March 21, 2011

Social Media's Massive Failure

For several years there has been consensus among a very vocal and highly placed group of marketing executives and commentators that fundamental changes have taken place in our culture and in technology which render traditional modes of marketing communication no longer relevant or effective.

The thinking behind the hypothesis goes like this:
  • Marketing is a "conversation."
  • People are no longer willing to accept the "interruption" model of advertising.
  • The objective of marketing communication is for a brand to create "engagement" with consumers.
  • Traditional forms of advertising do not create engagement and have substantially outlived their usefulness.
  • The Internet has created an environment in which consumer control of his/her purchasing behavior is unprecedented.
  • Consumers are quickly moving away from brands that are obviously out to sell them something in favor of brands that seek to engage with them and have conversations.
  • Social media represents the most effective medium for engaging with consumers and having these conversations.
Among mainstream brands that have adopted this new marketing paradigm, none has been more zealous than Pepsi-Cola.

Last year, Pepsi substantially abandoned its long-standing commitment to traditional advertising in favor of social media. It canceled its annual Super Bowl advertising. It diverted tens of millions of dollars from traditional advertising to create the "Pepsi Refresh Project." Pepsi Refresh was an online social media initiative in which Pepsi gave out 20 million dollars. They also spent many millions more in support of this initiative.

I am pretty certain Refresh is the largest social media initiative ever undertaken. Never before, to my knowledge, has a brand taken so much of its traditional advertising money and energy and re-directed it into social media.

Most major brands have some kind of social media program. But never before, to my knowledge, has a major consumer brand made a social media program the centerpiece of its advertising and marketing.
"We took the divergent path," explained Frank Cooper, chief consumer engagement officer for Pepsi. "We wanted to explore how a brand could be integrated into the digital space."
The idea behind the program was that you, the consumer, got to engage with Pepsi by voting for the "Refresh" projects you deemed most worthy. There were also other opportunities to engage through an enormous online effort -- Facebook, Twitter, YouTube, website, blogs. Millions of dollars were also spent in what might be called "traditional advertising in support of social media."

Skeptics (such as yours truly) have been eagerly awaiting a report card on this initiative as it is the first real test case for a major brand implementing a massive transfer of marketing resources from traditional advertising to social media.

The results are now in. It has been a disaster.
  • Last week, The Wall Street Journal reported that Pepsi-Cola and Diet Pepsi had each lost about 5% of their market share in the past year. 
  • If my calculations are correct, for the Pepsi-Cola brand alone this represents a loss of over $350 million. For both brands, the loss is probably something in the neighborhood of 400 million to half-a-billion dollars.
  • For the first time ever Pepsi-Cola has dropped from its traditional position as the number two soft drink in America to number three (behind Diet Coke.)
  • In 2010, Pepsi's market share erosion accelerated by 8 times compared to the previous year.
The Refresh Project accomplished everything a social media program is expected to: Over 80 million votes were registered; almost 3.5 million "likes" on the Pepsi Facebook page; almost 60,000 Twitter followers. The only thing it failed to do was sell Pepsi.

It achieved all the false goals and failed to achieve the only legitimate one.

In reaction to this disaster, Massimo d'Amore, chief executive of PepsiCo Beverages Americas had this to say...
"When my ancestors went from the Middle Ages to the Renaissance, they blew up the place, so that's what we are doing."
He also said...
"We need television to make the big, bold statement...
Social media has taken a huge hit. Only zealots and fools will continue to bow down to the gods of social media.

(More on this subject here and here)


echo said...

very nice blog......

Anonymous said...

So, by that logic, a bad TV commercial means that broadcast media is a massive failure?
Surely it's the engagement level of the campaign as much as the channel used to promote it.

Anonymous said...

Correlation/causation. Try again.

Rew said...

Engagement is only half of the equation - and arguably the easy bit.

Conversion is the hard part.

Ari Firestone said...

I was forwarded a link to this page by a supplier of mine and, having now read and reread this article, I must admit that I am aghast! I don’t know who Bob Hoffman is, but I must say that his writing is an example of the most irresponsible kind of journalism – if you can call it that.

In this article, the writer provides us with some very limited statistics and then proceeds to draw conclusions about what those statistics tell us about a broad social media campaign, in specific, and social media in general. Yet, the writer makes no effort to establish any causal relationship between the campaign and the outcome. Even if we give “The Ad Contrarian” credit for offering up factual statistics (which is, in and of itself, asking us to make an unreasonable leap of faith) the onus is on the writer to demonstrate why the outcome is a direct result of the factors he points to.

The writer first describes (quite loosely) a major social media campaign undertaken by Pepsico to promote their Pepsi and Diet Pepsi brands. The writer then points out that those two brands each subsequently lost 5% of the market share they held prior to this social media campaign. Then the writer basically asserts that social media, in general, is a failure because the campaign undertaken by Pepsico is directly responsible for the erosion of market share.

Even those with a fraction of a brain can easily envision myriad factors that could have contributed to the erosion of market share. For example, I could just as easily (and just as irresponsibly) assert that Pepsi and Diet Pepsi would have lost 20 % of their market share had it not been for the saving grace of this social media campaign. Understand that I make no assertion, because it would be as irresponsible – absent of additional facts and research – to make such a claim as the claim made by The Ad Contrarian.

In the end, the anti-social media bias of the writer is evidenced by the condescension in the last line of this article…”Only zealots and fools will continue to bow down to the gods of social media”.

Shame on The Ad Contrarian and it’s writer, Bob Hoffman!

white label social media program said...

Wrong move for Pepsi and I'm very said to hear about this. Truly social media marketing is effective but always choose where you got the great results. Traditional marketing is still effective and if this marketing give you a good results, why will you shift?