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All About Facebook

MARCH 24, 2009

Don’t place ads—build brands.

More and more every day, the social networking giant Facebook is becoming a large part of the overall Internet experience. Company estimates state that over 175 million people have joined since its founding in 2005, and the users themselves contribute millions of pieces of content daily.

The February 2009 Facebook numbers are striking.

Each day during the month, Facebook users averaged over 3 billion minutes on the site. They updated their status 15 million times and became “fans” of a particular company, brand, product or person 3.5 million times daily.

In addition, Compete found that that US residents spent more time on Facebook than any other Website, beating out previous leader Yahoo!. However, Nielsen Online still ranks the site third behind AOL and Yahoo!.

But Facebook’s rapid user growth has not translated into advertising revenues.

The habits of social network users are one obstacle. In 2008, IDC found that 43% of social network users never clicked on ads, a dramatic difference from the 80% of other Internet users who did so at least once a year. Further, 23% of nonusers who clicked on an ad then made a purchase; only 11% of social network users who clicked on ads did the same.

If not through advertising, how can marketers leverage Facebook for their campaigns?

When marketing professionals were surveyed by TNS Media Intelligence on what objectives had the most social media potential, most said brand-building initiatives such as gaining consumer insights, building brand awareness and increasing customer loyalty.

None said increasing intent to purchase.

“If you’re going to build a community, don’t center it around your product, but rather on something deeply relevant to a particular consumer group,” said eMarketer CEO Geoff Ramsey. He also suggested keeping fans of your brand pages happy by giving them a lot of content and letting them share the love with others.

All About Facebook

MARCH 24, 2009

Don’t place ads—build brands.

More and more every day, the social networking giant Facebook is becoming a large part of the overall Internet experience. Company estimates state that over 175 million people have joined since its founding in 2005, and the users themselves contribute millions of pieces of content daily.

The February 2009 Facebook numbers are striking.

Each day during the month, Facebook users averaged over 3 billion minutes on the site. They updated their status 15 million times and became “fans” of a particular company, brand, product or person 3.5 million times daily.

In addition, Compete found that that US residents spent more time on Facebook than any other Website, beating out previous leader Yahoo!. However, Nielsen Online still ranks the site third behind AOL and Yahoo!.

But Facebook’s rapid user growth has not translated into advertising revenues.

The habits of social network users are one obstacle. In 2008, IDC found that 43% of social network users never clicked on ads, a dramatic difference from the 80% of other Internet users who did so at least once a year. Further, 23% of nonusers who clicked on an ad then made a purchase; only 11% of social network users who clicked on ads did the same.

If not through advertising, how can marketers leverage Facebook for their campaigns?

When marketing professionals were surveyed by TNS Media Intelligence on what objectives had the most social media potential, most said brand-building initiatives such as gaining consumer insights, building brand awareness and increasing customer loyalty.

None said increasing intent to purchase.

“If you’re going to build a community, don’t center it around your product, but rather on something deeply relevant to a particular consumer group,” said eMarketer CEO Geoff Ramsey. He also suggested keeping fans of your brand pages happy by giving them a lot of content and letting them share the love with others.

Why Advertising Is Failing On The Internet

238 Comments

by Eric Clemons on March 22, 2009

Editor’s note: The following is a guest post by Eric Clemons, Professor of Operations and Information Management at The Wharton School of the University of Pennsylvania. In it, he argues that the Internet shatters all forms of advertising. “The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed,” he writes. The views he expresses are his own, and we present them here to foster debate. (Obviously, we hope there is a place for advertising on the Internet since it pays our bills).

1. There Must Be Something Other Than Advertising:

The expected drop in internet advertising revenues this year was neither unpredictable nor unpredicted, nor was it caused solely by the general recession and the decline in retail sales. Internet advertising will rapidly lose its value and its impact, for reasons that can easily be understood. Traditional advertising simply cannot be carried over to the internet, replacing full-page ads on the back of The New York Times or 30-second spots on the Super Bowl broadcast with pop-ups, banners, click-throughs on side bars. This might be a subject where considerable disagreement is possible, if indeed, pushed ads were still working in traditional media. Mostly they have failed. One newspaper after another is going out of business across the United States, and the ad revenues of traditional print media, even of highly respected magazines, is declining. The ultimate failure of broadcast media advertising is likewise becoming clear.

