November 05, 2012

Either Facebook Is Nuts Or I Am

In our last exciting episode, we decided that Facebook's business strategy is a pig's breakfast. They reach a billion people but all they can do is sell crappy little ads to divorce lawyers for $1.50.

We described this problem in esoteric marketing terms (well, esoteric for a dumb-ass blogger, anyway) as one of confusing the "demand creation" model with the "demand fulfillment" model (please don't make me explain that again. Just read this.)

So where does this lead us? It leads us to the conclusion that Facebook is in the wrong business.

First, let's start with a little media theory. Of all the overblown ideas being hustled by the online ad industry the biggest, by far, is "targeting."

Media science baloney notwithstanding, reach is way more important to big marketers than targeting. To paraphrase a former colleague of mine when asked by a cola maker who their target should be, he replied, "Any asshole with a mouth."

Big brands need big reach, not the diminishing returns of finer and finer targeting.

The "precision targeting" of online advertising is supposed to make it far more efficient and effective. Not even close. Not even close to close.

In fact, online advertising's record of motivating consumers is alarmingly terrible. With all their clouds full of data, Facebook ads attract 5 clicks for every 10,000 views. This is mindblowingly ineffective.

In fact, in a recent experiment a blank display ad -- blank! --with no copy, no art, no nothing, just empty space -- had a higher click rate than the average "precisely targeted" Facebook ad. The whole online targeting/effectiveness thing has so far proven to be a complete and utter joke.

Of course advertisers -- being dumber than stumps -- don't realize that "targeting" means absolutely nothing without impact. Who cares how many left-handed Episcopalian cheese-makers you can reach if they don't notice the ad? As a certain Mr. Bernbach once said, "If no one notices your advertising everything else is academic."

Secondly, why would a company that can reach a billion people even want to sell targeting? They should be selling anti-targeting. They should be selling reach. They are the only media property in the solar system that reaches a billion people and they are trading on their ability to reach falafel lovers in Yonkers.

Facebook has taken precision targeting bullshit to its logical absurdity. They're sitting on a gold mine, but they're throwing away the gold and selling the dirt.

So, you might ask, why is Facebook pursuing this strategy?

The answer is that they have to. They refuse to allow advertisers to use Facebook to create ads with any degree of impact. Consequently, they have nothing of value to sell to substantial advertisers. All they have is negligible little junk space for weight-loss hustlers.

Now we get to the speculative part of this exposition. Demurrals notwithstanding, I think the creepy Zuckerberg kid doesn't really want to be in the ad business. Like all these rich web phonies, he sees himself as some kind of high-minded visionary. Advertising just doesn't fit his smug idea of who he is and what he stands for. Just look at this ridiculous spot he produced to celebrate himself.

To him, advertising is a crass affair, unbecoming his noble purpose. Which is why it is relegated to invisible little postage stamps on a part of the page no one looks at.

In short, he's embarrassed about being in the ad business. To be honest here, so am I. But I don't have investors.

Here's what Facebook needs to do:
  • They need to forget about "precision targeting." It's bullshit and it's not working. And it's not the business they should be in anyway.
  • They need to sell reach. They have tried. But as currently configured it is a pathetic joke. Reach and frequency are irrelevant if the ad units have no impact. See Mr. B above.
  •  The platform doesn't matter. Mobile or immobile, advertising that is invisible is worthless. Period. Exclamation point. All this hyperventilating about Facebook's mobile strategy is a red herring.
There are only two ways this is going to happen. First, the Z-man has to get used to the idea that he's in the ad business. Second, he has to get rid of all the Global Chief  Engagement Content Relationship Jargonators. He has to get some ad sales people who know what the f/k they're selling, and then give them something worthwhile to sell.


Anonymous said...

Why does it have to be either/or? You and Facebook could both be crazy!

Anonymous said...

You could say exactly the opposite and talk about Yahoo. I guess it would still make sense.

andymac53 said...

