Startup Fab says thanks, Facebook!

@CNNMoneyTech July 26, 2012: 5:24 AM ET

NEW YORK (CNNMoney) -- Ahead of Facebook's earnings report, everyone is asking the same question: will the company be able to deliver on the advertising front? One company says the social media giant already has.

"I like to say that Fab is the e-commerce company that was built on Facebook," Fab CEO Jason Goldberg told CNNMoney. The company, which pivoted from a gay social network to a design marketplace, said Facebook advertising helped it initially get off the ground.

Stroll through Fab's new office in downtown New York and you'll find artfully designed statues of faceless pigs, Andy Warhol-inspired screen prints of Marilyn Monroe, giant Lego statues, and plenty of Fab signage plastered against the bright red and yellow walls.

The office now hosts 200 people, up from 20 the previous year. In the last year, they've also jumped from 200,000 members to five million members. Most recently, Fab closed its series C round of funding, raking in $105 million from top investors.

In short, they're moving full speed ahead. And Goldberg says Facebook (FB) has been a catalyst for that growth.

When Fab was gearing up to launch, it utilized the social network's targeted advertising model to spread the word. Three months before going live, Fab released a splash page that read, "Fab features daily design inspirations and sales up to 70% off retail."

The company initially spent $50,000 to advertise on Facebook, hoping to garner interest from influencers in the design realm.

According to Goldberg, the strategy clearly worked. People who clicked on Fab's Facebook ad often invited their other friends on Facebook to sign up.

"Over two thirds of our initial members joined from Facebook," Goldberg said. "We found that every person that we acquired through Facebook ads on average invited three people before we even launched, and one of those [three] people joined."

Fab now spends millions of dollars a month across 20 countries on Facebook advertising and says on any given day, 25% of the visits to Fab are coming from Facebook.

"We get a very fast return on several million dollars a month of advertising," Goldberg said.

It's a success story Facebook needs to hear more of if it wants to keep growing. And not all companies see the same success from Facebook as Fab. In May, GM (GM, Fortune 500) pulled all its paid advertising from the site -- an indication that hundreds of thousands of "likes" don't necessarily pay off.

Nate Elliot, an analyst at Forrester Research, says a big presence on Facebook is "an overly simplistic metric and one that doesn't really tell you if you're having success."

"If you think of what that "like" button represents, that's somebody that already knows and supports your brand," he said. "So what you can get from a customer actually having hit the "like" button is actually a little more limited than most marketers think." To top of page

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