Pushing a message at a potential customer when it has not been requested and when the consumer is in the midst of something else on the net, will fail as a major revenue source for most internet sites. This is particularly true when the consumer knows that the sponsor of the ad has paid to have this information, which was verified by no one, thrust at him. The net will find monetization models and these will be different from the advertising models used by mass media, just as the models used by mass media were different from the monetization models of theater and sporting events before them. Indeed, there has to be some way to create websites that do other than provide free access to content, some of it proprietary, some of it licensed, and some of it stolen, and funded by advertising.

The idea that content has a price and net applications should find ways to earn a profit without providing free access to other people’s content gets explosive reactions; when virtual reality pioneer and tech guru Jaron Lanier suggested in a New York Times Op Ed that authors deserved to be paid for their content he actually received death threats. But other models are possible and several suggestions for alternative forms of monetization are offered below.

2. Advertising will fail:

The internet is the most liberating of all mass media developed to date. It is participatory, like swapping stories around a campfire or attending a renaissance fair. It is not meant solely to push content, in one direction, to a captive audience, the way movies or traditional network television did. It provides the greatest array of entertainment and information, on any subject, with any degree of formality, on demand. And it is the best and the most trusted source of commercial product information on cost, selection, availability, and suitability, using community content, professional reviews and peer reviews.

My basic premise is that the internet is not replacing advertising but shattering it, and all the king’s horses, all the king’s men, and all the creative talent of Madison Avenue cannot put it together again. To analyze this statement we need a working definition of advertising, and I proposed the following, which is as general as I could make it:

Advertising is using sponsored commercial messages to build a brand and paying to locate these messages where they will be observed by potential customers performing other activities; these messages describe a product or service, its price or fundamental attributes, where it can be found, its explicit advantages, or the implicit benefits from its use.

It is frequently argued that the advertising industry will provide sufficient innovation to replace the loss of traditional ads on traditional mass media. Again, my basic premise rejects this, suggesting that simple commercial messages, pushed through whatever medium, in order to reach a potential customer who is in the middle of doing something else, will fail. It’s not that we no longer need information to initiate or to complete a transaction; rather, we will no longer need advertising to obtain that information. We will see the information we want, when we want it, from sources that we trust more than paid advertising. We will find out what we need to know, when we want to make a commercial transaction of any kind. The conventional wisdom is that this is exactly what paid search helps us to do, but all too often they are nothing more than a form of misdirection, as I explain further below. Instead, we will use information that we trust, obtained at the time that we want to see it.

Better targeting of ads using individual interests and individual behaviors will ensure that we do not bore or annoy as many people with each ad, but cannot address the trust issue. As for paid search, it is closer to other mechanisms that allow a website to sell access to potential customers. It works effectively as a revenue source for Google, of course. But it surely is not replicable for the average content website.

3. Advertising will fail for three reasons:

There are three problems with advertising in any form, whether broadcast or online:

• Consumers do not trust advertising. Dan Ariely has demonstrated that messages attributed to a commercial source have much lower credibility and much lower impact on the perception of product quality than the same message attributed to a rating service. Forrester Research has completed studies that show that advertising and company sponsored blogs are the least-trusted source of information on products and services, while recommendations from friends and online reviews from customers are the highest.
• Consumers do not want to view advertising. Think of watching network TV news and remember that the commercials on all the major networks are as closely synchronized as possible. Why? If network executives believed we all wanted to see the ads they would be staggered, so that users could channel surf to view the ads; ads are synchronized so that users cannot channel surf to avoid the ads.
• And mostly consumers do not need advertising. My own research suggests that consumers behave as if they get much of their information about product offerings from the internet, through independent professional rating sites like dpreview.com or community content rating services like Ratebeer.com or TripAdvisor

Yes, both network executives and their ad agencies have noted that we are not watching traditional ads, and they attribute this to the fact that we have moved beyond newspapers, televised network news, and broadcast movies, to video games, iPods, and the internet. Porting ads to a new medium will not solve the three problems noted above. The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed.

