Since Facebook was featured on the cover of Newsweek magazine less than a year ago, it’s been called everything from the social platform that would revolutionize marketing forever, to an overblown and overhyped experiment.
Industry watchers say the truth lies somewhere in the middle. Although Facebook certainly offers marketers global reach, desirable demographics and powerful “endorsed by your social graph” capabilities, its recent attempts to transform online advertising have either fallen flat or failed completely.
Facebook’s increasingly worldwide audience is one of its most valuable assets. Its rapid international growth is especially remarkable because the majority of countries – including Turkey and Israel – experiencing speedy expansion do not speak English as their primary language.
More than half of Facebook users are not enrolled in college. The fastest-growing demographic is the over- 25-years-old group. In fact, comScore Media Metrix found that more than 41 percent of all Facebook visitors are 35 years or older.
Facebook has long been considered the social network of choice over MySpace.com for those with higher educations, but recently it overtook MySpace in terms of daily page views and reach, according to Alexa. The boost has been enough to make Facebook the sixth-most-viewed website in the world. Hitwise finds that U.S. traffic to Facebook increased 80 percent from November 2006 to November 2007. However, traffic to MySpace was almost five times greater than to Facebook in November.
Speculating on the valuation of Facebook was an industry pastime this summer until Microsoft bought a 1.6 percent stake in it for $240 million in October, giving Facebook an estimated value of $15 billion.
Critics wonder if Facebook is worth what Microsoft paid for it. Many say there is no way to justify the value unless Facebook can grow into something much more than its current iteration.
But with estimates that spending by advertisers on social networking could almost triple to more than $3.5 billion globally by 2011, it’s not surprising that companies like Microsoft don’t want to miss out on the marketing opportunities.
Many Marketing Methods
Advertisers and marketers have plenty of options when it comes to Facebook. One is “Insight,” which is collected marketing data of social demographics and psychographics that Facebook provides to advertisers in an aggregated, anonymous way.
Another feature is “Pages,” which is the capability of businesses to host pages on Facebook for various brands, products and services. Brands have long attempted to build their own profile pages, with little success of getting past Facebook’s identity moderators.
Advertisers can buy “Ads” that can be targeted based on member profile data such as location, interests and activity. They simply write an ad, decide where they want to drive traffic, choose a target audience and purchase them on a CPC or CPM basis.
“Social Ads” are another option; they pair targeted ads with related actions from a user’s friends – allowing Facebook members to sign up as “fans” of an advertiser and then have their names and profile photos displayed alongside the marketer’s ads on their friends’ Facebook pages.
Online marketing consultant Sam Harrelson says he ran two Social Ad campaigns and spent approximately $500 in all. The return was about $15. He’s disappointed and doesn’t think what Facebook has rolled out so far will ever work or sustain any sort of revenue for advertisers or marketers.
Scott Aikin, president of shopping site Mallicious.com, says that Social Ads are very similar to “Flyers,” Facebook’s original form of ads, which was discontinued in December. The biggest change is that ads now show up in the news feed when attached to a relevant social story, as opposed to only in the left-hand ad space. The news feed, which lets people know what their friends are doing on Facebook and in the real world, is the first page Facebook users see when they log on to the site – making it a key place for ads.
Affiliate Scott Jangro used Flyers to target college-aged women for his Virtual Costume Party app, and says that although the application got tons of page views, they were not highly converting. He thinks it’s possible that Facebook did some analysis on Flyers and slowed down the ones that didn’t have a high CTR, but that’s “just a theory based on that one data point.”
But Aikin says he managed a substantial amount of traffic to his Social Shopping Mall application through Flyers and by advertising on third-party apps. He says that the prices are a little high for the value, but thinks this may change as Facebook brings in more adults.
Some think that Facebook’s advertising opportunities are revolutionary. Adware, malware expert and longtime affiliate marketing pundit Wayne Porter wrote a blog on Revenews.com saying that for the first time, advertisers are able to see the interests listed on 50 million Facebook user profiles. “This is groundbreaking if you are a beer marketer, because there are not many places besides Facebook where the average young man writes ‘I like to drink beer’ next to his name.”
