A few weeks ago, we unveiled Facebook ad techniques to leverage the endorsements of your fans– to share their likes with their friends. And we demonstrated that the CTR on an ad showing your friends liking it is a multiple of one without a like. The next logical step is to show your friend’s review in the ad, such as this new format that Facebook started testing over the weekend.

Notice that it not only has your friend’s name linked, but also includes their review and the number of stars. We predict that including the star ratings will significantly increase the ad CTR by another order of magnitude, provided that the rating is 4 stars and above. The same we’ve seen true when users see an application’s average rating on the install screen.

This is a smart move by Facebook, as it makes ads less scammy (hard to cheat the system), emphasizes the core value proposition of Facebook ads (help multiply the love your fans already– among their friends), increases the value of their inventory, and increases Facebook’s ability to monetize.

If you’re a cosmetic surgeon with 500 fans of your page, what would you pay to be able to tell all the friends of those 500 people about the positive experience? What if you’re a terrible doctor? Then this type of advertising might not be effective– nor should any type of advertising be effective if your underlying service isn’t stellar.

Would you use this advertising for your company? Privacy concern or a marketing bonanza? Perhaps it will encourage you to get more reviews of your business on Facebook so that you can run ads?

Kudos to Facebook for creating incentives for businesses to participate more deeply on Facebook and to reward good behavior.

Dennis Yu has helped brands grow and measure their Facebook presences. He has spoken at Search Marketing Expo, Search Engine Strategies, Web 2.0, The American Marketing Association, PubCon, Conversational Commerce Conference, Pacific Conferences, HostingCon, Affiliate Summit, Affiliate Convention, UltraLight Startups, MIVA Merchant, and other venues. Yu has also counseled the Federal Trade Commission on privacy issues for social networks. Yu has held leadership positions at Yahoo and American Airlines. His educational background is finance and economics from Southern Methodist University and London School of Economics.