Facing Up to Facebook

After a rough start, the biggest social network is setting the standard in the newest area of performance marketing.

While most publishers are scrambling to find their place in social media, Facebook is quickly perfecting performance marketing techniques that have the potential of reshaping online advertising on a scale unseen since the rise of search engine optimization. Its recent hookups with some of the world’s biggest brands offer a glimpse of the future, and it isn’t a pretty sight for affiliates.

Just four years old, but already pushing 800 pounds, the gorilla of social networking is romping through the performance marketing jungle like it owns the place. It doesn’t – at least, not yet – but its recent momentum is reminiscent of the rise of Google five years ago when Yahoo still seemed to have an iron grip on the search market. With MySpace in a coma and other social media still finding their footing, nothing appears to stand in Facebook’s way.

While Facebook’s progress has been rapid, it hasn’t been without missteps. A deal with CNN during the presidential debates blew up when Facebook’s then-new Connect service promised more than it could deliver. “I think Facebook Connect had a little ways to go in terms of development at that point,” admits Randi Zuckerberg, Facebook’s Director of Market Development. “And CNN had a little ways to go in terms of their comfort with social media. It was not as successful as we hoped.”

But, heck, that was almost a year ago. What’s happened since? As Zuckerberg put it: “We regrouped.” Consider some more recent examples:
• Coca-Cola has attracted about 3 million “friends” who eagerly opted-in to hear the latest from the soft-drink maker.
• About 1.2 million Facebookers RSVP’d for a global lovefest during the Obama inauguration, resulting in the biggest live-streaming event in history.

• Papa John’s saw 131,000 pizza lovers sign up for its fan page on its first day.

Where does affiliate marketing fit into social networks? Good question, according to Judy Shapiro, the senior VP for Marketing at Paltalk, a network that offers free video chats to its 4 million members. “The question we’ve been asking ourselves is how do we incorporate the power of social media into the affiliate marketing model, because it doesn’t exist today. It just doesn’t.”

Of course, affiliates are free to place ads on Facebook. But there have been widespread complaints within the affiliate community of inflated click counts. A company spokesman says Facebook is looking into what he admitted was “suspicious” activity.

Shapiro has her own strategy for PalTalk (see p48), which she says has up to 100,000 users online at any given time. She divides the world of social media into two hemispheres: the part ruled by Facebook where people are connecting with people they know, and the part controlled by social networks where users connect with strangers.

“The people-you-know part of the social marketing phenomenon is going to be challenging [for affiliate marketers]. I can’t even think of a good way to do it, personally. It becomes problematic,” she says. But if you target the audience by commonalities, as Facebook does, then “the affiliate marketing machine has to compete with plain, old-fashioned behavioral targeting. The affiliate CPA [cost per action] model is often the black sheep of the marketing family, largely because networks can’t monetize it as well. Networks like CPM deals better because they’re money in the bank. The problem with a lot of CPA programs is the risk has shifted from the advertisers to the content producer.”

Translation: there’s not much potential for affiliate CPA marketing in the Facebook model. Sure, some affiliates will post a few links here and there and claim to be making a fortune. But, as Facebook’s bigger ad clients are finding out, they’re a lot cheaper for affiliates to generate conversions through display ads while rates are in the bargain basement.

Witness Facebook’s success in recent months with brands like CareerBuilder.com, the New York Times, Honda, Papa John’s Pizza and, of course, Coke (see sidebar). But the trailblazing client surfaced in mid-2008 when CNN, eyeing Facebook’s 200 million users and oh-so-young-and-hip demographic, launched a major CPM-based experiment that has become the textbook example of building brands with social media.

Socially Acceptable
“Marketing is very different than it was even two or three years ago,” says Andy Mitchell, VP of interactive marketing for CNN Worldwide. “Really, marketing is about trying to find your way into a conversation with whatever product you have, and people do it in a lot of different ways.” Some make videos they hope will go viral, some share content about their brand, and some even ask consumers to make commercials for them, as is the case on Al Gore’s Current TV.

Mitchell notes CNN has always tried to be “first out of the gate” in seeking new ways to interact with its viewers, whether it was with its early experiments with the web back in the mid-90s or its more recent forays in citizen journalism through its iReport service. “I think it’s really important for any brand – not even specific to the new industry – to be where the audiences are and always test and try to be involved in anything that’s happening out there in the ecosystem. Right now, it seems like social media is a place where a lot of conversations are happening.

“When you’re a brand that trades in information, and when conversations are happening about information, you better be out there putting your information where people are having those conversations so that they’re talking about you.”

That may sound self-serving, but the late entry of other news networks into social media supports his point. News shows on CBS, NBC and ABC, for example, famously support themselves with ads aimed at the over-50 crowd – drugs for erectile dysfunction, adhesives to keep dentures in place, financial tools for retirement planning, and pills to help you go more often or less often. CNN, by contrast, actively pursues younger viewers with personalities like Anderson Cooper, online polls and on-air gadgetry like Political Editor John King’s mastery of touch-screen computer maps. It’s only natural CNN should be the first major network to jump into social media when Facebook created Facebook Connect, which gives media companies like CNN a way to publish content on Facebook. “They were one of the only media companies that really stepped up to integrate Facebook Connect right out of the box,” says Zuckerberg.

That’s not surprising. Ever since the early ’90s, most media companies – most famously, those in the entertainment industry – have tried to keep their content inside “walled gardens” so that viewers could only see that content – and generate page views – on that site. Facebook Connect turns that model on its head. By posting content on Facebook, it means the 200 million Facebook users can interact with the content by sharing it with friends, returning to the publisher’s site to make comments, or even make purchases.