Affiliate marketer Carsten Cumbrowski says he believes ad campaigns could be effective for smaller-budget items like ringtones and cell phones because the Facebook crowd skews younger. In general, Cumbrowski thinks Facebook, like most other social networks, “is very limited in terms of the type of ads that work well.”
Others doubt that Facebook is the next advertising gold mine because users don’t have their wallets out on social networks. They are there to socialize. And some think advertisers would have better luck targeting users when they are searching on news or search sites – because it shows intention.
Causing much of a hullabaloo in the news is “Beacon.” It enables the tracking of user activity across a network of external participating sites and then reports that back to Facebook. Activities could appear in the form of “endorsements” (e.g., Harry just bought a book on Amazon), that appear in a Facebook RSS feed area. Facebook said the model was intended to turn millions of Facebook users into a “word-of-mouth promotion” service.
However, in late November, Facebook decided to alter its Beacon feature after attacks from privacy groups and MoveOn.org demanded Facebook stop broadcasting users’ purchases without their consent. The Beacon feature is no longer active for any transaction unless the user clicks “OK” – making it an opt-in, not an opt-out, system.
Consultant Harrelson says Beacon was a horrible idea. “It reminds me of the toolbar apps from 2002.” He believes there were too many concerns over privacy, data ownership and Facebook’s long-term sustainability as a platform “to cause much skirt hiking.”
Another Facebook feature, “Groups,” allows users to organize around a cause or common interest. Groups have several levels of controls associated with them and can be public, private or invite-only, and they can also be hidden from the group directory. Owners can email notifications and communications to all group members.
Jamie Birch, director of affiliate relations for Converseon, a digital Web 2.0 communications agency, says they are looking into having their own group because it would provide an additional venue to communicate with affiliates and educate them on Converseon’s programs.
Out of all of Facebook’s offerings, it is the ability to develop applications that is most enticing to affiliates. Launched in May, Facebook Platform allows developers to build third-party applications within Facebook’s user interface. It took off like wildfire because it gives marketers a cheap and effective means of promoting their website to the growing Facebook audience.
As of mid-December 2007, there are more than 10,000 applications, and the most popular apps include Top- Friends, FunWall and iLike when ranked by most engaging as opposed to number of users.
iLike, a music-sharing social network, allows users to list favorite songs and bands on their profiles. It makes money by facilitating purchases of music through iTunes and Amazon. During its first nine months on the Web, iLike attracted 3.5 million users, but on Facebook it added 5 million in just 60 days – proving to advertisers that people are interested in what their friends like.
But the viral success of iLike is not the norm. The dynamic of Facebook’s application marketing has changed because the marketplace has become saturated. Users frequently uninstall applications, and the release of each new application means more applications must fight for attention.
Michael Allen, president of ShoppingBargains. com, a source of coupon codes, released his application for Facebook at the end of September 2007. He says he wishes he had launched it a month earlier during the zenith of user installation and when developers could market their app to an unlimited amount of people. In late August, Facebook changed policies and limited marketing to only 20 people per day.
Allen is hoping to expose Shopping Bargains to new users through Facebook. He wanted to make its deals customizable and easily shareable among friends within trusted social circles instead of forcing people to leave that warm environment.
Mallicious’ Aikin developed the Social Shopping Mall app, which allows users to save coupons they find on Facebook to his site. He explains that if a visitor uses a $5 coupon for ShoeMall through his app on Facebook, Aikin gets 100 percent of that affiliate commission.
Aikin claims he’s glad to have developed an app because it was an interesting learning experience and gave him a better understanding of how to monetize social networks.
Users can find Aikin’s app on Facebook in a variety of ways: through ads, via the application directory, in a Facebook search, on profile boxes, using news feed stories, and on ads on apps that are available through third-party advertising networks. But Aikin warns that even with all the marketing tools available, “the success of your app comes down to the value you provide.”
