scantily clad women or other questionable content, said Gaston Legorburu, chief creative officer at Sapient Corp., which provides online advertising services to clients such as Coca-Cola Co.

“I still see a lot of hesitation from big brands to take that risk,” Mr. Legorburu said. “They are still very shy around buying media next to user-generated content.”

Facebook reached 200 million global users in April, double the number from August last year. Much of the growth is coming from older users. People aged 35 to 49 accounted for about 34 percent of Facebook’s U.S. users in March, up from 27 percent a year earlier, according to research firm Nielsen Online. The percentage of users aged 18 to 24 was 7.6 percent, down from 17 percent a year earlier.

“You want to target everyone? We can give you that,” Ms. Sandberg said. “Our core focus is on demand generation — on knowing who you are and showing things that will interest you.”

Facebook had 69.2 million users in the U.S. in March, compared with 55.9 million for News Corp.’s MySpace, its closest competitor, according to New York-based Nielsen.

One indication that 2009 is an important year for Facebook: Mark Zuckerberg, the company’s 24-year-old founder, has committed to wearing a tie every day to the office, Ms. Sandberg said.

“This was a year where we were really, I think, going to have to execute,” Ms. Sandberg said.

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