Do you fancy a share of Facebook? General Motors certainly don’t.
Currently, the world’s largest social network started trading on the Nasdaq last week. Did you buy shares? And if so, why?
With over 900 million users you can see the temptation.
If you did, maybe it’s because you believe that Facebook can draw on an endless pit of ad money.
If you didn’t, maybe you think even Facebook will go the way of Bebo, MySpace and a long list of others that peaked and declined. Seems life on line can be very short. After all, Facebook is just over 8 years old (launched February 2004 by Mark Zuckerberg, Eduardo Saverin, Dustin Moskovitz and Chris Hughes) which in terms of any other business off line would be still learning to walk.
Although it may manage to sell ads on the PC version, over half of Facebook users are using it on smart phones, where is much harder to push ads effectively. Days before its flotation, the company admitted that it had yet to generate meaningful revenue from users accessing Facebook over smartphones, which the future growth in users will come from. For Zuckerberg, who now has new masters in the form of shareholders, he has one hell of a challenge on his hands.
Already some brands are doubting it’s effectiveness – General Motors announced that it was cutting all adspend from Facebook, (see Brand Republic article) amid suggestions it was unsatified with its return on investment.
Back on the PC interface you have the growing problem of software like Mozilla’s AdblockPlus which blocks all ads on Facebook and a piece of software that is become popular with students.
Even though the shares did well at the beginning, they didn’t excel later, reaching a high of $43.20 and falling back to their staring price of $38.23. In a major embarrassment, the Wall Street banks who helped hype up Facebook sell the shares to investors were forced to step in and buy shares to prevent them closing below the initial $38 they were first sold for.
But hell, who cares, Facebook was able to raise a whopping $16 billion, making it the largest Internet IPO of all time and Mark Zuckerberg is a very rich kid. As they say, “the kid got lucky.”
Next day he married his college sweetheart Priscilla Chan.
The success of Facebook is based on a simple primal part of human behavior, we are pack animals and need to relate to others. It really is that simple I’m told by one of our consulting psychologists. We like to chat, share, discuss, download, comment and nose into each other’s lives, and Facebook does it all. It’s also why emails, texts and Twitter do we. And letters and the telephone before that. It’s really that basic, as the old BT ads said, “we like to talk”, and technology has made it easy so we don’t have to feel lonely.
Its success isn’t about a clever strategy but down to its users.
From a commercial point of view, when you have billions on it, business believe that as has a rich audience to tap into that by throwing ad budget at it, they believe it must sell. As we now live in the world of metrics, rather than common sense, numbers rule. But as business guru Charles Handy says, “common sense is anything but common.” And anyway, number satisfies the other basic primal need of humans, to feel safe. Being creative requires balls.
Does ad budget spent on Facebook work? Is the rule of quantity over quality effective?
Of course it rather depends on three factors.
One: relevance of message. At least Facebook isn’t bad at that, they effectively use your profile well to target ads at you. Though I’m not sure why I get ads for dating services when I have clicked the ‘in a relationship with’ box.
Two: proposition. Alas, few ads (I’ve reviewed about 100 over the last week) have a decent strategy or sales proposition, all are like small ads in newspapers, functional messaging. All logic, no emotional engagement and few have a decent decent call to action. Whoever creates these ads should read Drayton Bird’s book ‘Commonsense Direct Marketing’, it may be old but many of the principles are valid and digital advertisers could learn and lot that could dramatically reduce wastage, increase response levels and save a lot.
Three: creativity. Um, only about 1 ad in 100 is even slightly creative on Facebook. Despite being one of the most creative nations on the planet and one of the best at advertising, when it comes to Facebook we produce total crap. All the experience of 50 years of great thinking go out the window, all the psychology, learnings about the importance of emotional engagement and imagination are replaced by utter blandness.
So the question isn’t “do ads work or not” rather then “are those producing ads for Facebook actually doing any work at all?”
I doubt it, after all, it’s quick and easy money and all most clients want ( I suspect) is to be seen to be in a social media space rather than actually worry about how to use it effectively. The same used to be true of DM, clients mass mailing mailers with little effect while the real experts in DM were pulling their hair out in frustration.
Of course looking at the other end of media (and the top of the media hierarchy), you can’t get away with that on TV, which, with outdoor, is a growth area in both the UK and the US at the moment.
With 50 years of understanding, it’s about how well it delivers against it’s spend. How well it brand builds and engages consumers. Of course, as one of our consultant psychologist will tell you, TV has a massive advantage in that people watching are in a mind state that is far more vulnerable to influence (lean back) than people on Facebook (lean forward). Of course relevance is important whichever medium you are using, but relevance alone is not enough. This used to the argument of junk mailers to justify any lack of creativity.
At least if you get your creative right you can get a 3.5 x return on spend from TV, and massive rise in brand awareness and equally as important – trust. Ever seen the slogan “As seen on Facebook”?
Now this isn’t another of my articles about TV vs social media, but one about what is the king really wearing?
If Facebook wants ads to work, which it needs to to retain confidence in the minds of brands and the media industry, it should really encouraging advertisers to do some decent advertising. One of my friends who works for a leading research agency and specializes in social media sites is open is reporting that the majority of digital ads fail but the few that work work fro one simple reason – good creativity. Even more challenging on small screened mobiles.
Facebook is also declining in it’s established territories of the US and UK. China is an opportunity but like Iran plan to, the State can soon replace it with their own version.
It also has no lack of rivals, “trying harder” to take a slice of the social media pie – Wikipedia list over 100. China’s Qzone has 536m users, but combined with the other two Chinese sites, Tencent Weibo & Sina Weibo, they outrank Facebook with 1146m users. Windows Live only has 1/3 of Facebook’s membership with just 330m users. But in the world of digital, things can change very quickly.
It will be interesting to see how Facebook shares trade over the next year but more importantly how the site performs long term.
I think Facebook is here to stay but I believe that with new ideas and new technologies appearing daily one will eventually knock it off the top. And if one has a bigger share of voice than Facebook we’ll be listening. And then, we the advertising industry, will put our clients money where the biggest mouth is.