Frustrations with the Facebook IPO Controversy
There’s been a lot of talk about Facebook as the company prepares for it’s IPO. Many are questioning the value of Facebook, saying the social media site is just a fad. Others are claiming the site lacks a successful revenue steam. Those arguing this increased their cries as GM announced it was no longer running Facebook advertising, claiming the ads had little impact on their consumers. The news was a $10 million per year loss for Facebook, and perhaps even more as brands begin re-evaluting their Facebook ad effectiveness.
I hate to say this and bring my own personal opinion into the matter, but I am a little frustrated at the comments surrounding the questioning of Facebook’s advertising. Many have posted comments saying they have never clicked on a Facebook ad themselves, and there was even an article comparing Facebook ad performance against Google ad performance. As a marketer, I am surprised as these comments and would like to point out a few things regarding Facebook ads.
1. Search marketing is not social display advertising. Comparing the two is not comparing apples to apples. Search marketing performance is a lower-funnel tactic, capturing people who are in-market since they are actually searching for something. Social display advertising is an upper-funnel tactic, developing relationships with consumers and forming opinions. Obviously, a lower-funnel tactic is going to out-perform an upper-funnel tactic.
2. Facebook ads generate brand awareness and engagement with consumers. This is especially true of ads that drive Facebook likes and provide brands with earned media via an increase of followers of their page posts. Other forms of ads cannot provide this type of earned media or interaction. Can you talk with brands through your TV? In a search ad? In a display banner? No. Only through Facebook can you get almost as close to brands as you can. People live brands through Facebook. People engage with the content. They share posts by brands. They comment on photos from brands. They provide suggestions to brands. What’s the best way to drive users to your brand page? Facebook ads. They’re right on the site. They have a like button. They’re easily targeted. They perform well.
3. Without brand awareness, you won’t see sales. Period. Think of any major brand: Tide, Pampers, Milky Way, or Pepsi. What makes you recognize these brand names? Advertising. Without advertising, these brands would remain unsold on brand shelves as consumers choose products which whose names they know and have heard of. Are you going to purchase a brand you haven’t heard of on the shelf over one you have heard of? No. You want to purchase something that you have positive or neutral expectations of, not one that you don’t have any prior knowledge of.
4. Facebook is just one site. Brands move their advertising dollars around all the time. At the end of the day, Facebook is just one site. Comparing it to other networks such as Google or Yahoo just doesn’t make sense. Though it has the traffic, the traffic on Facebook is going there for social networking. On Google, users are on the site to search, check their mail, see photos, and participate in a handful of other online activities. As Facebook expands, especially into gaming, this will change. For now, however, Facebook is just that- Facebook. One site, with lots of visitors and lots of potential.
5. Facebook is a data owner. And it’s scary. Think of everything Facebook knows about you that other sites don’t. It knows your friends. It knows who you talk to day in and day out. It knows who you trust. It knows what you did Friday night. It knows everyone you’ve ever dated. It knows what games you like to play, what photos you like to share, and what type of posts you like. With extensions outside of Facebook itself, it even knows things like what articles you read on news sites. In the right hands, Facebook knows you better than you know yourself. It’s scary. And it’s where the goldmine is at.
As a marketer, I may be a biased to Facebook advertising. With the amount of success brands and small businesses have seen from them though, I really believe in them, and I hope you’ll at least take a taste of the Facebook pie.
-Bryan Nagy
Very sensible commentary Bryan. There should be more guys like you in our business.
The problem is that there is some hard core aversion to FB and some real haters. In a certain demographic (like a bunch of my 40-something friends with six figure incomes) people just hate FB and now have declared that they will never have an account or don’t use theirs. These are target market type people with lots of disposable income. As an advertiser, do I care if a bunch of broke 25 year olds see my ads? I personally hate social media and the complete lack of privacy that goes along with it. It might be a viable advertising vehicle at some point but I think it’s a ways off (like when the generation that has grown up with it has more disposable income). But by then, a lot will change and FB may not even exist.
The thing is though, the 18-34 market is a sweet spot for many advertisers. Not all advertisers are marketing to those with high disposable incomes. We all buy things, right? You and your friends with six figure incomes just might be buying more luxury type things (BMWs, international vacations, expensive jewelry, etc.) The young group is also the demographic with some of the highest disposable incomes even if they aren’t making as much money. This age group often doesn’t have the same financial responsibilities that you have, are just starting professional jobs, many don’t have kids, and those that are couples without kids have an extremely high disposable income (it’s just them!). Compare this with the typical 34-54 age group where many are families.
