January 06, 2012

Facebook's Advertising Squeeze Play Facebook spouting the rhetoric of community, friendship and changing the world, has systematically built its platform to extrude cash from advertisers. And though we haven’t yet seen an overt expression of naked greed from Zuckerberg & Company, we are beginning to feel the effects of the advertising squeeze play they’ve constructed. Understand the back-story. Facebook offers fan pages for brands. Facebook encourages brands to accumulate fans and to spend money on apps, promotions, games and other forms of engagement. Just as brands begin to master this new medium, they change the definitions, swap out fans for likes and generally mess with our heads. Like new addicts, brands adjust on the fly, redirect their efforts, redouble the labor assigned to post, monitor and measure Facebook activity and again begin to master the new Facebook universe. Spouting the engagement mantra, brands expand their offerings; begin spending to advertise on Facebook to existing or prospective fans and experiment with Facebook’s ways to optimize access to fan Newsfeeds. To incent added advertising spending, Facebook institutes a filter on wall posts, called the EdgeRank Algorithm that, by design or default, significantly reduces the number of brand massages reaching brand fans. At first they encouraged a reach and frequency/engagement play. Then they unilaterally manipulated the platform to reduce free reach thereby creating demand for more new paid ads. Sponsored Stories ads essentially sell brands the access they thought they were getting organically by creating compelling brand posts. It must be great to own the end-to-end system so that you can diabolically adjust the variables and run the rats through the maze. Facebook got us hooked on free reach, scolded us into paid engagement and now is subtlety but regularly tightening the apeture on brand access to fans’ walls and by extension to the huge reach multiplier represented by friends of fans in order to force us to buy more ads to get what we were getting in an early iteration of the platform. It’s a classic squeeze play; one that Twitter and others will soon try to emulate. Google has already drawn fire for its attempts to unfairly weight its own travel properties in the search algorithm. Savvy brands will resist the tightening of the screws by developing metrics to measure the business impact and monetary value of fan interactions. These calculations should guide the level of future investment. Remember that there is a widespread hunch that Facebook fans are deal-seekers and light rather than heavy customers. Facebook clearly is a game worth playing, but it’s not the only game in town nor is it yet a critical “must have” success factor for brands. Don’t be surprised to see prominent brands diversify their social media spending, reduce the intensity of Facebook activity or even dump Facebook campaigns in the New Year.
Does Facebook Work? With 800 million active members, as many as 25% accessing the network using a mobile device, and hundreds of millions spent by brands to attract and engage fans, clients are starting the New Year by asking, “Does Facebook work?” The short answer is … it depends on what you want Facebook to do. With massive reach, strong frequency and cultural integration, marketers expect Facebook to be a persuasive tool to reach and engage customers and prospects. Yet on a basic level, the jury is still out on these fundamental questions. Some clients want to build brand awareness and amass large numbers of fans hoping to better engage customers and prospects in conversation leading to brand preference, loyalty and maybe goose a few more sales. Others want to reduce the distance between a brand and its clientele quickly and build intimacy necessary to accelerate the number, frequency and value of sales. Measuring these desired results is not clear or easy. For the most part, brands don’t really know who their fans are. There is no way to crosstab Facebook fans or likes with customer databases or purchase histories. So we don’t know if we are reaching new customers or saturating existing customers by using Facebook as a secondary or tertiary channel. From a direct marketing standpoint, F-commerce is in its infancy, though Facebook has become an effective vehicle to tout deals or specials and is becoming a significant force in coupon distribution. But nobody is harvesting significant sales on Facebook … yet. In the absence of customer tracking or direct sales, brands developed content, games, promotions and on-going dialogues to engage customers. Marketers convinced themselves, with a little help from Facebook, that some combination of interactions, likes, clicks, plays, comments, time spent on apps and original posts constitutes engagement which mysteriously translates into brand awareness, preference and advocacy. But there is no consensus on these measures and nobody has documented this phenomenon in a credible way. There are lots of correlations but little proven causation. Consider the stats that are bandied about brazenly. 86% of American women have a social network profile 95% of them are on Facebook 50% of female social networkers bought products based on information they found on social networking sites. The average user spends 7 hours a month on Facebook, Roughly half (49%) of Facebook brand followers want sales and offers In spite of these data points, we don’t know who our fans are or their relative value to our brands or our business. We aren’t selling them much that we can track or directly attribute to Facebook. And we think consumers like us and engage with us. But there’s evidence that brands and customers expectations are out of sync with each other. And Facebook itself has filtered access to the followers we’ve amassed and their friends, which limits our reach and frequency. To confound things further, we don’t really have a way to translate discrete actions on Facebook by individuals or in aggregate into meaningful behaviors affecting brand or revenue growth. If we are honest with each other the answer to the question of Facebook’s marketing efficacy is … we don’t really know. Maybe we are in the infancy of Facebook marketing experimentation or maybe, as Catherine Boera of Active International argues users see Facebook as a social rather than as a marketing medium.

Danny Flamberg

I am a veteran marketing consultant working with leading and emerging brands

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