4. Alternative models for monetization are available:

Again, my research suggests that there are three general categories for creating value that can be monetized, including selling real things, selling virtual things, and selling access. Some websites exist solely to sell real things. Many of the best-known perform aggregation of demand, so that there will be enough customers to justify stocking and selling items for which there is only limited demand. Amazon is merely the best-known example. Sites like Amazon and Zappos are especially good for long tail items … where else do you go for a copy of the Green Sea of Heaven, Elizabeth T. Gray’s magnificent translation of the Ghazals of Hafiz, or for a pair of size 20 basketball shoes? Selling real things online has been studied since the advent of interest in eCommerce and will not be discussed further here. Other websites sell virtual things. These activities fall into three categories:

• Selling content and information, from digital music to news and information. Some of these sites are funded by subscriptions, like Gartner Research; some are by direct micropayments for purchases, like iTunes; and some currently attempt to fund themselves through advertising, like Business Week or The New York Times, while still searching for a more effective business model.
• Selling experience and participation in a virtual community, including Second Life and World of Warcraft, Facebook and MySpace, Flickr and YouTube, or LinkedIn. Not all of these have found a way to charge for participation.
• Selling accessories for virtual communities, like completed homes and stores, furnishings, clothing, and pets in Second Life or characters and accessories that would be difficult to earn in World of Warcraft, although this behavior is generally despised by serious World of Warcraft players.

Finally, some websites create and sell access to customers. Again, this can be divided into multiple categories.

• Misdirection, or sending customers to web locations other than the ones for which they are searching. This is Google’s business model. Monetization of misdirection frequently takes the form of charging companies for keywords and threatening to divert their customers to a competitor if they fail to pay adequately for keywords that the customer is likely to use in searches for the companies’ products; that is, misdirection works best when it is threatened rather than actually imposed, and when companies actually do pay the fees demanded for their keywords. Misdirection most frequently takes the form of diverting customers to companies that they do not wish to find, simply because the customer’s preferred company underbid. Misdirection also includes misinformation, such as telling a customer that a hotel is sold out when, indeed it is still available, if the hotel has chosen not to pay a promotional fee, and then allowing the guest to choose an alternative property. Misdirection is, regrettably, still a popular business model on the net, although for reasons I explored in an earlier TechCrunch post on Google it seems ultimately to be unsustainable. More significantly from the perspective of this post, it is not scalable; it is not possible for every website to earn its revenue from sponsored search and ultimately at least some of them will need to find an alternative revenue model.
• Evaluation, assessment, and validation. The opposite of sending a customer someplace other than where he wants is providing the customer enough information for him to make an informed choice on his own. Recommendations on TripAdvisor.com allow potential guests to evaluate and validate recommendations provided by Hotels.com; not surprisingly, Hotels.com originally owned TripAdvisor, and benefited greatly from it. Since Hotels.com did not attempt to influence or censor TripAdvisor content the website was (and is) trusted and helped put recommendations from Hotels.com at a level of trust comparable to those from an experienced travel agent. There are at present only a few other examples of website symbiosis like this, where community content on one site adds considerable value for another; consider also the relationship between the Beeryard’s list of new beers and Ratebeer.com, where clicking on the name of a newly arrived beer at the Beeryard will allow you to examine reviews on Ratebeer.com.
• Social search. Social search is a way of tailoring search based on the user’s network of friends. Rather than searching for any hotel in Chicago, or for any hotel that paid for the keywords “hotel” and “Chicago” I would like to be able to ask for the hotel where my friends stay when they are in Chicago. This invades no one’s privacy, avoids the annoyance of pushing ads at me when I am not searching for something to buy, and provides more relevant results than paid search usually can deliver. There are many problems with this, including the fact that my friends may not be on Facebook or other networks yet and those that are may not post their hotel or automobile or restaurant preferences. Most seriously, while it is clear how Microsoft might benefit from this, using its Facebook connection to undercut Google sponsored search, it is not clear how Microsoft or any other firm could monetize this directly.
• Contextual mobile ads. At present contextual mobile ads delivered by SMS appear to offer much promise. Imagine a hypothetical all-knowing information-based firm that (i) knows your location because you have registered to have the information from your in-phone GPS shared with your friends and (ii) knows that you like Thai restaurants because it monitors the content of your email and your online restaurant searches and (iii) knows that you are hungry because you just said so in a text message or Twitter post you sent from your phone. What a great time for them to text you an advertisement for a nearby Thai restaurant, sent directly to your phone. But why would you trust this? I remember when Hotels.com used to refer me to the same hotel, albeit at different prices, when I asked for a two-star or three-star hotel close to my office; I was never sure which was more amusing, the 80% price increase for the same hotel when I was willing to splurge on a three-star for my visitor, or the fact that there were comparable hotels 20 blocks closer to my office. I suspect that my hypothetical all-knowing firm will similarly be providing sponsored content; perhaps I will take a couple of additional seconds in order to find the restaurant I really want. This probably does not work as a form of advertising.

