Pretty interesting timing: in a 24 hour period, we've got Facebook touting the effectiveness of the Sponsored Stories ad product while simultaneously agreeing in a court settlement to increase its disclosure and opt-out opportunities for consumers. The very engine of what makes the social context of Facebook's advertising effective (far more effective than ads on Facebook without such contextual clues) would seem to be in jeopardy. I included screencaps side by side below. Just another day in the life...
Entries in facebook (12)
Facebook and other identity and behavior networks have created new behaviors - and these behaviors have had no trouble attracting the attention of consumers. The new behaviors have been so empowering of consumers, that as they adopt new behaviros, they have learned to tune out advertising even more effectively. Consumers have even learned to kill ads, concepts, and brand strategies they dislike en masse.
Debra Aho Williamson, principal analyst at eMarketer in Seattle, noted that when the firm published its most recent forecast for digital advertising back in February, it projected that Facebook revenue would probably double again this year to $6 billion, a number she said is likely now out of reach.
"Consumers have adopted social media a whole lot faster than advertisers," Williamson said. "It's taking them a lot longer to figure out how to fit social media into their plans. [TheStreet.com]
This gap in "monetization" should be viewed in the context of how all innovation takes time to conquer relevant adoption curves and settle into a business model that works for all participants. With the pace of today's change, we have cases like Groupon, where the vectors of growth point one way, while the sustainiability of the business is highly questionable. This phenomenon in the information sector is likely to continue as the flow of information between market participants becomes effortless. It is even worthy of excellent satire from McSweeney's: Ponzify
So it's not just about your 2 Million app downloads that net you some nice venture funding for "traction" in the marketplace. Make sure you're paying attention to how your users behave, as well as how their behavior change when you add "monetization" strategies.
Watch Facebook's Mobile ad product introductions carefully. If the users hate the products, and find them annoying, intrusive, or unstable, that's bad for the Facebook ecosystem and engenders the kind of hatred consumers have for companies like AT&T, in which they stay with the company but hate it because they cannot easily leave. Conversely, if the consumer ignores the ads, and skps right through them, that's bad for advertisers, who need at least some user attention to get value out of the ads. The holy grail for facebook is helping to identify the ads in the middle: the ads so content-like that consumers will see them as a net benefit.
This is small thinking strategy for Facebook, at best. Which are the two or three brands whose social engagement strategies you like as much as you do their products? Those are the ads that will be premium inventory in your newsfeed. The social experiences that consuemrs want, which are so attractive consumers will seek them out for their value, are the name of the game for Facebook, because these experiences will have to rent access to Facebook's identity network. And that is where the money will be.
What were you doing last night? Mark Zuckerberg had a hackathon. Oh yeah, and today his company went public.
I have been thinking about valuation of Facebook all week, and i think whatever the offering price is, it's wrong, and the GM announcement just made things worse by focusing on revenue in the Millions. The valuation should not be based on revenue.
Instead we are looking at the premiere testing ground for defining social expereiences and ad products across multiple channels based on the behavior and reactions of real users. The future is clearly coming, where recommendations and votes of confidence from friends will be louder than advertising. With the end of broadcast, and even the end of web portals, attention is a strategic asset. And Facebook has a boatload of attention, because we are addicted to news about other people.
To be cute about my hypothesis: Facebook will know the future, ship an awesome product and move on, before you can Tweet it.
Facebook is in a dominant market position to be able to take the attention people spend on the platform, across devices and all over the social web, to find out what works before any of their competitors, and with enough scale to stay ahead. As long as they do not piss off users (the product being sold to advertisers) then the business is incredibly valuable. I don't really know how to value it, but you must imagine some of these platforms competing with each other, and almost no one can compete with Facebook in this regard.
Facebook keeps saying they are not trying to be a great company, they are trying to make a great product, and while the effects are similar the emphasis contained therein produces really remarkable results. So don't worry about getting the valuation right, because they are going to ship a lot of code before anyone figures out the generational shift in behavior and advertising we're in, but I think Facebook might be the company that gets there first.
Instagram's acquisition by Facebook illustrates how the tension between identity networks, and behavior networks will play out in the marketplace, and how it may not benefit users directly. This divide pits sites like Pinterest and Instagram vs. Facebook, Twitter, Path, and others.