With the 2008 debates on the horizon, CNN jumped in eagerly, only to find out it had picked the short end of the pool. Facebook had technical problems with its new product, and Mitchell acknowledges there were those at CNN who thought programming belonged on CNN’s site, not Facebook’s. In the past, when media companies pushed their own agenda “it was all about them and everything had to happen on their own website. We do that the vast majority of time,” says Mitchell. “But when we were able to very clearly demonstrate what the value was in pushing people to Facebook – and how the CNN page on Facebook was really an extension of CNN – people got it because it was clearly the right thing to do.”

So, despite the problems during the debates, the two companies forged aheadthrough the election and targetedthe inauguration as theultimate test of their strategy. “What we tried to do was create a participatory experience around a news event,” says Mitchell.

Let’s stop right there. As a consumer, have you ever “participated” in news coverage? Maybe you wrote a letter to an editor after a story was published, or called in a tip beforehand, but you’ve probably never participated during a news event unless you were part of the story. What CNN wanted to do was trigger actions by the viewers on a scale that had never been attempted in any media. We’re talking clicks, comments, emails, registrations, opinions, even dialogue, involving hundreds of thousands of people, globally, simultaneously. OK, we can go on now.

“We knew people were going to be watching what was a celebration for many people in a solitary environment because it happened during the work day, so we made something solitary ‘social,’ and that made CNN the place to be for that event,” says Mitchell.

The strategy was simple: saturate Facebook with cheap CPM ads, targeting users who showed a particular interest in political matters, and try to get them to RSVP to watch CNN’s inauguration coverage on Facebook. Then – after the ads had done their duty – generate additional viral or “organic” impressions as word spread on Facebook of the unprecedented event. “We had a couple of roadblocks,” recalled Mitchell. “So for the first couple of impressions per user, we owned all the real estate on the site.”

The excitement building around the inauguration combined with heavy promotion paid off. By January 20, 1.2 million Facebook users had RSVP’d to watch the coverage and another 500,000 “friends” who were invited put themselves down as a maybe. “That demonstrated to me the power of social viral organic impressions on the site and what that can mean for someone in the performance marketing space,” says Zuckerberg.

According to Mitchell, CNN started buying up all the web capacity it could get its hands on and set up a waiting room in case viewers couldn’t get a streaming feed right away. Before the event, Facebook estimated there would be 750,000 or 1 million live streams, but that turned out to be low. “At any given moment, there were 1.3 million streams,” says Zuckerberg. “We were seeing, at peak, over 8,000 Facebook status updates per minute,” which, she says, “exceeded even our wildest dreams.”

Much to everyone’s surprise, Facebook even broke news, with activity spiking when Ted Kennedy collapsed after the inauguration. “Immediately, there were thousands of status updates pouring in on Facebook – people talking about it, and telling their friends about it. It wasn’t until a few minutes later that the first article came out saying Ted Kennedy had collapsed. CNN actually cut to me at the Facebook headquarters where we were broadcasting live to talk about the reaction to Ted Kennedy’s collapse because of all the information pouring into Facebook. I think that really speaks to how far media has to go to stay relevant,” says Zuckerberg, who may be the first marketing executive to become an instant network TV correspondent during a presidential inauguration. To her, that was fun, but the real excitement was in seeing the return on CNN’s ad spend. “They got something like a half-billion viral impressions,” she says.

Including those, Mitchell says CNN’s engagement rate was well over 1 percent. “For those of us in the digital media marketing world, the engagement rates and click rates are meager at best. So when you’re past 1 percent, you know you’re doing something right. But that really shows the credibility that marketing had with those consumers and their communities.”

What About Twitter?
Not bad for one day’s work. But CNN’s partnership with Facebook also includes almost 400,000 opt-in registrants on the CNN fan page and hundreds of thousands of others on fan pages for particular CNN shows and personalities. And, encouraged by the Facebook experience, the network has created breaking news feeds on Twitter that have generated 1.5 million followers. All this is on top of the 1.5 million viewers who previously signed up for news updates, programming notes and other news from CNN. Mitchell ballparks the total number of CNN’s interactive contacts at something close to 5 million.

“Facebook is an important partner for us … and I think we provide each other a ton of value because we created great content and they have a platform for engaging in great content. It’s kind of a perfect match,” he says. “So we’re definitely long-term partners with them. At the same time, we’re looking for ways to put our brand and our content out there in as many places as makes sense to us.” Facebook is dating others, too. It worked with the NBA on the All-star game. It worked with 15 different networks on the Oscars. And interest in similar projects has gone global for Facebook, which has 65 million users in the U.S. and another 150 million around the world. While no other news networks have signed deals yet, Zuckerberg boasts “we’re in discussions with everyone.”

If the short-term is bright, the long-term is brighter. Zuckerberg waxes philosophical as she recognizes the potential Facebook has to influence the course of journalism at a time when traditional news operations are laying off thousands of writers due to plummeting ad rates and readership that expects to interact with the news. “I think right now there’s a huge trend towards real-time information, which is really the crux of Facebook’s model right now. And I think that might be the reason for the struggle going on between traditional media companies and social media,” she says. “To be honest, I hear more breaking news from my friends on Facebook or other social media sites than I do from the news.”

Looking to the future, Zuckerberg sees where all this is leading, and it’s the same Media Oz that visionaries like Trip Hawkins talked about a decade ago during the height of the dot-com boom. “I’m really excited for the day in which the TV and the computer are the same. Maybe you’re watching a basketball game and it shows you that one of your friends just commented ‘OMG, that was a great slam dunk!’ And you’d have that right there on your TV screen because you’re connected into all this social media.

“Advertisers and marketers can really target their commercials and their messages based on who’s watching and talking to their friends. I think that will be an incredibly exciting day.”