Of course no one knows yet, but if I had to guess, based on my meatspace experience, I would offer the following guesses for successfully monetizing the net in the future:

• Selling Virtual Things: People will pay for superior, timely, original content and for superior online experiences. Presently I willingly pay for the Financial Times, The Economist, and Foreign Affairs, I value the content, and, indeed, I feel I need it; I will continue to pay for them online. Perhaps I would not be willing to pay for archive material, which I expect that I would be able to find elsewhere, but I will cheerfully pay for the newest content online. Similarly, I willingly pay the cover change for my favorite jazz clubs in New York, and expect that I would cheerfully pay to participate in Second Life or World of Warcraft if, indeed, I had any interest in those virtual experiences. I guess, ultimately, if we compete for status through our purchases of accessories, clothes and homes in meatspace we will probably continue to purchase virtual accessories in Second Life, though I can’t say I fully understand this yet.
• Selling Access. Misdirection will fail totally and completely. I use a Mac, but I have abandoned Safari for Firefox. I have an iPhone and an iPod but I have never used the little white earbuds, preferring instead to purchase a pair of Shure E500 phones that I think sound vastly superior. Similarly, I would be equally happy to purchase a search service that worked for me, rather than accept a free one that works both against me and against the firms I patronize. In contrast, while people will continue to value community content and social search, these will be difficult to monetize. Finally, contextual mobile ads will, likewise be difficult to monetize. With information easily available, I will make my own restaurant choices, irrespective of those pushed at me via SMS, especially when I know that those pushed at me have been pushed for a fee, rather than based on an impartial assessment of my preferences. Yes, I can imagine SMS ads initially succeeding if they provide discounts, but ultimately this leads to little more than a bidding war for traffic and benefits no one other than the firm that provides the text messaging services. I can think of a few commercial SMS services that will benefit everyone, such as letting the most loyal guests of a restaurant know when it is still possible to get a reservation if they act immediately, eliminating the inefficiency of empty tables, but the restaurant will do this itself, using its email or cell phone contact lists. I don’t see this as advertising, or as being monetized by any intermediary. Of course, in an age before texting and email restaurants would have welcomed the all-knowing intermediary as the only mechanism available for communicating quickly with its most loyal customers. Now, restaurants have lists of their most loyal customers and can send out real time messages of interest. If the Blue Note were to text me on some night that I am in New York that it is still possible to get a table for two for Clark Terry, or Tria were to text me on a day when I was in Philadelphia that, surprisingly, there was no wait for an outdoor table right now, I’m sure I would respond to both. Of course there is no intermediary for this interaction, and this is more like direct communication than paid advertising.

The internet is about freedom, and I suspect that a truly free population will not be held captive and forced to watch ads. We always knew that freedom comes at a price; perhaps the price of internet freedom and the failure of ads will be paying a fair price for the content and the experience and the recommendations that we value.

An Icon That Says They’re Watching You

By Saul Hansell

I have an open question for the people who complain about the potential of advertising networks to track your behavior on the Internet: What is a better way?

Some might say that all behavioral targeting should simply be banned. But if you don’t think that showing Chevy ads to people looking for cars is equivalent to poisoning the peanut butter, we need a middle ground that explains to people what’s going on and lets them decide what is acceptable.