Jangro, the affiliate who developed the Virtual Costume Party app, had a less favorable experience. He launched his app in October and would “not deem it as successful,” suspecting that current users of Facebook are “not in the buying mind-set.” Jangro thinks that if shopping is not fun or useful enough to gain traction on Facebook, “it doesn’t seem advisable for affiliates.”
Still, Jangro says there is an opportunity on Facebook to build brand, and recommends those who are thinking about developing an app should first focus on one that is entertaining and engaging and then worry about how to monetize it. He thinks if an application name is interesting enough, it could garner adds from curious friends who learn about it on the news feed page.
President of SubmitAWebsite.com Joe Griffin points out there are a plethora of opportunities for advertisers. If a marketer of iPhone accessories wants to reach people on Facebook, he could leverage iPhone Groups, check out the fans of the iPhone Page or advertise based on users’ demographic information or listed interests such as “gadgets, technology, Mac users.”
But many advertisers shy away from social networks because there are reports that they can’t trust what users say in their profiles – they fear people lie about their age or interests.
Consultant Harrelson says he likes Facebook as a social network but doesn’t think it’s a good fit for marketing in its current stage of evolution: “” at this point, we’re still too closely linked to off-line models and metrics that break down when you try to translate them to the social networking world.”
Another much-buzzed-about application is Twitter, a free social networking and microblogging service that allows users to send text-based posts of up to 140 characters to the Twitter website via short message service, instant messaging, email or an application such as Twitterfic.
Converseon’s Birch says people feel three ways about Twitter: “You like it, you don’t understand it or you can’t stand it.” Regardless, Twitter has been one of the fastest-growing apps in the history of the Internet since it launched in the spring of 2007.
Marketers such as Birch like Twitter because it offers a new way to share information. It is an additional medium for communicating with his affiliates in the way that they want to be reached.
Affiliates vary in how they get their information: Some like phone calls, some want email once a year, some prefer RSS and some want information as frequently as it comes out. Twitter messages can be received a variety of ways: on Internet- capable devices, the Web IM, and phone – which makes it a flexible solution.
Affiliate managers want to offer affiliates the most up-to-date information in the way that is most convenient for them. The more affiliates know about what is going on with a program, the more they can tailor their marketing, and the more they are able to convert their traffic into sales, according to Birch.
So if an affiliate manager receives a new coupon or hot product from a merchant, they can send a tweet to those who are following the account. For example, Birch could Twitter about a promotion for a specific product – with the message that the first person to sell it gets a 12 percent commission. Birch says that he has incentivized people to use Twitter by offering deals available only through it.
Another advantage of Twitter is that it is useful for reaching early adopters. Birch says they sent out the Twitter invitation to approximately 100 top affiliates in their 11 affiliate programs and about 40 to 50 affiliates are following it.
Some think Twitter is an excellent tool for reaching affluent, well-educated early adopters and influencers, but not the general public. Brands, such as Carnival Cruises and The Wall Street Journal, are experimenting with it but they only have followers in the double digits – more successful experiments have attracted numbers in the thousands, but nothing significant.
Twitter is appealing to marketers because it and other “presence platforms” are an immediate way for people to communicate their thoughts and ideas. Marketers can leverage it by selling to the user directly or by seeing major trends in the millions of daily public posts.
Harrelson says that as a marketing device, Twitter is great for building brand. “It can be a direct-response-type tool (TwitterLit.com comes to mind), but as a platform it’s much better for getting your name/identity/view/message out there.” Harrelson has been using Twitter since November 2006 and says it has been the source for more network connections than any other activity he’s been involved in, including conferences, email or Facebook. Jangro says Twitter is a good promotional tool for individuals but thinks there needs to be a good amount of people reading the updates. “If you can’t get the users, the marketing value is nothing.” For this reason alone, Twitter may not be on the top of the list when it comes to ways that brands can communicate.
Regardless of which social networking platform online marketers opt to leverage, most industry watchers agree that we are just starting to see the marketing possibilities.