Advertisers' Free Ride May End On Facebook

For advertisers on Facebook, the free ride may be coming to an end.

When the social network filed for its initial public offering, the spotlight shifted from the site's exponential user growth to a metric that may have more bearing on its market value: ad sales. For years, many advertisers simply set up shop for free on Facebook, displaying their brands to users who "liked" them. But to see how Facebook now hopes to turn many of those advertisers into paying customers, look at how it convinced Omaha, Neb.-based retailer Gordmans Inc. to stop relying on free Facebook marketing and to start spending on a new kind of Facebook ad called "Sponsored Stories." According to a new study by Portland, Ore., marketing firm BlitzLocal LLC, between June 1 and Dec. 31 of last year, unpaid displays of marketing posts to users, which the industry calls "organic," decreased 33% among its more than 300 clients. "Content that used to live for a day may now live minutes in a user's News Feed," said Dennis Yu, chief executive of BlitzLocal, which analyzed some 5.7 million posts. Amid this shift, Facebook last year unveiled a new ad format, dubbed Sponsored Stories, which requires marketers to pay for exposure for their posts—including some they might once have gotten for free.