,So the mighty P&G has spoken about social media. When these companies speak the marketing community has to listen. These guys think long and hard about the issues to cut straight through the hype. I know because I did it for Unilever. I worked directly with Unilever digital teams to help them understand the real value of digital media to their business. So, what was the basic message emanating from P&G? Well it’s that social media is not “media” and there’s no point in advertising around “someone breaking up with their girlfriend”.
I disagree slightly with the first part of this criticism. Social media is a form of media because it is space which carries content and delivers an audience that can be traded for money. From an advertising perspective these are the core characteristics of a “medium”. The big question comes when we try to explore what type of medium social media actually is.
In reality social media is not social media, it’s personal media. Social media is really comprised of groups of individuals sharing their personal communications. These social media communications are online versions of personal phone calls, text messages or letters. And whilst in some cases individuals may be prepared to publish these communications, it doesn’t follow that advertising placed in them will be effective. Such advertising is the equivalent of a radio ad in a phone call.
Advertising media planning is no longer about reach (and sites like Facebook certainly deliver reach). Twenty-first century media planning is about going deeper than reach, it’s about delivering mindsets, engagement and involvement. And it’s a fact that whilst an individual is deeply involved in a personal communication, like dumping their girlfriend, they are unlikely to engage with advertising in or around that communication. This notion was encapsulated by David Ogilvy who once observed that you’re more likely to get the best direct response from an ad placed in the afternoon movie repeat than in the latest episode of Dallas (The big hit drama of the day). In other words, advertising can’t win when competing with high value content.
A few months ago on I wrote “Advertising on social networks is a Web 1.0 technique in a Web 2.0 world. It may be the case that carrying ads is not a sustainable route for these networks or for advertisers.” I think this remains the case. It’s a problem for the likes of Facebook though, because if they cannot monetize their inventory their value will fall. So how might sites like Facebook monetize their inventory? I think their answer is to monetize the relationships they have with their users. But this isn’t an ad model. It’s something more akin to Seth Godin’s permission marketing and value exchange. Facebook has a brand franchise. It needs to provide added value to its users by teaming up with partners and offering deals to its users. Social media should be an enabler which allows companies and individuals to exchange value.
Follow us on Twitter
Is Facebook worth $15bn?
So Microsoft has paid $240m for 1.6% of Facebook which makes Facebook potentially worth $15bn. The question on almost everyone’s lips; is it really worth that much? Well when you look at everything Facebook potentially opens up, it may well be. Here’s why:
First, This deal potentially gives Microsoft a new advertising platform that will enable it to compete much more effectively with Google for ad revenue. Facebook merges the capability to collect individual level member data with the ability to show ads. So it’s like fully segmented direct marketing in an online display environment. Or put another way, it’s like Google Adwords with customer data as the driver of ads served rather than the keyword terms being searched. Microsoft has a 5% share of the paid for search market versus Google’s 75%. If Microsoft’s strategy is right, they may well significantly increase their share of online ad revenue.
Second, the marketers holding the ad revenue purse strings spend large chunks of their time trying to segment consumers into groups that are more or less likely to use a given product. It’s currently a rather inconclusive and imprecise science. But because Facebook is about both individual level data and shared interest groups, it opens up huge opportunities to understand much more about how consumer groups are demographically defined. The organisation that holds that type of information will hold an interesting competitive advantage.
Third, we’re not just talking about a traditional online display ad revenue model here; we’re talking about a totally new way of consuming certain types of communication. This land grab is also about the big games of web TV and telecommunication. Facebook may become the place where consumers go to access these services and that sort of portal has an almost incalculably high commercial value.
Whilst many critics have scoffed at this deal price, it may not be as high as it looks. Unless of course something new comes along and entices people away from Facebook just as quickly as they moved in.