July 19, 2012

Open Questions About the Open Graph Facebook’s Open Graph has potential but is problematic. The risks or benefits of gathering and connecting data streams from across the web through the Facebook platform still isn’t clear to most marketers. The technology play puts Facebook at the center of data streams that will soon rival Epsilon, Equifax, Experian, Transunion or FICO. Soon Facebook will collect, hold and be able to slice and dice huge amounts of personal and behavioral data on hundreds of millions of individuals. The marketing potential and the privacy problems are obvious. The value proposition is even more problematic when you realize that Facebook is not a benign player. They intend to dominate database marketing by controlling the inputs and merchandizing the outputs. Seen through this lens there are two perspectives on the value and vulnerabilities of the Open Graph. White Hat Scenario Facebook the beneficent creates a technology platform to gather and stream information across all platforms. The evolution of the Social Graph into the Open Graph enables brands to track, engage and interact with consumers in many places. This begun with the migration of the Like button and continues to include actions done on 3rd party apps and on branded websites. Open Graph promises to take millions of unknown and undifferentiated brand fans and turn them into targetable segments, effective advocates and viral ambassadors that will penetrate new markets and build measurable connections between social interactions and sales. Open Graph aspires to be the universal social CRM tool that allows brands to monetize their fans and friends of friends. In Brian Solis’ terms, Open Graph will enable “retention to become the new acquisition.” No longer confined to Facebook, a brand now can capture and leverage word-of-mouth advocacy and brand loyalty across platforms. By connecting friends with friends and alerting friends about the interests and actions of their friends, brands build a referral network, which, when activated, is more impactful, more credible and more responsive than all other forms of advertising. Using this network gets a brand more content reach than the measly 16% that brands can expect on their branded Facebook page. The benefits of using the Open Graph are extended reach and credibility, broader and more nuanced access to the Facebook audiences they’ve already accumulated and cues for targeting Facebook ads better. Black Hat Scenario Facebook insidiously created the rope for brands to hang themselves. By connecting with customers and prospects through Facebook, brands cut Facebook into traffic and relationships they might not otherwise get. Since more real interaction takes place on branded websites than Facebook pages, Open Graph allows Facebook to bogart brand engagement by collecting data on its platform and on everyone else’s. Once collected, Facebook the beneficent will sell brands access to their own data using targeting tools derived from their own data sets. They will guarantee better results since they already filter content aimed at brand fans and keep access and reach artificially low. But for an additional investment in Sponsored Stories, Facebook will offer more impactful ads that work harder than regular Facebook ads or digital display ads. Once you buy into the Open Graph, Facebook has your data and your marketing budget by the short hairs. Today there isn’t enough Open Graph campaign data to make a judgment call. Facebook is mounting an effort to reach out to brands and agencies to orient them to the potential of the Open Graph and bring them into their ecosystem. But details of this “Shipyard” initiative are still sketchy. Facebook needs to capture this conversation quickly before it’s rivals derail their plans. They understand that Facebook’s developers are focusing on the data while most brand marketers are still trying to get their heads around the fundamental dynamics of social media engagement. The battle won’t be joined and the true scenario won’t get played out until brands and Facebook get onto the same page.
The Facebook Factor: Chicken or Egg? The crux of the Facebook advertising pitch is that the 800-pound guerrilla social network drives business for the brands that use it. New research from Forrester suggests that the chicken or egg question still remains open. In a new reported titled “The Facebook Factor” Gina Sverdlov and team admit that quantifying the RI of Facebook investments is difficult and then go on to run regssions against survey data. They asked respondents to their on-going Q4 2011 North American Technographics Online Benchmark Recontact Omnibus Survey if they were fans of brands on Facebook. They focused on Best Buy, Coke, Blackberry and Wal*Mart – all iconic brands with lots of Facebook fans and large consumer audiences. They also asked survey questions about purchase frequency and volume. Then they did logistic regressions against the self-reported data. The findings showed generally that fans are much more likely to know about, consider and buy from highly visible brands. No surprise there. Forrester chose to spin the data to conclude that “Facebook fandom has the largest impact on purchase” based on the results of serial regression analysis. For Best Buy, Facebook fans were 5.3 times more likely to buy though its not clear if they bought because they are fans or if buyers, already in a relationship with the brand, became a fan to publicly signal their on-going endorsement or advocacy of the brand. It’s the chicken or the egg scenario. The fancy math, which is based on self-reported and therefore inherently unreliable data sets, cannot show us if there is causality, correlation or just coincidence. My hunch is that people who already love brands are the ones who fan them on Facebook primarily because they want deals and advanced or inside notice of new products, services or prices. The other significant value of fans seems to be their role as ambassadors and advocates. In the study Blackberry owners have an 87% probability of recommending Blackberry to a friend while non-fans only have a 44% referral probability. Given RIM’s issues, these numbers are astounding (or dated) on their face. But I’d buy the idea that Facebook fans are also twice as likely to talk up and recommend brands as non-fans. It’s logical. There’s also a healthy dose of RFM (recency, frequency, monetary value) evidence in the survey data. People who bought from any of the brands were 20-40% more likely to recommend the brands they bought. I’d guess they have an equally high probability or making a second purchase from the brand and it’s a fair bet that Facebook fans do this more and possible more often than non-fans. There is self-reported data that suggests that Facebook fans spend from 2X to 3X more than non-fans, but in the absence of real purchase histories, color me skeptical. This research seems to prove that Facebook fans can be powerful brand advocates. The jury is still out on their value as super customers. The real ROI question is … can brands cost-effectively mobilize these advocates to drive sales?

Danny Flamberg

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

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