Identity networks, like Facebook and Linkedin, focus on You and managing connections to pieces of identity, and while you may have have wide-ranging conversations within such networks around content, which are key to communicating your identity, the profile remains the anchor point to an identity you care about. Facebook deserves credit for making this idea popular and easy to understand - forcing Google and Microsoft to change in many ways.
Facebook's Connect and Open Graph initiatives show how crucial the concept of identity is to the Facebook model- the advertising Facebook sees in the future isn't customized by cookie pools, it's customized based on the open graph. It's not limited to Less and less of the meaning that users derive from being Facebook users will come from using Facebook.com and more and more will come from experiences enabled by the Facebook Platform. Facebook, as it extends the platform, is admitting that it cannot innovate fast enough at the edge to keep every user fully engaged - what they want is to have that user identified and authenticated, pulling their behavior into the Facebook ecosystem.
Thus, the edge of the platform, powered by identity, is where new user behaviors will emerge. These emergent groups of connections, I call Behavior Networks. They have several important properties.
- Leverage an identity network to authenticate users - e.g. social sign in
- An intentionally narrow feature set, the novelty of which self-selects new users.
- User to user value exchange is based on behaviors - e.g. who you are on Pinterest is DEFINED by what you pin.
- Nonlinear growth in user base enabled by the Identity Network.
- Scale is the enemy of behavior networks, because they represent the end of novelty (2).
Behavior networks remain rooted in one style of behaving, and are key to a very specific context or action. Instagram and Pinterest are in this category. While relying to varying degrees on your identity (on Facebook, Twitter, etc) your identity on these sites defines your behavior - if you never publish anything, you don't exist. No matter how many instgram photos you take, that's all the network says about you.
Test yourself, when was the last time you deleted an Instagram photo? When was the last time you deleted a Facebook post? I've done many of those things on Facebook, but I never worry about Instgram.
The real-time web is perfect for behavior networks. All that matters is what you are doing- your behavior is your only identity but it doesn't live forever.
For these reasons, these behavior networks represent a challenge for marketers. Extending engagement beyond the behavior network - site traffic, conversions and so on - will be used to prove that the marketer's participation had some value. And this will require functionality a behavior network operator will be loathe to construct. All ROI metrics will come down to this: did the users engage further? Did they pin stuff and their friends bought it? The ROI analysis will require a channel linked to identity. So as marketers we face the dilemma of proving the value of engagement beyond behavior networks, and these are uncertain times indeed.
My next two posts on this topic will deal with:
- Path, Twitter, LinkedIn and Foursquare: Can there be more than one identity network
- How will the tension chnage the practice of marketing?
Consumer attention is finite, but so is your marketing department. Pinterest reached scale quickly, and I commend it for its 10 million users, but are those users so invested that the next “thing” won't become just as hot by rising 50% faster? How much of your social media team's time are you willing to bet?
Have you started working on your Spotify strategy? A Quora strategy? A GameMaki strategy? I just heard about GameMaki this morning, but that doesn't mean I should brainstorm a strategy around it. Though maybe I would if I'd only been asked this question on Quora. Life — and marketing — moves pretty fast and so do users. How long before the next big thing races to the top of Mashable?
Remember that client meeting when someone said something like this: “If you don't get your brand on Pinterest ASAP, your competitors will win, and you'll lose!” Did your client ask you for a “Pinterest strategy?” Then you need to run, because Pinterest is a fad.
Ultimately photos as content generates high newsfeed engagement for Facebook pages. Mobile channels accentuate this engagement. Pinterest is only the white foam cap on a big, big wave. Marketers and clients need to worry about the tide, not the foam. After all, if Pinterest is your only reminder that consumers share images, where have you been while the social Web has been scraping images for social sharing?
However, if Pinterest is only a fad that doesn't mean you can't use it successfully. Be sure to manage your time investment, stay focused on your objectives and embrace your customers by listening to them. A fad can drive results, particularly if it means immediate consumer attention. But it also means they can vacate the premises pretty quickly. Pinterest, or any site, shouldn't be the first page of your social and online marketing strategy, but it also doesn't have to pass without your notice.
If your team can't stay focused, you have bigger problems than Pinterest. Being agile enough to jump on Pinterest, disciplined enough to stick with it and humble enough to jump off again when users inevitably wander is a very tall order. The fear of missing out certainly applies to marketers. Focus is the antidote. Listen to your customer. Serve your customer. Profit.