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16th May 2012

In The News: Facebook Ads, Do They Work or Is GM Being Rash? Wrong Questions.

This article was written by Hayden Shaughnessy for Forbes.com. There’s enough momentum behind the Facebook IPO for GM’s decision to withdraw its advertising dollars from the social networking site not to affect any investment decisions but the timing is interesting. Earlier this week Facebook conceded that it is struggling to deliver ad inventory to a growing base of mobile users. The effectiveness of mobile ads, in particular, is dependent on context. So is the social graph breaking down? Is the idea of highly contextual advertising an illusion? Seems like there are least four ways to look at it. One says you can’t mix engagement with aggressive ads anyway, especially on a social network; a second says creating contextual ads relies on knowing what people are doing on Pinterest, Twitter and YouTube too, so the social graph is not Facebook’s to own and Facebook needs to buck up its sales’ effort rather than rely on sounding gnomic about the graph. And then there’s an argument that says, GM pursued the wrong strategy, or at least an incomplete strategy – this is not Facebook’s issue. But there’s a fourth view, which is that General Motors will have to advertise on Facebook anyway. To be sure, Facebook will have to innovate to make its social networking environment a more interesting place for brands to be. But even without that, GM will keep spending those dollars on Facebook ads. Navigate these issues and brands can do very well with Facebook. The first realization has to be that ads are not the dominant way of communicating in social. According to Dennis O’Malley, whose start-up Ready Pulse extracts conversation and engagement for brands across different social platforms, Facebook’s advantage lies in the vast numbers of people who have given brands “permission to communicate“.  It’s obvious really. The big advantage in social marketing, as distinct from search, does not lie in display or text ads. “Use the analogy of organic versus paid search,” advises O’Malley. “We’re still finding, certainly in the B2B space, that organic beats paid every time. Similarly people go to Facebook and opt into communication with a brand. They don’t opt in to being marketed at.” That’s why, for example, Dell’s customer service strategy on Facebook works well. It is rooted in engagement. Combining organic, conversational behavior with any kind of advertising could be a cardinal error. It’s like trying to cultivate grass with a plough. The two are connected but not necessarily sequential. “If you are getting deep engagement, it is already providing the display ad value for you,” O’Malley adds. However, Michael Scissons at Syncapse, simply doesn’t believe Facebook will or can give up on Facebook ads. “Does the market really believe this headline? For me, unquestionably, they will spend on Facebook ads.” More on that below. What’s also apparent in the social arena is that the “context”, the holy grail for advertisers, has to be built up across a number of sites. Yes, Facebook does track where people are going to around the web, but sites like Pinterest, YouTube and Twitter elicit different behaviors and conversations. New advocates emerge in these destinations. Taking that into account good “context” becomes a complex beast. The social web is precisely what it says, a web, and not just a social networking site, however hard Facebook has worked to trap all the relevant data. Context is not Facebook’s alone. But nor is it necessarily a straightforward asset either. People who have taken up advocacy positions provide a great real-time “legacy” that brands might want to use. Comments, compliments, buzz, rave reviews. But is it appropriate or effective to see this in the context of ads? Say for example you have a whole tranche of young people liking, tweeting and pinning a new board design or uploading a video to YouTube of that board on the waves. The value of their advocacy is worth more than any display ad or text ad. La Jolla, in retail, is doing some great work in building its own data on advocates, not relying on Facebook’s graph but collating data from across different platforms and building strong relationships with superfans across the social space, not just on Facebook. Ads  are meant to trigger an action, like a sale.  Particularly in the context of a high value object like a car people simply won’t be going to Facebook for a purchase. Ads, you might say, become irrelevant except as a way of getting people to your brand page. And that’s why Scissions believes GM will keep spending. What O’Malley would like to see is GM using tools like Ready Pulse to create insights into what messaging would actually work for them – rather than concluding Facebook ads don’t measure up.  The key then is drive behavior down at the dealerships where the sales take place. It’s an analysis that Scissions agrees with. “There are many brands advertising on Facebook very effectively.  Look at Red Bull and their content, Dell and customer service. For GM the issue is what are they doing at the local level with their distributors? I think they need help in determining what their local strategy is.” Auto makers have been good at building national brand strategies on Facebook but haven’t yet thought through how to help dealers to get people to test drive cars. “It comes back to the strategic context,” adds Scissons. “Is the GM CMO really questioning the value of Facebook advertising? Facebook represents 20% of all page views in the United States. GM needs to work out strategic questions about its loyalty marketing on Facebook, its dealer marketing and its national brand advertising. They are all different.” Ari Brandt of in-game ad platform MediaBrix says Facebook bears some responsibility for not creating the types of units that give brands high impact advertising. “The same is true across all digital platforms,” Brandt says, “not just Facebook. On Facebook though 50% of people engage in social games. We work directly with game developers to place code on their sites so we can provide highly immersive experiences during natural game breaks.” Mediabrix however shares its ad revenues with the game developer not with Facebook. They currently enjoy 7% click through rates from in-game ads compared to the 0.05% typical across Facebook. Finally, there are many reasons for suggesting that GM have overstated their intention. That makes it a good wake up call for Facebook. “When one of the world’s largest automakers says they are not going to advertise to 900 million people, that is strange to say the least,” says Scissons. “Just to get people to their newsfeeds (where their engagement marketing takes place) they have to advertise. Each time a feed goes out only a fraction of their fans are watching. To get engagement they will have to advertise.” Having said that, already two weeks ago CNET and BusinessWeek were both busy reflecting advertiser disquiet at Facebook’s lack of concern for the high spending brand, including, in some cases, simply not having agents available to take calls. In short GM’s decision looks rational only if you agree they need to emphasise engagement over advertising. Plenty of brands on Facebook are doing well. But what might the engagement vs advertising split mean for Facebook’s revenues? GM’s $10 million ad budget is a quarter of its overall spend on Facebook but according to O’Malley and Scissons it might find a better home supporting the GM distributors, all of whom will also be on Facebook. That’s an issue of strategy that GM haven’t clarified. Rather than accept a decline in spend, Facebook could advocate a broader engagement strategy while it innovates around higher impact ad opportunities, and gets a better sales strategy in place.  Some of the content GM creates for Facebook is poor to say the least. The content marketing budget could do with a boost! But so could Facebook’s ad sales staffing. Overall the message seems to be that Facebook is leaving money on the table while GM needs help in understanding how to use this medium to the full. There are two parties to what looks like a very high profile case of poor execution. Read the full article here.

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