August 16, 2012

Social Media: With Friends Like Facebook...

Here at The Ad Contrarian Global Worldwide Nerve Center Headquarters we pride ourselves on fairness and accuracy. I mean, considering it's a blog.

So today, we are going to the defense of social media. You heard that right -- we're defending social media.

What is the reason for this temporary loss of sanity? Facebook.

You see, the Facebook IPO disaster may turn out to be a tipping point for social media -- a bad tipping point. And it may not be fair.

For almost 5 years, consumer interest in social media has grown at a phenomenal rate. Facebook and Twitter have become international sensations. Social media marketing, on the other hand, has had a less than brilliant history.

Nonetheless, the marketing industry blindly embraced the magic of social media marketing. The Facebook debacle is changing that. Marketers are now saying out loud what they only whispered a year ago -- how much of the miracle of social media is real and how much is bullshit?

The irony in all this is that Facebook may be a social media venue, but as a business it is nothing more than another medium for selling display ads. To be more succinct, Facebook does not sell social media, it sells display ads. And as we know, the record of online display advertising is below dismal.

Investors think of Facebook as a social media play. It is nothing of the sort. Facebook makes about 85% of its income selling crappy little ads that no one notices. The press has portrayed the Facebook face plant as an indication that the business community has lost confidence in social media. While this may be true, it is not really relevant to Facebook's business problem.

I have been more than critical of the hype surrounding social media marketing. But let's be fair. Let's judge social media marketing on its ability to create results. Not on Facebook's ability to sell display ads.

Thank you!
When I put this post to bed last night, "The Ad Contrarian" was #2 and "101 Contrarian Ideas About Advertising" was #4 on Amazon's advertising ebook best-seller list. Thanks! We're taking over the publishing world 99¢ at a time.

6 comments:

Graeme Wood said...

That's a vital, and under-reported, distinction - I've seen a number of brands have great success (although at low scale) increasing sales, and more increase claimed brand preference using Facebook. But that's using Facebook pages, apps and communities. And in most cases preaching to the converted. The difficult bit is scaling those successes to any degree, which is where the ad products should, but rarely do, help.


Which isn't going to keep Wall St happy.....

I'd guess that we'll see Facebook charging brands for access to pages within 18 months, which will be make or break for their long term monetization plans

zhangdro said...

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SEO

Diane Cook-Tench said...

Part of Facebook's real value is in the information they have on so many millions of people across the globe. There rich database of detailed likes and dislikes, regarding everything from political opinions to car ownership is worth a lot of money to advertisers and brand developers - maybe even medical researchers and more.
I'm going to buy Facebook stock, it's just a matter of when. My guess is that there are many investors that are waiting to see how low the stock goes before making their purchase. It's not a matter of whether Facebook is a valuable company, that's evident.
It's value goes up further when you consider cultures outside the US. I spent time last month with Iraqi students at VCU as part of the Iraqi young leadership program. All spoke excellent English and were sophisticated social media users. They're funded by the US embassy and are here to learn how to use social media for humanitarian good. Facebook is the main social media site that they all depend on and use. According to them, everything else pales in comparison. Most say that they have to lead lives of shut-ins as it's too dangerous to be out on the streets.
A young Iraqi medical student told me that his parents get very upset if they can't catch up with him on his cell phone every two hours. He's working on a national medial site for Iraqis. He said that a normal day for him includes at least 10 hours of computer time. His life is no different than those that came from across that country to participate in this program.
So perhaps, we need to consider some of Facebook's other uses past the small crappy advertising. Though even there, I'm seeing better ads from terrific little startups in Richmond showing up on my wall and picture pages. Ledbury is a two-year old shirt company here, started by two guys in their early 30's. They're getting 50,000 hits a month on their site with 8 percent of visitors purchasing. Sales in the past 12 months were 3.1 million. They don't do traditional advertising and use pop up stores in major cities to spread the word - that and pr. Check them out, they're doing everything right. Including creating their own terrific content that's all in-house, from photography to videos. I believe they're the wave of the future and middlemen like a lot of us will find that there are fewer clients down the road. Many of us will work inside firms, big and small. www.ledbury.com/

Diane Cook-Tench said...

Part of Facebook's real value is in the information they have on so many millions of people across the globe. Their rich database of detailed likes and dislikes, regarding everything from political opinions to car ownership is worth a lot of money to advertisers and brand developers - maybe even medical researchers and more.
I'm going to buy Facebook stock, it's just a matter of when. My guess is that there are many investors that are waiting to see how low the stock goes before making their purchase. It's not a matter of whether Facebook is a valuable company, that's evident.
It's value goes up further when you consider cultures outside the US. I spent time last month with Iraqi students at VCU as part of the Iraqi young leadership program. All spoke excellent English and were sophisticated social media users. They're funded by the US embassy and are here to learn how to use social media for humanitarian good. Facebook is the main social media site that they all depend on and use. According to them, everything else pales in comparison. Most say that they have to lead lives of shut-ins as it's too dangerous to be out on the streets.
A young Iraqi medical student told me that his parents get very upset if they can't catch up with him on his cell phone every two hours. He's working on a national medial site for Iraqis. He said that a normal day for him includes at least 10 hours of computer time. His life is no different than those that came from across that country to participate in this program.
So perhaps, we need to consider some of Facebook's other uses past the small crappy advertising. Though even there, I'm seeing better ads from terrific little startups in Richmond showing up on my wall and picture pages. Ledbury is a two-year old shirt company here, started by two guys in their early 30's. They're getting 50,000 hits a month on their site with 8 percent of visitors purchasing. Sales in the past 12 months were 3.1 million. They don't do traditional advertising and use pop up stores in major cities to spread the word - that and pr. Check them out, they're doing everything right. Including creating their own terrific content that's all in-house, from photography to videos. I believe they're the wave of the future and middlemen like a lot of us will find that there are fewer clients down the road. Many of us will work inside firms, big and small. www.ledbury.com/

Greg Satell said...

TAC,

I would argue that Facebook is not necessarily a business based on display ads. That was the most obvious ad product, the first one they tried and therefore where they get most of their money now.

They also earn a ton of money from fees from app providers like Zynga and have new products like sponsored stories (which I don't think much of) and promoted posts (which I think is a real winner).

In any case, they only need to get it right once and that's multiplied by a billion users. That's pretty powerful.

- Greg

BOB HOFFMAN said...

Greg,

All I need is wings and I could fly.

B