While 66% of small businesses have used Facebook for marketing, only 22% have used Facebook ads, according to MerchantCircle, the largest online network of local business owners. The company released its quarterly Merchant Confidence Index survey of 5,000 local business owners today, and other findings include the following: two thirds of those who’ve used Facebook ads would do so again, location-based marketing is declining, and interest is on the rise for group deals, especially those published by familiar entities including Facebook and Google.

The survey’s results indicate that Facebook’s self-serve advertising business, which account for a very significant portion of its total revenue, has plenty of room to grow. If Facebook can convince more local marketers on the site to advertise, it could fuel big total revenue gains that might improve its standing in the event of a long-anticipated IPO.

While the sample size is relatively low compared to the amount of marketers and advertisers on Facebook, MerchantCircle doesn’t overtly tout an Facebook-related services, so the data shouldn’t be biased.

Here are the core findings of the study:

Facebook Ads

• 66% of local businesses use Facebook for marketing
• 94% of local businesses are aware of Facebook Ads, though only 22% use them
• Of those 22%, 65% said they would use Facebook Ads again
• Reasons cited for repeat use of Facebook Ads were: ease of use (66.5%), ability to pause (64.8%), quality of targeting (53.7%), opportunities for acquiring new customers (49.3%)
• Reasons cited for not using Facebook Ads again included: not acquiring new customers (69%), cost (34.5%), low click-through rate (28.5%)

The high awareness of Facebook Ads, coupled with the 44% difference between marketers and advertisers shows that there’s great potential for the self-serve ad product to grow. Facebook could increase the percentage of repeat advertisers and counter the biggest reason for not repeating by improving its education efforts and providing advertisers with best practices for targeting, creative, and bid management.

Daily Deals

• Only 9.4% of local businesses have offered a daily deal, with 8.4% saying they haven’t but plan to in the next six months
• 77% of those who’ve run deals say they’d do so again, up from 50% last quarter
• Citing familiarity with these big platforms, 52% of of local businesses would choose to run Facebook Deals or Google Offers instead of deals through Groupon, LivingSocial or other deals providers
• Other reasons for preferring Facebook included bigger audience size (26%), and better local targeting (21%)
• Other reasons for preferring Google included bigger audience size (42%), and brand reputation (34%)

Facebook’s daily deals service Facebook Deals is off to a shaky start, with anecdotal evidence suggesting few purchases due to weak value and low quality of available deals. However, MerchantCircle’s data indicates businesses are interested in using the service. Facebook needs to consider subsidizing Deals so it can hook users with huge discounts, and should consider improving copy-writing and design to make Deals more compelling.

Location-Based and Mobile Marketing

• 22% of businesses are using Facebook Places for marketing, down from 32% last quarter
• Only 7% are using Foursquare for marketing, down from 9% last quarter
• 18% of local businesses have used mobile marketing or advertising, with 71% citing a lack of understanding as their primary barrier to use.

Facebook’s location-based deals service Checkin Deals that builds on Places hasn’t seen much adoption despite it being a free way to inspire users to promote a business to their friends through checkins. Again, Facebook needs to provide better educational resources, perhaps in the form of webinars or live seminars in key markets to jumpstart business adoption of Checkin Deals.

Overall, the data tells a story of how Facebook holds significant marketing and advertising potential for small and local businesses. However, without large dedicated ads or marketing teams they can’t get a good enough understanding of social to dedicate spend there. While Facebook has purposefully tried to keep its number of employees low to maintain the startup feel, the strategy may be inhibiting it from conducting the education and outreach efforts that could accelerate growth of its business.

Cost-per-action social media and search advertising service Taykey has just closed a $9 million second round of funding led by Sequoia Capital.

The company tracks social media mention and search trends in real-time to take advantage of urgent advertising opportunities and interest-based targeting parameters to power Facebook, Twitter, and search campaigns. Here’s a closer look at what it provides to advertisers on and off Facebook.

