Facebook, you have a huge audience, now engage it!

The Wall Street Journal today has a piece with the following headline: Facebook Tries to woo marketers, firm’s ‘engagement ads’ amplify its push to curry favor with Madison Ave.

If you use Facebook, and you all know I do, you know these ads. They appear on the side of your profile and you can engage in them or not. I usually do not. I don’t find the ads offensive or pushy; they are just there.

Still, the WSJ article addresses something I’ve written about for B&C before: engagement, and I think Facebook has the right idea here, even though so far it’s not really paying off.

According to the WSJ, MySpace still cleans Facebook’s clock when it comes to advertising. News Corp.-owned Fox Interactive Media, which includes MySpace (and also Fox.com) claims 15.9% of the online display advertising space, while Facebook can claim just 1.1%, according to comScore Media Metrix. And that’s even though Facebook has 160 million users to MySpace’s 119 million or so.

In this radically changing advertising environment, I’m a strong believer in engagement. It makes perfect sense: if someone is completely enraptured with whatever content he or she is involved with, the advertising that comes as part of that content will be more effective. If I were an advertiser, I would integrate my product into Rock Band or Spore or Madden NFL or whatever video game was hot. I would have made absolutely sure to be somewhere around Tina Fey’s impersonation of Sarah Palin, whether in pre-roll on Hulu or in a banner add on NBC.com’s SNL page.

And I might reconsider my choice to buy TV. I’m sure it’s heresy to say this on B&C’s own web site, but I question TV’s ability to engage viewers at this point. Most people watch TV while they are doing something else, and if they are focusing on the TV, nearly 30% of them are skipping the ads.

I’ll tell you the two shows that are really engaging me right now: HBO’s True Blood and HBO’s John Adams, which I’m watching on DVD. Neither have ads, but they should, because I am riveted for an entire hour while watching those programs. If you put an advertisement in front of me, I would see it and remember it.

In addition, if I were an advertiser I would look closely at shows that have high levels of DVR recording and playback. Viewers might be skipping those ads, but at least they care enough about the shows to record and watch them; they aren’t just filling space while people cook dinner. The ratings for NBC’s Heroes might be falling off a cliff on Monday nights, but it’s one of TV’s most DVR’d shows, adding 20% or so back in once the live-plus-seven ratings are factored in. Even if the ads are being skipped, at least people care about the show, which means if they watch the ads, they should be more focused in general. (In addition, Heroes is becoming a real bargain because its ratings are dropping, although in this economy everything might be a bargain).

The problem is not that people aren’t watching TV or that they aren’t engaging in content — they are, probably more than they ever have in history. The problem is that they have more ability than ever before to avoid advertising.

So how do advertisers reach consumers?

This is where I think Facebook comes into play. I am on Facebook all day long, and when I’m not on it on the Web or on email, I’m on it on my Blackberry, much to the dismay of my mother who yesterday said that if I had had a Blackberry in high school we never would have had a conversation. Anyway, it seems to me that my high level of engagement in Facebook should be highly appealing to advertisers. Where better to reach someone than in a place where they are paying complete attention?

What that means to me is that Facebook has figured out two out of three important things: 1) how to gather a huge network of people and 2) that advertisers are interested in reaching them. But neither Facebook nor advertisers have figured out what sort of ad they need to create to reach them. I think what we can see from Facebook’s current experimentation is that clickable banner ads aren’t doing it. They fit into Facebook’s format but they are easy to ignore. So either Facebook or those who advertise on Facebook need to try something else. If I were smarter, I might make a few suggestions here, but I am only smart enough to make the observation, not actually smart enough to propose a solution.

That’s for the geniuses at Facebook to devise. They got Obama elected, so I have faith they can figure this one out too.