This is much harder than it sounds: Any one Web page you visit can have a dozen advertisements and invisible bits of code that each send information about you to different companies, each with different ways of using that data. The privacy policy of the site you are looking at — not that anyone reads privacy policies — can’t even try to explain this to you, because the site owner doesn’t even know what all of its advertisers are doing.

Joseph Turow Example of an icon–the T? below the ad–to indicate the advertiser collects or uses data about the browser

I’m coming to the conclusion that each advertisement on a page has to speak for itself. That’s implicit in the approach Google is taking for its new behavioral targeting system. It puts the phrase “Ads by Google” on all its advertisements. Click that link and you’ll get some limited information about Google’s targeting system and an ability to adjust some of the interests that Google is tracking.

But Google’s approach is presented in a way that glosses over what they are doing and discourages people from reading the disclosure and exercising control, says Joseph Turow, a marketing professor at the Annenberg School for Communication of the University of Pennsylvania.

Mr. Turow has developed a plan that is simpler and more comprehensive: Put an icon on each ad that signifies that the ad collects or uses information about users. If you click the icon, you will go to what he calls a “privacy dashboard” that will let you understand exactly what information was used to choose that ad for you. And you’ll have the opportunity to edit the information or opt out of having any targeting done at all.

“I don’t think ‘Ads by Google’ is enough,’” he said. “The problem with the whole rhetoric Google is using is that it is designed to stop you from wanting to learn more and do something.”

In his mockup, Mr. Turow’s icon has a T for targeting and a question mark. I would propose a bull’s-eye or maybe some sort of creepy eyeball.

What I like about the idea of an icon is that users can learn which ads collect data without having to do anything other than surf the way they normally would. When they do get curious, you can click on the icon and learn more.

I asked Nicole Wong, the deputy general counsel of Google who looks after privacy issues, about Mr. Turow’s concept. She defended the phrase “Ads by Google” on the grounds of simplicity. Anything more risks confusing users.

“I wonder, would the user really understand what a behaviorally targeted ad is compared to a contextual ad?” she said, saying the company is open to changing the phrasing of the text of its notice.

The information that Google shows to people who click on the link on these ads is also similar to, but more limited than, what Mr. Turow proposes.

Mr. Turow’s dashboard is meant to explain exactly why you are seeing a particular ad. You will see what part of it was customized — the product, the price, the image and so on. You will also see the data used — your surfing habits, outside data vendors, inferences from your I.P. address, etc. You can click to learn more specifics about exactly where the data came from and to delete or modify the information used about you.

What Are CMOs Thinking?

MARCH 17, 2009

“How the heck can we…”

There are a lot of tough jobs in the current downturn, but high on the list must be chief marketing officer (CMO). A CMO’s job is to keep products moving—even in an economy where practically nothing is moving.

To find out how top marketing officers around the country are dealing with adverse economic conditions, Duke University’s Fuqua School of Business and the American Marketing Association (AMA) conducted the “CMO Survey” in February, a poll of nearly 600 US marketing executives.

What they found out could help you in your business.

To begin with, of course, none of them were very happy.

The survey found that 59% of marketers were less optimistic about the economy than they had been one quarter before. Amazingly, though, that is better than when the survey was conducted in August 2008. Then, 77% of respondents were less optimistic.

“While marketers in general remain unexcited about the economic situation, it is encouraging to at least see that pessimism is not increasing among the marketing community,” said Christine Moorman of Fuqua. “This could either indicate that marketers think the worst times are behind us, or they have simply adjusted to operating in an adverse environment.”

When the CMOs were asked about the first customer priority for the next 12 months, price dominated.

The marketers expect marketing spending to remain almost flat this year, growing by only 0.5% over the next 12 months. But where they are spending their limited marketing dollars is changing.

They anticipate a more than 7% decrease in traditional advertising and increases of about 10% in both Internet marketing and new product introductions.

CMOs are turning to new and often unproven strategies that focus on the Internet, partnerships, new markets, and new products and services to keep their companies moving forward.

Business-to-consumer marketers are making even more significant shifts to the Internet, for both product and service advertising.

“The shift is part of a broader movement to the Web and social media as key ways to reach customers,” said Ms. Moorman. “However, it also reflects marketers’ hopes for improving return on marketing investment with a cheaper and more effective set of tools.”