How Taykey Works

Let’s take a look at an example of an advertising campaign powered by Taykey. A singing contest television show such as X-Factor could hire Taykey for a month-long campaign on what amounts to cost per Facebook Like model, where the client pays a price per Like and sets a goal of the total Likes they want. Taykey would then monitor social networks, news, blogs, and searches for trends in the behavior and interests of the show’s target age and location demographic. It could determine what other TV shows or musical artists the audience Likes, and then run a series Facebook ad campaigns for the X-Factor Page targeted at people with those Likes.

Taykey co-founder and CEO Amit Avner tells us that “if X-Factor judge Paula Abdul falls off the stage, we’ll know in five seconds and go buy ‘Paula Abdul’ Google search keyword ads” to preempt the oncoming rush of searches for that keyword. Taykey might also purchase Twitter trending topics, or ads on Bing, Myspace, Digg in an effort to drive its own cost per Facebook fan as low as possible to make the maximum margin on the deal with X-Factor. Otherwise, X-Factor might just target 18-35 year old women, whereas Taykey would target those with interests related to the show, such as those who Like competing show American Idol.

Taykey says its patent-pending algorithm mines data from across the web, deduces keywords and sentiment, and maps the data to demographic and psychographic profiles. It then specifically targets those with the right profile, relieving brands from having to constantly discover new targets. Without using cookies or tracking of individuals, it shifts spend from one trend to the next attain the optimal CPA.

Avner explains to us that brands advertising on Facebook often target an age, gender, and location demographic that is too wide and unfocused, leading to lower conversion and rapid burnout. Taykey pinpoints the interests of these audiences to run a series of campaigns that keep conversion rates higher over time than more general campaigns. For instance, instead of targeting 18-24 year old males in New York City that Like ‘hip hop’, Taykey would determine specific artists such as “Jay-Z”, or television shows such as ’106th & Park’ to target the fans of.

Taykey and Real-Time Facebook Advertising

The 19-employee Tel Aviv-based company was founded by three former members of the Israeli Defense Ministry’s intelligence arm, and has now secured a total of $12 million in funding. Several Fortune 100 companies have already run campaigns targeted by Taykey’s algorithm, including Pepsi, for which it attained 46,000 Likes in two days at half the projected spend.

It will use use the new round of funding, joined by Softbank Capital and Crescent Point, to hire engineers in Tel Aviv, Israel and to build out a New York sales office.

The “Related Adverts” real-time advertising system Facebook is testing that displays ads related to the content of a user’s most recent status update or wall post could be very useful to Taykey’s business. “We’d love to get in on it as soon as possible” says Avner of the beta product that doesn’t allow advertisers to choose if or which traditional interest-targeted Facebook ads are displayed in real-time.

As more brands realize the concrete value of Facebook fans, CPA ad services such as Taykey will become crucial to attaining large volumes of fans at the lowest possible price. While more well established Ads API tools and services will likely continue to manage much of the Facebook spend of the world’s biggest brands, real-time focused advertising services can complement a marketing mix by exploiting fleeting low-cost pockets of conversions.

Luxury apparel brand Lacoste has built up a Page on Facebook that has almost six million fans, and it has done so with the help of a landing page that encourages first-time visitors to immediately interact with it, either by Liking the Page or by using a branded application.

While Facebook by default sends users straight to a Page’s Wall, Lacoste provides a good example of why you should consider a more sophisticated approach to engaging users — especially because Facebook itself has recently changed the options for what you can and can’t do with Pages.

In the following article, we’ll explain the necessary steps for creating a quality custom landing page for your Page.

In March 2011 Facebook removed the Static FBML app for Facebook, which was the popular choice for building customized landing pages and other tabs in Pages. While existing tabs using the Static FBML app continue to function for now, new tabs cannot be built in this way. Instead, customized tabs on Facebook Pages need to be created as a new app via the Facebook Developers site, with your chosen content then embedded using an iframe.

Although Page owners who use Static FBML will need to adapt, the change is overall a win for the ecosystem. Whereas Static FBML pages were fully hosted on Facebook and had some limitations, you can embed any kind of web page into an iframe, giving the developer unlimited possibilities. It’s now very easy to add crowd-pleasing functionality such as images, video and tweets, as well as back-end technology such as Google Analytics for tracking usage. And, because these pages are hosted on your website, you have complete control over how everything looks and works.

