January 03, 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.  

 

Jan 3, 2012 11:41:14 PM | Advertising, SOCIAL MEDIA

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Danny Flamberg

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