I was going to write something in response to the post about Mark Cuban leaving Facebook for MySpace (he doesn’t like that you have to pay to reach 100% of your audience), but Dalton Caldwell beat me to the punch with a well-put take:
We can expect to see Facebook deemphasizing traditional advertising units in favor of promoted news stories in your stream. The reason is that the very best advertising is content. Blurring the lines between advertising and content is one of the most ambitious goals a marketer could have.
Bringing earnings expectations into this, the key to Facebook “fixing” their mobile advertising problem is not to create a new ad-unit that performs better on mobile. Rather, it is for them to sell the placement of stories in the omnipresent single column newsfeed. If they are able to nail end-to-end promoted stories system, then their current monetization issues on mobile disappear.
The only thing I’d add to this (which I tweeted yesterday) is why would brands be treated differently than people on Facebook? If any of us post something to FB it will only reach a portion of our friends, so why should a brand be able to reach 100% of their fans? It’s a filtered platform and that’s what makes it different than Twitter and Tumblr.
I’ve been saying the ability to build awareness is the biggest strength of Facebook (and more broadly social). Intent is great and Google has built an incredible advertising machine, but most brands need to create intent, not harvest it. Interesting to see that Fab agrees with me:
Forbes says retail site Fab it’s spending $25 million in Facebook ads this year. CEO Jason Goldberg is adamant on his company’s “digital ads” preference according to Forbes. “Facebook ads are more effective than Google search or display ads, because Google ads are based on intent, while Fab is designed for people to discover new items they aren’t searching for. Fab is designed to be a site people sign up for and browse around and eventually make purchases, Goldberg says.”
Two interesting nuggets in Ezra Klein’s story about studying economics in video games. First, a question I’ve asked myself many times about Facebook and currency:
“Just for example,” Castronova says, “Facebook has an entire currency system that isn’t taxed or regulated. At what point does that threaten what the Federal Reserve does?”
Next it’s a broader point about what effect video games have on the economy-at-large:
There’s also a question of whether actions in online worlds count as real-life economic activity. “Say someone is playing Eve Online for a whole week and not providing services in real life,” Guðmundsson says. “That would hurt GDP [the measure of real-life economic growth], but it would increase the Gross User Product in the virtual world. So did overall value creation really decline?”
My problem with this “should Zuckerberg be CEO” story (beyond the fact I think he should) is that there’s only one real reason given and it doesn’t even belong to the author, but instead to Reuters blogger John Abell: “Facebook needs its spiritual leader and chief innovator in a hoodie. But it doesn’t need him as CEO, placating investors in a collared shirt.” Do we really believe Facebook’s stock is sliding because Zuckerberg is spending too much time worrying about investors?
For what it’s worth (and it’s probably not worth much), my feeling on Facebook is that it’s still early and that a) they’re not yet where they need to be with their business (let’s remember the company is only around 10 years old) and b) the market is so caught up with Google and “intent” that they’re still not seeing the bigger opportunity with brand advertising (I wrote a bunch about this right around the IPO). Facebook is still a gamble, but even they’d admit that. They believe (and need to convince the market) that they have the best years ahead of them and that they plan to fully realize the giant (and unprecedented) opportunity staring them in the face.
This is sort of interesting. Gizmodo is paying $20 per-photo for new pictures of Mark Zuckerberg (and asking some real questions about privacy):
For someone who doesn’t believe in privacy, Mark Zuckerberg is awfully guarded. He has made Facebook public by default, and yet his own public posts are few, far-between, and tend towards the anodyne. Facebook’s share-everything CEO even went so far as to keep his recent wedding a secret from his own friends, presumably to avoid public scrutiny. For all his bluster about public sharing, Zuckerberg reveals very little of himself. That needs to change.
This is a cross-post from the Percolate Blog. I thought you all might enjoy reading it here as well.
Let me get something out of the way before we get started: In case you haven’t heard, Facebook is going to IPO this week.
Okay, seriously, all this IPO talk has driven people to dive into Facebook’s business model and lots of folks are coming up with doubts. As Peter Kafka points out, even Facebook has its doubts, mentioning as much in their IPO filing: “We believe that most advertisers are still learning and experimenting with the best ways to leverage Facebook to create more social and valuable ads.”