You can read the full article, including a step-by-step guide to setting up customized landing Pages using iframes, in our Facebook Marketing Bible.

There were a few interesting hires at Facebook this week, as deduced from Facebook’s LinkedIn feed and other sources, including former operations engineer Matthew Welty who left to head up Path’s operations and a Global Brand Partnerships job. Other positions that were removed from Facebook’s Careers Page since last week strongly suggest that these jobs were filled.

New hires per LinkedIn and Other Sources:

• Jesse Chen – is now Marketing & Product Analytics Intern.
• Nisha Gulati – now works in Corporate Communications, formerly worked as a Campaign Director at Rushanara Ali Campaign for Bethnal Green and Bow in East London, UK.
• Neel Hajare – Intern.
• Jordan Harp – now a Communications Intern, formerly an Intern in the New Media Office Intern at The White House.
• Mike Harp – works in Global Brand Partnerships, previously VP, Brand Director at Publicis Entertainment / Modem.
• Christopher Lo – Consumer Brand and Marketing Intern.
• Erin O’Rourke – Recruiting Coordinator, previously performed similar work at inernet Brands.
• Sanja Popovic – Software Engineering Intern.
• John Pottebaum – Software Engineer, formerly a Technical Director at Pixar.
• Zef RosnBrick – now a Software Engineer at Facebook, formerly a Software Developer Intern at Epic.
• Daniel Sommermann – Software Engineer Intern.
• Momchil Tomov – Intern.
• Wenchuan Weng – Software Engineering Intern.
• Chen Xing – Intern.

Recent departures, per LinkedIn and Other Sources:

• Matthew Welty – formerly an operations engineer at Facebook, now set to be the Head of Operations for Path.

Prior listings now removed from the Facebook Careers Page:

• Intern Program Manager
• Salesforce Application Developer
• Email Marketing Execution Analyst
• Search Analyst
• Technical Program Manager
• Business Operations Manager
• Director, Financial Planning and Analysis
• Finance Operations Project Manager – FB Payments and FB Credits
• Business Partner (Sao Paulo)
• Team Lead, Online Sales Operations (Austin)
• Analyst, User Operations – Dutch (Dublin)
• Sales Marketing Manager (Palo Alto)
• Strategist, Market Solutions – Local
• Sales Marketing Manager (Palo Alto)

Who else is hiring? The Inside Network Job Board presents a survey of current openings at leading companies in the industry.

Facebook is looking to make several hires at its Singapore and São Paulo offices this week, according to its Careers Page and LinkedIn feed. A few interesting jobs were added on the Careers Page, such as Internet Threat Researcher, Malware Researcher, a Communications Manager and a Public Policy person in Brazil, also a Compliance Manager for financial and legal compliance in the Palo Alto, California office. See the rest of the list for more.

Posts added this week on Facebook’s Careers Page:

• Internet Threat Researcher
• Malware Research
• Oracle Applications DBA
• Communications Manager
• Public Policy and Communications Manager (Sao Paulo)
• Group Technical Program Manager
• Director, Business Operations (Global Direct Sales)
• Compliance Manager (Palo Alto)
• Account Manager, Gaming (Palo Alto)
• International Client Partner (Milan)
• Head of Sales Training (New York)
• Analyst, Online Sales Operations – Italian (Dublin)
• Analyst, Payment Operations – Turkish (Dublin)
• Analyst, User Operations – Spanish (Palo Alto) – Contractor
• Monetization Product Marketing – Sales and Marketing Solutions
• Product Marketing Manager, Ads
• Strategic Partner Development, Technology & Communications
• Software Engineer, Tools

Jobs posted by Facebook on LinkedIn:

• Business Manager (India)
• Sales Associate (Singapore)
• Account Manager, Online Sales Operations (Singapore)
• Account Manager, Online Sales Operations (Sao Paulo)
• Sales Associate (Sao Paulo)
• Public Policy and Communications Manager (Sao Paulo)
• Platform and Mobile Researcher
• Advertiser Researcher
• User Interface Engineer
• User Interface Engineer – Accessibility
• Technical Sourcer-Contract

Who else is hiring? The Inside Network Job Board presents a survey of current openings at leading companies in the industry.