I appreciate that targeting for big brands is not what they want but what about small businesses? Say that donut shop in Yonkers - it can only sell to locals who like donuts. Maybe targeting is something that could work for small businesses? What say you AC?

Geoff said...

I absolutely agree with everything you said here. I also know you don't care, but I was bitchy on an nearlier post and want to atone.

There is a problem though: "real value" for online ads is almost always defined as interupters: interstitial ads that pop up between me and my content.

Start doing that and those billion users might just vote about how valuable their Facebook content truly is.

Anonymous said...

andymac53- I certainly can't speak for Bob, but I think you've proven his point. Sure, FB can provide another place for a Yonkers donut shop to promote their business(albeit, innefectively), but then again, didn't the Yellow Pages always offer the same thing? And I don't recall anyone saying that the Yellow Pages 'changed everything'. The key is that it's overstated time and time again to both the big guys and the little guys that this is somehow a new phenomena. And it's not. Just another place to throw up a piece of clutter in hopes that someone in your target DMA will notice.

Tiffany Gholar said...

Thanks for writing this. I am so glad I found your blog. I'm so tired of the false promises of the "social media experts" who are only following me on Twitter because they want me to reciprocate and am glad to see you're willing to speak the truth, and are coming from a perspective of real experience.

Facebook recently gave me a $50 advertising credit. I am using it to promote an upcoming art show. It costs me $2 for each RSVP, and knowing how flaky people are on Facebook, I'm not sure how many of the people who said "yes" will actually show up. I'm glad I am not spending any actual money on this little experiment.

Chris Seiger said...

Is the upstream thought of all of this the question of whether Facebook is a medium or not? Just because you can sell ads, does that make you a medium?

Ken Katzberg said...

All I know is, I'm blowing snot reading this. Thanks, Bob, please don't get hit by a truck.

Stephen said...

Great post.
Your last sentence surely invites your next one....what are they going to sell to advertisers? As Geoff notes above - this leads you to a classic ads as an interruption model...and we know pop ups on youtube, wherever, get clicked on quicker than anything in the history of the universe. As people start to consume video more naturally and easily online and on mobile then video would suggest itself to be the most relevant and likely type of 'ad'. But then we're back to the fact that digital environments - be they mobile or desktop - don't have the same advertising/consumer relationship. Turn on the TV and the ads are there - no-one thinks 'jeez, can't believe the ads are on'. Turn on your phone or laptop and something pops up and everyone in the world thinks 'jeez, I hate these things'. While your conclusion is that maybe he is in the ad business...isn't there another angle that maybe he won't ever make the ad business work and that giving away great stuff for free isn't ever the best business model in the first place...?

Dev Sh said...

Excellent post. I enjoy all of yours but this one was a really good read.

Anonymous said...

I have used fairly effectively for local business.

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Mark London said...

The problem with selling reach is that to make those ads function they would have to be interruptive - those billion users would then find a social network wITHOUT those, and *poof* no more FB.
That's the issue that keeps Mr Z awake at night.

Anonymous said...

Completely agree with Mark London's comment. Facebook was initially started as a way of connecting people socially. As the hype built around it and greedy investors saw it as a potential cash cow they had to come up with ways to monetise it. The problem is in doing so they undermine the very reason it was created in the first place.

I don't think it will ever make the kind of money investors hoped it would.

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Unknown said...

Since they already have an audience 3 times the Superbowl, maybe they could actually sponsor an event like the Superbowl online. Rather than disrupting their users in a thousand small annoying ways, they could do it completely—but just once in a while.

Of course their brand demands that the coverage of any event be done differently than the networks would do it. What if they used the best of the video/photo/written content contributed by their 1 billion users to show what is happening on the ground, or behind the scenes of a sanitized for TV event like the Superbowl, the elections, or a war?

Or what if they had Facebook channels where they aggregate the best user content into areas people are interested in like cooking, politics, sports, marketing, etc. They could then have relevant advertisers sponsor those areas, and maybe even pay FB users for their contributions. There's got to be a lot of interesting info out there among 1 billion minds.