The Wall Street crowd got all lightheaded last week because Facebook posted some better than expected numbers. Pardon me if I don't join in the champagne shower.
Here in the Ivory Tower wing at The Ad Contrarian Worldwide Headquarters, we're starting to think that Facebook may turn out to be one of the all-time dumbest companies on the planet. And remember, to be the all-time dumbest you have to be dumber than Pepsi. That ain't easy.
I'm the farthest thing from a digital strategist, but I have this feeling that Facebook's business strategy is all wrong.
Facebook is the only media company in the universe that reaches a billion people on a regular basis but seems determined to sell cheesy $2 ads to dentists.
To understand the problem with this we have to go back to first principles. We have a couple of axioms about advertising that are relevant to this issue.
The first is that interactivity is the enemy of advertising. Whether the interactivity takes the form of clicking a tv remote, pushing a radio push-button, clicking a mouse or swiping a page, we believe that people are far more likely to interact with a medium to avoid advertising than to engage with it. You can read more about that here.
Second, we believe that online advertising has turned out to be far better at fulfilling demand than at creating demand. This accounts for the success of advertising on sites like Google and Craig's List, where people are searching for something. It also accounts for the failure of most display advertising. You can read more about that here.
The exception to the first axiom is found in the second axiom. People will purposefully interact when they are looking for something -- when they are in "demand fulfillment" mode.
In this mode, people will engage with advertising. When they are not in this mode, they will avoid. Somehow Facebook seems to have gotten the idea that they are like Google.
They are using a "demand fulfillment" business model -- crappy little listing ads that only "searchers" would find appealing -- to monetize "demand creation" advertising -- which requires big, impactful, and atttractive ideas.
Anyone following me here?
Maybe this brilliant graph will help.
The way you make big ad money in the "demand creation" model is in the upper right quadrant. You sell big, impactful ads to broadly targeted advertisers. The way you make money in the "demand fulfillment" model is in the lower left quadrant. You sell a million crappy little ads to dentists. This is how the yellow pages and the classifieds used to do it, and how Google now does it. Facebook is a "demand creation" medium stuck in a "demand fulfillment" quadrant.According to Facebook's coo, they have so many users, it's like three times the Super Bowl audience every day. But do you see the Super Bowl crowd there? Do you see Coke and Budweiser and Doritos? No, you see pet groomers and divorce lawyers.
This is because they are selling the wrong stuff to the wrong people for the wrong reasons at the wrong price. Other than that, they're doing fine.
In our next exciting episode, we'll talk about why Facebook's focus on mobile does not solve this problem; why their emphasis on precision targeting is all wrong; and why they need to do something different and radical.
Maybe we'll also find out why if I'm so f/ing smart, how come they're all billionaires and I'm a schmuck with a blog?