Relevvant is the developer of the Facebook Page tab application TextualAds, which allows Page admins to collect phone numbers from fans and publish targeted SMS updates to them. And the company has made an interesting move today, partnering with Constant Contact to bring its app to the Facebook Pages of the email marketing giant’s 500,000-plus clients.

The partnership should help Constant Contact keep its service offering relevant as more marketing occurs on Facebook.

Constant Contact has already made several acquisitions in the last year to further this same goal. In February it bought social CRM startup Bantam Live, which offered a dashboard for managing messaging and workflow activity surrounding contacts on Facebook and Twitter in real time. In May 2010 it acquired NutshellMail, whose system for aggregating social media updates into emailed digests it used to offer a social media tracking system for clients.

Now, Constant Contact customers will have access to TextualAds. Facebook Page admins enter the app which provides a WYIWYG editor for designing an SMS alerts signup tab application to be hosted on their Page. Phone numbers collected from the tab can sent text messages informing the fans about discounts, contests, events, or other news. TextualAds permits admins to target specific subsets of their audience based on location and profile characteristics.

Admins can view dashboards of metrics on subscribers and SMS campaigns, and can receive a special keyword and shortcode that allows fans to signup for SMS updates via text message. They can also receive the code for a TextualAds widget for display elsewhere on the web. The partnership will permit easy importing and exporting of user contact information between TextualAds and Constant Contact.

Email marketing companies are becoming a consolidating force in the Facebook ecosystem as they spend the cash they earned during the boom years prior to the emergence of social networks to buy Facebook-related services relevant to their core businesses. In January, Experian purchased Facebook Ads API developer Techlightenment in January, and FanBridge acquired musician and brand promotion app developer DamnTheRadio.

Small developers building utility apps for marketing and communication, social advertising technologies, and page management are in a strong position to take advantage of the service gaps of well-established but slower moving companies from the pre-social era. They can either provide necessary complements to clients of these old service suites, become acquisition targets like the companies listed above, or strike lucrative partnerships that open doors to huge volumes of clients as Relevvant has done here.

Even though Facebook likely has around 700 million users now, it actually isn’t often that we hear the social network is a major driver for user acquisition in mobile gaming — at least compared to FreeAppADay or having an inside connection to Apple.

But a veteran team from the social gaming world is trying to disprove this with its first app Mob Empire, a Foursquare-meets-Mafia Wars game. CrowdMob, which was co-founded by LOLapps’ former creative director Damon Grow, Alex Han and Matt Moore, is among a handful of startups that are trying to build location-enabled mobile games that are genuinely social.

The app, which the company has intentionally kept quiet about since its April 1 launch, pits friends and strangers against each other in a quest to gain control of venues in their city. The game has a modest number of users at the moment with just over 17,000 Facebook monthly actives on AppData, but that’s because the company hasn’t really publicized it to date. Grow said the company is focused on getting engagement of existing users up and ensuring the back-end can scale before marketing or promoting the title.

> Continue reading on Inside Mobile Apps.

Musicians have begun allowing fans to exchange Facebook Credits for access to pay-per-view streams of concerts, and the standard price seems to be 50 Credits per show, the equivalent of $5. American jam band Widespread Panic has launched a Facebook app in partnership with ecommerce platform Milyoni’s Social Theater to process Credits payments, while English singer/songwriter David Gray is working with European telecom O2 to accept Facebook Credits, PayPal, and credit card payments.

Initially designed for payment of virtual goods in social games, Facebook Credits have recently been used as a payment system for some digital media including film rentals. Now the music business is experimenting to see whether Facebook’s virtual currency, built-in audience, and communication features can help it grow pay-per-view concerts as a revenue stream.