This young market is a sweet spot for many brands- Ford (who do you think is the target for Ford Fiestas?), Target (young professionals), major fast food companies, Coke, Apple, etc. All of these are huge advertisers with huge budgets.
Additionally, if you run almost any comScore or Nielsen report, you’ll see that moms have some of the highest indexes against social media. Who makes the purchase decisions in many households? Who is the target for huge advertisers like Procter and Gamble? Moms.
I agree that there will be the next thing a few years (there always is), but for now I stand by Facebook as a great means of reaching consumers.
Bryan,
The math is fuzzy. As a marketeer with experience in print and internet the upper funnel you are referring to has such a huge opening. I see internet advertising as no different than the weekly shoppers/pennysavers. How valuable is something if you give it away for free? Do people see ads yes but mostly they are looking for a coupon that gives them $2 off of a large cheese pizza
The bigger problem is the free content of anything web based (excluding search). I know of no one that says oh I saw that ad or company my friend liked on facebook. People are desensitized to internet ads regardless of where they are located. The internet is so fractured with so many used to be’s wanna be’s and gonna be’s I see Facebook as the new MySpace
My idea is If you want free content than you will see a full screen media ad prior to accessing the site and every 15 minutes or so you will see another one as long as you are engaged on that site (like most video content providers are doing) Read a story see a sponsored ad. Spend 15 minutes on Facebook see a sponsored ad that way you are guaranteed eyeballs
The metrics com scores are all good but there is a difference between paid site scores and free site scores. The internet business model as it exists has to evolve into a pay to play.
Concerning the 18 -34 market why would you take the shotgun approach? If I was ford/gm or any auto manufacturer i would be doing videos and putting my dollars where I could be seen with that crowd. How did they reach them before free internet? I think marketeers have gotten extremely lazy and hide behind metrics that make print and broadcast media look honest. There is an old saying figures lie and liars figure.
If you think Moms are making purchasing decisions based on what they see on facebook I would disagree. Moms buy what they need based on coupons, sales, and what their moms used. Facebook has nothing to do with it.
Way to many companies have jumped into Social media like lemmings following all the others off of a cliff.
But 18-34 year-olds aren’t watching TV like they used to, and they don’t use print like other generations either. They go online for video content, talk with their friends on social networks, share ideas and news on blogs and forums. If I were an advertiser, this is where I would be spending. This is where their eyeballs are.
Regarding moms, I can agree that 100% of their purchase decisions aren’t made from Facebook. It does, however, play a big role. Sure, mom purchase brands that their moms purchased. What about products just released in the last 20, 10, 5 years? This isn’t the case then. They’re purchased from branding, reviews, trends, sales, and experience. Social media (and digital media) is a great way to communicate these things. Moms are one of the number one users of social media, especially social gaming. Studies across Nielsen and comScore show this. In a recent study from eMarketer, nearly 50% of moms say product reviews on social media affect their purchase decisions, 21% of their friends (online) decisions affect their purchase decisions, 18% say blogs affect their purchase decisions, and 12% say general social media buzz affect their purchase decisions. Even at 12%, consider how much of an impact this can make on a brand’s overall sales. Brands are doing great things on social media, in blogs, and across the internet to make reviews, sales, content, and media blitzes reach targets like moms in hopes of increasing sales.
http://www.emarketer.com/Article.aspx?R=1009132
I can agree that there are people out there who aren’t affected by social media or digital media. Maybe you aren’t one of them. Maybe even people you know aren’t one of them. There are, however, millions of people that are. Just as I know there is a place for traditional media and understand people use media differently than I do, as marketers, we have to open our eyes to what other people can be doing with media.
Bryan
Exactly I would say that the 18 to 34 yr olds are not being influenced by facebook but by other media like you tube where it is something that gets passed around. I would also say the closer you get to the 18yo demo that they are not reading much of anything. Moms 5 10 20 years ago were and are influenced by media but I don’t think it can be unequivocally proven they are being influenced because they play words with friends You are correct when a friend says they like something it can influence a decision but to attribute that to social media is a reach and it definitely isn’t that high of a number. Thanks for the response. it will be interesting to see how it progresses.