Ad Fab: Hot startup makes a splash on Facebook... at logout

The e-commerce site Fab, which is adding a million members a month, is making a big expansion push, and is bucking conventional wisdom about the value of Facebook display ads.

Fab's ad on Facebook's log-out page. Screenshot by Donna Tam/CNET

Fab, a social media-driven online retail site, is growing fast -- like 1-million-users-a-month fast -- and it's going all out to propel that growth by buying up the splashiest display ad Facebook offers.

Never mind that some marketers complain about the effectiveness of advertising on Facebook. Fab founder and CEO Jason Goldberg says Facebook ads pay off, and then some. Which is why for a 24-hour period -- which started at 9 p.m. PT Thursday night -- Goldberg ponied up an undisclosed amount to buy Facebook's so-called "log-out" ads that appear when members sign out of the site.

How many of Facebook's roughly 550 million daily users actually log out of the site daily is unclear, and Facebook isn't saying. But Goldberg says he expects 50 million people to see the ad.

Jason Goldberg (sitting) and Bradford Shellhammer, co-founders of Fab.com Fab.com

"We have a much broader partnership with Facebook -- we're spending millions of dollars on Facebook right now and it's delivering better returns than any other advertising," says Goldberg, who says he didn't pay the $700,000 it reportedly cost to buy a Facebook log-out ad for a day. "This [log-out ad] has been the best single thing for a one-day blip in the last six months."

As of 8 a.m. PT -- after it had been up 11 hours -- the ad brought in "tens of thousands of new signups," said Goldberg. That, he says, should result in a top sales day for Fab. Goldberg says the company's on track to do $150 million in sales this year.

That's phenomenal considering that just over a year ago New York-based Fab was banking on a completely different business idea. In June 2011, Goldberg and co-founder Bradford Shellhammer turned Fab from a gay social network into a retailer of all sorts of goods -- from jewelry to artwork and home furnishings -- through flash sales that typically last 72 hours.

It's has been adding users at lightning speed. Fab now claims 7 million users, and Goldberg said two million of those people joined in July and August alone.To goose the growth, Fab yesterday removed its e-mail sign-up requirement so that visitors no longer need to register with Fab to see a product.

"As we get 50 percent of our sign-ups from social sharing, having this sign-up requirement to view products was really frustrating to users and shooting us in the foot," Goldeberg wrote on his blog. "There's not much worse than getting excited about a product your friend shared on Facebook or Pinterest or Twitter, then clicking through to view and buy the product and getting a huge log-in blocker. Lame."

Fab's torrid growth has attracted an all-star list of investors, including Ashton Kutcher and Andreessen Horowitz. Last month, Fab raised $105 million on top of the roughly $50 million it scored in earlier funding rounds.

Fab has also been on a global push. In May, Fab opened offices across Europe, and Goldberg says that almost a third of Fab's sales this year will come from Europe. "We're starting to mass market... and we're starting to build our brand," said Goldberg. And on the way, it might become a case study for the power of display ads on Facebook.

 

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