Despite the lack of a native Facebook music playing app, musicians and Facebook have started to depend on each in several ways over the past few years. With the decline of Myspace, hundreds of thousands of musicians now stream their music from third-party applications such as RootMusic’s BandPage and ReverbNation’s BandProfile, which they host as tab apps on their Facebook Pages. The Pages act as a portal to purchasing concert tickets, merchandise, and MP3s, as well as a place to launch new singles.

Facebook benefits from musicians as well, as nearly half of the most popular Facebook Pages are music related. Fans spend time on the site to consume music news, stream music, discuss their favorite artists, and post photos and check-ins from concerts they attend. Facebook recently revived its official “Music on Facebook” Page, which it uses to share useful tips for musicians, venues, industry professionals, and listeners.

Links about concerts posted on Facebook drive up to $5.30 in ticket sales each, and social shares have been shown to generate significant amounts of MP3 sales. However most of these sales occur off-site, such as on iTunes, where Facebook doesn’t get a cut, and the connection between social media efforts and profits is less clear. The new experiments with charging users Facebook Credits to watch concerts through Facebook apps could change this, earning money for the social network through its 30% tax on Credits and demonstrating Facebook’s importance to the industry.

Pages of both Widespread Panic and David Gray feature tab applications through which users can pay 50 Facebook Credits for access to live and rebroadcasted streams of a concert. The artists promote the applications in posts to their Facebook fans and to their websites.

The purchasing experience for David Gray’s concert is simple, and once Credits are transferred, the app reloads to display the streaming player. The option to pay with credit card or PayPal and watch on David Gray’s website expands the accessibility of the pay-per-view experience, but also permits fans to watch in an environment with less viral potential. While the Widespread Panic shows to be streamed don’t occur until next week, the purchase process is somewhat clumsy, as it’s difficult to tell if one has successfully paid, which could lead users to accidentally make redundant purchases.

Those who pay can watch David Gray’s concert which is occurring right now in Dublin, or view rebroadcasts later this evening and tomorrow. The audio quality is pretty good, as is the video minus the occasional short lag or choppiness.

His streaming app wisely allows users to post comments to a discussion feed while watching, with the comments defaulting to being posted to a commenter’s friends via the news feed. This drives more traffic back to the app, stimulating sales. The app also displays a Like Box social plugin encouraging users to Like the O2 Blue Room music division’s Page. These social features resolve our primary complaint with the Warner Bros film studios’ experiment with streaming films such as The Dark Knight for Facebook Credits — namely that it wasn’t inherently social, with no way to discuss the film with other viewers nor invite friends without interrupting the viewing experience.

Musicians that are already filming their concerts, and especially those offering pay-per-view off of Facebook, should consider syndicating their shows through a Facebook app in exchange for Credits. The site’s viral channels can draw in new customers, its Pages offer strong fan retention and communication opportunities, and Facebook Credits makes it easy to accept payments. Success of these early experiments could help Facebook Credits pay-per-view concerts emerge as way for musicians as well as their record labels and management to generate a direct return on investment on building and engaging a Facebook fan base.

The Inside Network Job Board is dedicated to providing you with the best job opportunities in the Facebook Platform and social gaming ecosystem.

Here are this week’s highlights from the Inside Network Job Board, including positions at Acquinity Interactive, A Bit Lucky, King.com, Kixeye, Tagged and lolapps.

• Online Marketing – Senior Online Media Buyer
• Online Marketing – Web Designer / Graphic Designer
• Online Marketing – Social Media Business Development Lead & Internet Guru

• Director of Quality Engineering
• Technical Project Manager
• Flash Game Engineers
• Senior Game Engineer
• Product Manager

• Senior Product Manager

• Business Intelligence Developer
• Product Manager , Social & Mobile Games
• Game Developer

• Game Producer
• Game Designer
• Creative Director – Social Games
• Product Manager – Monetization

• Flash Animator
• Game QA Tester
• Senior Game Designer
• 2D Animators/Illustrators – Entry, Mid and Senior Roles

Listings on the Inside Network Job Board are distributed to readers of Inside Social Games, Inside Facebook and Inside Mobile Apps through regular posts and widgets on the sites. Your open positions are being seen by the leading developers, product managers, marketers, designers, and executives in the Facebook Platform and social gaming industry today.

