"Facebook's new advertising tools: How they affect users"

(Facebook CEO Mark Zuckerberg)

NEW YORK: Messages from brands such as Walmart and Starbucks may soon be mixed in with your Facebook status updates and baby photos from friends and family.

Facebook unveiled new advertising opportunities Wednesday to help the world's biggest brands spread their messages on the world's largest online social network.

Brands you've endorsed by hitting the "like" button will now be able to push deals and other updates right into the news feeds that show your friends' updates, photos and links. These marketing messages could also show up if one of your friends has interacted with a brand, such as by liking it or commenting on a photo.

The new approach also means that advertisers will be able to reach users on mobile devices for

the first time, giving Facebook a new and lucrative source of revenue.

The changes come ahead of Facebook's initial public offering of stock, expected this spring. The IPO could value the company at as much as $100 billion. That means Facebook has to prove it can bring in real advertising revenue from Target, Procter & Gamble and other massive brands.

"Facebook is making serious money from ads right now, but they are not making serious money from major brand advertisers. That's where the ad money is," said Rebecca Lieb, an analyst with the Altimeter Group. "They currently have rather low-rent, shoddy ads on Facebook."

That could change as Facebook starts integrating brands' messages into the news feeds of its 845 million users as part of a long-term vision of moving from ads to stories about brands.

Facebook made the announcement at the American Museum of Natural History in New Yorkin a rare East Coast appearance for a Silicon Valley company that is now seriously courting Madison Avenue.

Rather than bombarding people with flashy ads, Facebook is urging companies to integrate themselves into what people are already doing on the site - talking to their friends and family, commenting on photos or posting news links.

"The definition of the word 'advertise' is to draw attention to," said Chris Cox, Facebook's vice president of product. "The definition of a story is narration, which you'd think is what people prefer."

Facebook has a vast trove of information about its users' lives, hobbies, likes and dislikes, yet the company has kept advertising fairly unobtrusive to date. Ads for teeth-whitening, wineries and laundry detergent and the like are relegated to the right side of users' Facebook pages. Over time, Web-savvy users have grown used to ads and many are tuning them out.

Those ads are not going away, but brands will now be able to push updates - or as Facebook likes to call, "stories" - right into the news feeds. Facebook's challenge will be to keep these ads as unobtrusive as possible so that users are not alienated or driven to "unlike" brands.

"I think they understand that people value authenticity," said Clara Shih, CEO of Hearsay Social, a marketing software company for businesses. "The new page format and the new ad format encourage authenticity and storytelling."

1-800-Flowers tested the new format through Valentine's Day this year. President Chris McCann said he saw a marked improvement in customer response to ads, and he looks forward to expanding the brand's reach.

"A typical page post reaches 16 percent of our fans," he said. "Now we have the opportunity to boost that to 70 to 75 percent."

Companies can continue to set up Facebook pages on their brands for free. They'd pay to insert updates into news feeds and elsewhere based on the number of fans they have. In other words, posting the message will remain free, but getting more people to see it will cost money.

Facebook will collect feedback and test how users respond as it rolls out the changes gradually. At first, users may see just one message a day from a brand inside their news feed, or even less. And they won't see messages from random companies they are not connected to in some way - directly or through a friend.

"Facebook has certainly backed down on things," Lieb said. "But they are not just going on what people say. They are going on what they do."

Beyond the updates within news feeds, Facebook will also start showing ads when people log out of the site.

According to research firm eMarketer, Facebook had a 14 percent share of the $12.4 billion display advertising market in the US last year. Even before Wednesday's announcement, eMarketer had estimated the share would grow to 16.8 percent this year, surpassing Google's 16.5 percent.

Yet Google had more than 11 times Facebook's ad revenue of $3.2 billion last year. Google relies on text-based ads that aren't as lucrative as display ads, but the search leader makes up for that in volume.

The numbers suggest that even as Facebook increasingly competes with Google for ad dollars, it hasn't yet fully taken full advantage of its potential.