But what does that mean really? And what’s the opportunity? And, most importantly in many people’s eyes, does Facebook really have the opportunity to be a bigger company than Google?
While I don’t know the precise answers to those questions, I do have lots of opinions and since it happens to be Internet Week in NYC, I’ve been having these conversations a lot (mostly on panels). The bulk of the argument against Facebook revolves around their lack of “intent” data. This, of course, is what Google has in bulk and is the reason they are a multi-billion dollar business. Being able to target people at specific points in the purchase process changes the way marketing works. It allows advertisers to do something that was all but impossible (you could buy in-store and outdoor around stores, but that’s a whole lot less efficient). This is an amazing thing for marketers and Google’s market cap reflects it.
But if you ask most advertisers why they spend millions (and sometimes billions) on traditional ads, it’s not to harvest people who intend to buy, it’s to create demand: continuing to grow a business requires continuing to bring in new customers constantly. However it makes you feel, most ads exist to remind you that you need something new. That shoe company with billboard isn’t trying to get you to buy their shoes over a competitor, they’re trying to remind you that you need new shoes and, they hope, when you walk into the store you’ll spring for their brand.
That’s where brands spend real dollars. When startups show off “the chart” (you know, the one with the gap on time spent versus ad spend), they are looking at the effect of digital platforms not having a good answer to intent creation.
That, I believe, is where the opportunity for social is. We’re not there yet, but the promise is that you can use your understanding of a user’s interests to present them with messages that let them know about things they want before they want them. If Facebook figures this out it will be a bigger company than Google.
So how does content fit in?
Using the traditional purchase funnel, I think you still have a gap between awareness and intent. Once someone knows about your brand or product, how do you create need? One really good way of doing that is to remind them you exist (a large portion of CPG ad spend is used for just this). The way to remind people you exist is to create content they’ll see. To create content they’ll see on Facebook you need to a) be engaging enough that it builds organic activity and pushes beyond the base distribution you get through EdgeRank or b) buy Reach Generator. The two big goals (awareness and intent creation) have paid actions associated with them in Facebook, Twitter and Tumblr. If these companies continue to build on these ideas and find better ways to target users based on their interests they will be solving a real problem for advertisers, something that hasn’t really been done on the web since paid search in the early 2000s.
Of course, there are lots of ifs here. The products are not quite there yet (targeting, for instance, is still largely based on social connections instead of interest connections), but I think these platforms will get there and I think they’ll succeed.
This is a really interesting way to think about the power of Facebook:
Google could still put ads in front of more people than Facebook, but Facebook knows so much more about those people. Advertisers and publishers cherish this kind of personal information, so much so that they are willing to put the Facebook brand before their own. Exhibit A: www.facebook.com/nike, a company with the power and clout of Nike putting their own brand after Facebook’s? No company has ever done that for Google and Google took it personally.
The rest of the article is worth a read as well. It’s a former Google engineer explaining why he left and what’s changed inside the organization in the last two years with the transition to social.
Facebook did a big study on how we find information and, not entirely surprisingly, our weak ties tend to give us stuff we wouldn’t otherwise run across. Nothing really shocking there, but, as Slate notes, the scale of the study was:
The other crucial thing about this study is that it is almost unthinkably enormous. At the time of the experiment, there were 500 million active users on Facebook. Bakshy’s experiment included 253 million of them and more than 75 million shared URLs, meaning that in total, the study observed nearly 1.2 billion instances in which someone was or was not presented with a certain link. This scale is unheard of in academic sociological studies, which usually involve hundreds or, at most, thousands of people communicating in ways that are far less trackable.
Well, this quote from a research engineer at Facebook is a relief:
The tools use our own technologies (talk about dog food) so they work, look, and integrate beautifully. Best part, if someone doesn’t like something, well, they can just fix it. (To wit, our email and calendar software is off-the-shelf and is the most unpleasant tool to deal with. Get this – we have a few people “specialized” in sending large meeting invites out, because there are bugs that require peculiar expertise to work around. Not to mention that such invites come with “Do not accept from an iPhone lest you corrupt the invite for everyone!”)
Nice to know big tech companies can’t fix calendaring either. Also, while we’re here, I liked this comment about Facebook’s use of PHP:
Facebook’s outlook of PHP is largely passionless; yes, engineers understand it is far from perfect, and people occasionally rant or show some WTF code sample. At the same time, at Facebook we love doing cool things, and PHP is simply a means to an end. With our extensive framework and libraries, it’s also often the simplest means to an end.