The European Union has taken issue with the worldwide rollout of Facebook’s opt out facial recognition feature that suggests friends to tag in photos upon upload, as we predicted yesterday. Bloomberg Businessweek reports that Facebook will be the subject of a probe by the Article 29 Data Protection Working Party, a committee that advises the 27 EU nations on matters “affecting the rights and freedoms of natural persons with regard to the processing of personal data and privacy”.

We were surprised to see Facebook quietly expand the audience of the opt out feature from its initial North American user base to the rest of the world, including to Europe, which has filed wide-ranging complaints about Facebook’s privacy policies in the past. Now, Facebook may be forced to reset the feature in Europe to default to opt in, which could hamper the site’s ability to coax more photo tags out of users.

The feature “Suggest photos of me to friends” was launched in North America in December 2010. Here’s our explanation of how it works, from our post yesterday:

“When users upload photos, Facebook’s algorithms groups the photos by those with similar faces. It also suggests friends those faces may belong to by matching them with previously tagged photos of those friends, and the suggested tags are automatically applied unless removed. This speeds and simplifies the tagging process by reducing the frequency with which users are forced to type out names.”

Some users may not want their faces analyzed and identified in Facebook photos, the world’s largest collection of photographs. Facebook’s only public announcement of the wider rollout came after criticism began yesterday. It added a short update to a blog post from December about the feature and published a link the post to Facebook’s official Page when a new blog post may have been warranted. The initial silence about the expansion of the feature made it seem as if Facebook was trying to hide that it had added a new opt out privacy setting to the accounts of hundreds of millions of users.

Potential Changes to Facial Recognition Feature

Gerard Lommel, a member of the Article 29 watchdog committee said that “Tags of people on pictures should only happen based on people’s prior consent and it can’t be activated by default”, and adds that the Working Party will “clarify to Facebook that this can’t happen like this.” Ireland’s data protection authority will also examine the feature.

Facebook typically adds functionality to the site in an opt out manner because few users would take the time or have the confidence to manually enable new features. However, we recommend it pair these opt out additions with timely, prominent announcements and awareness campaigns, which it failed to do here. This may be a case where the site will have to take two steps backward, changing “Suggest photos of me to friends” to opt in, because it didn’t take a transparent step forward by more visibly notifying users outside North America of the privacy setting.

Photo tags have never required consent, other than being friends with the person doing the tagging, so that’s not likely to change. There’s a lot of potential value in facial recognition streamlining the tedious photo tagging process for users, and Lommel’s statement doesn’t appear to recognize this. This will be reduced, though, if only a portion of the users sees the photo tag suggestions because Facebook surprised much of the world with the roll out and conservative authorities react strongly.

The company’s best bet at this point may be to add a prompt, tooltip, or announcement within the site alerting users to the change. This could allow it to claim users were made aware that facial recognition had been added and enabled, perhaps swaying authorities that might otherwise demand the feature be removed or defaulted to disabled.

Facebook has historically complied with government injunctions regarding privacy and censorship. If EU and Irish authorities return with demands that the feature be changed, Facebook would likely comply, and it could embolden other government around the world to request similar alterations. This could mean that many users will continue to tag photos by hand because their government has disabled the elegant technological solution designed to assist them.

Update 6/8/2011 3:15pm PST: Facebook spokeswoman Sophy Tobias has been quoted by Reuters saying ”We have noted the comments from some regulators about this [facial recognition] feature and we are providing them with additional information which we are confident will satisfy any concerns they will have,” Though Facebook has stated that it should have been”more clear with people during the roll-out process when this became available to them”, it has yet to announce any change to the feature or its privacy settings.

The last time Facebook encountered stern privacy criticism was over it allowing applications to request the phone number and home address of users. In response to the backlash, Facebook quickly disabled the capability. It later had to respond to inquiries from two members of Congress, and the option is still disabled. In contrast, Facebook appears to be holding its ground on the facial recognition issue, and may wait for formal requests from authorities before changing the feature.