The secret behind Facebook’s obsession with fan pages

Facebook’s advertising machine is growing fast, and it’s growing big: estimates put 2011 ad revenues at some $3.8 billion. But it’s also a system that is always being tweaked as the company tries to turn its vast trough of users into more cash.

The latest changes, you may remember, are an attempt to convince advertisers that they should be focusing on engagement more than click-through rates — what Mathew characterised as an appeal to “forget about clicks”. From the outside, it may be difficult to understand why this matters — but here’s some data that might shed some light on what Facebook is doing and why advertisers love fan pages so much.

Courtesy of social analytics firm Campalyst, we have information on a campaign run for Blue1, a Finnish subsidiary of Scandinavian Airlines. Through August and September, Blue1 ran a campaign across three different channels: a Facebook page with regular status updates; Facebook ads targeted on potential customers; and more traditional display ads.

Here’s what they found: branded fan pages — and the updates that users see — are vastly more successful than other ways of advertising on Facebook.

To be more exact, Facebook Pages convert people into customers at a far higher rate than other forms of advertising. The conversion rate is four times higher than ordinary display ads and more than six times higher than traditional Facebook ads. And when they do convert into purchases (airline tickets in Blu1’s case) people who are fans spend more: an average of 30 percent more in this case.

This makes sense, of course: somebody who visits a fan page has already declared their interest in a given topic, and so they are clearly more likely to purchase. But it’s also interesting in terms of how Facebook limits access and visibility, because the most important way to get people to visit a fan page is through status updates that appear in news feeds.

Here’s another intriguing stat: these click through rates are achieved despite the fact that — at best — only a third of fans actually see updates in their feed. On an average day, just 14 percent of users who are already fans of a brand will actually see updates that brand makes.

Given all of this, it’s not hard to see why Facebook has been slowly expanding the data available on fan pages and encouraging people to look at engagement stats while at the same time reducing the ability of those pages to inject themselves into the news feed. Now it can charge advertisers to get into people’s streams with what it calls Sponsored Stories.

“What Facebook did with the Sponsored Stories was give brands a tool to pay for reaching more people and boost the reach of their fans through the fan pages,” says Campalyst CEO Jevgenijs Kazanins.

“Effectively, they are saying that reaching fans in the stream is hard (and it became even harder due to changes in the stream) but there is a way to increase it by buying Sponsored Stories.”