On the surface, Facebook adding these little business cards are not a big deal (other than the scale of any initiative the company takes on). But I do think there’s something more interesting here: This is another step in Facebook owning your identity in the physical world. They’ve already claimed you in the digital world and pretty much locked things up, but the physical world is still a hodgepodge of identities split between governments, banks and employers. There’s never really been a global holder of identity data before (to my knowledge) and I’m not sure I yet understand what the implications are, but I assume it’s something Facebook is thinking a lot about.
Facebook apparently gets so many requests to take down photos because they’re unflattering that they’ve added an additional option for “I don’t like this photo of me.” It doesn’t actually get a photo taken down, rather it’s “designed to trigger compassion from the photo posters.” I’m not sure why I find this so interesting, but something about the basic humanity of being embarrassed by a photo and having to find a way to deal with that through software is very interesting. In some ways I’m surprised we don’t hear about lots more stuff like this from Facebook, after all with almost a billion people on the platform they surely run into “human problems” on a regular basis.
[Editor's Note: I posted this over at the Percolate blog and thought it was worth posting here as well. Hope you enjoy.]
Andy Weissman wrote an interesting post about what he calls the “golden age of internet marketing.” Essentially his vision, which I mostly agree with, is that a few large platforms are going to create native monetization models that better align the interests of brands, consumers and platforms than display advertising ever did. Google and Facebook are the two clear winners in this world so far, as both have found ways to serve brand needs while creating a better experience for users (at least with paid likes in the case of Facebook).
There are a few additional thoughts I have on this whole conversation, though. First, what are the ramifications of a web that is controlled by a few successful platforms? Andy gives the example of Tumblr, Twitter, Facebook, Foursquare, Instagram and Soundcloud amongst a few others. All of these platforms have managed to generate a ton of user engagement and some are already at the user scale needed to support native brand interactions. However, this number will always be very small (in terms of total platforms, not total consumers). I’m not sure that’s a bad thing, but I’m also not sure it’s a good thing. I believe deeply that the relationship people have with sites is different than the one they have with platforms, and there will always be value there. The problem is, essentially, to be successful with an advertising buy on a website these days you need to do something native for their platform (the site), which will never have the scale that a Facebook, Google or Twitter does.
Second, I think a lot of Andy’s article places the onus to get this figured out on the brand, but I’d argue an even bigger responsibility lies on the shoulders of the platform to understand how brands actually work. A few weeks ago I wrote about some comments from Jack Dorsey at Twitter about their model. Dorsey talked about capturing intent, which has been a big buzzword around marketing Google’s search advertising was coined as an intent miner. As I wrote then:
Twitter’s value is not about intent, in the classic funnel definition, it’s much more about awareness and interest: About exposing you to new products and services you didn’t know you were interested in. If Twitter can actually deliver this it has a truly differentiated ad product, but I worry they’re following the Google model too much and thinking too low in the funnel.
This may seem like a semantic difference, but I don’t think it is. I think generally Silicon Valley has not done a good enough job understanding what brands are all about and what they’re trying to accomplish with their spend. I actually think there are a lot of startups that think brands are stupid, which seems crazy to me considering most of them are ad funded. What I’m trying to say is that building a native marketing unit requires respecting your customer (the brand) as well as your users (the consumer). At the end of the day what truly separates Google’s search ads from other marketing units is that it’s respectful: It believes the user is smart and the brand knows what it wants.
Last, but not least, I think these platforms are going to need to be careful not to overextend themselves. When Facebook reads an article like the one from Emily Steel at the Wall Street Journal a few weeks ago about some of the top brands spending a bunch of money buying likes and then shifting the spend to content to keep those likers engaged, they’ve got to pause for a minute to think about how they can capture more of that value. A native marketing unit can’t capture the entire chain of value and it shouldn’t. Google doesn’t keep you in Google when you click an ad and (hopefully) it never will. But when platforms like Facebook look at the numbers will they be able to not get greedy and try to capture a bigger slice of the pie? Or will they try to become more and more of a walled garden: Controlling as many pieces as possible and causing that beautiful alignment of interests between the platform, user and brand to get out of alignment.