When the CMOs were asked to identify firms across all business sectors that excelled at marketing, Apple, Procter & Gamble and Coca-Cola topped the list. Some things don’t change.

Related research, released late last year, from the Verse Group and JupiterResearch (now folded into Forrester Research), found that 87% of US CMOs believed branding initiatives needed to be more flexible.

Not only that, 63% of them believed traditional brand positioning and advertising were losing their effectiveness. In fact, many felt traditional advertising was “broken.”

Looking ahead to this year’s marketing priorities, the CMOs ranked greater marketing accountability as most important, followed by finding a better way to manage brands across multiple platforms.

Trends and Best Practices in E-Mail Marketing

MARCH 13, 2009



Bill Nussey
President and CEO
Silverpop

eMarketer: What is e-mail marketing’s greatest strength?

Bill Nussey: What makes e-mail marketing unique is the ability to both broadcast and target individual personalized content at the same time. It’s also relatively inexpensive compared with other media.

eMarketer: What is its greatest weakness?

Mr. Nussey: E-mail’s greatest weakness is that some marketers use it too aggressively, and they undermine the value of e-mail for all other marketers and consumers.

Obviously, what I’m talking about is spam, selling me drugs or high school or college diplomas, or other such nonsense, and that makes an otherwise pretty good medium less valuable for everybody.

eMarketer: Do you think that consumers’ use of e-mail has changed in ways that e-mail marketers need to be cognizant of?

Mr. Nussey: Absolutely. Specifically—and there’s been studies on this—consumers are only willing to have a finite number of online e-mail offers at a given time.

“Consumers are only willing to have a finite number of online e-mail offers at a given time.”

For example, my neighbor might only be willing to have 10 or 12 e-mail newsletters, promotions or other subscriptions at any given time, and he might delete, unsubscribe or spam-button the ones that are no longer interesting to him.

A lot of marketers think of their e-mail programs in isolation, or if they do think about competition, they think about other companies like them. But truly what they’re competing for is the very limited attention that consumers and business recipients have for all e-mail, for the channel. So marketers need to be sure that they are one of those dozen or so active subscriptions that their target audience is actually paying attention to.

eMarketer: Are there other changes in the way that people communicate or use e-mail?

Mr. Nussey: Many, many. One that marketers new to e-mail marketing don’t pick up on is that when most consumers are no longer interested in a subscription, rather than unsubscribing, they hit the spam button. So there’s yet another major incentive for marketers to remain relevant, to remain engaged with their recipient base—rather than just press the blast button every week.

eMarketer: Even if I opt in, and then later on get bored with a particular retailer’s e-mail message, instead of unsubscribing, I press the spam button. If that happens enough, that could hurt the retailer’s ability to send e-mails to other customers who want to receive them, is that correct?

Mr. Nussey: Yes, and it’s very common. In fact that’s what most people do now.

eMarketer: Is there a way that an e-mail service provider can figure out how not to punish a retailer because of a certain group of people who are pressing the spam button when they should really be unsubscribing?

Mr. Nussey: Look at the activity of individual recipients on your list over the last six or 12 months, and people that are fundamentally inactive—who haven’t clicked, haven’t opened, haven’t purchased—take ’em off your list. What you really need to be concerned about is total respondents and total conversion rates, not how big your list is.

But if that’s not available to you because your boss wants the list to remain large, put up a profile page and ask people the kind of things they want to receive. Ask them the frequency they want to receive their promotions. Typically when people get frustrated and hit the unsubscribe button it’s usually because the marketer is sending too often or allowing messages to be sent from other brands that people didn’t subscribe to.

Keep the list extremely private and deal with the purposes people opted in for. That alone will pretty much keep you in the green zone for good e-mail marketing.

“Keep...in the green zone for good e-mail marketing.”

eMarketer: Are most Web retailers sending e-mails that people have opted in to receive?

Mr. Nussey: My company does a study every year, and we look at the patterns and trends in e-mail marketing for retailers. Based on our research, the vast majority—well above 90% of all online retailers of all sizes—have an e-mail capture on their Website.