Posted by Should you pull all of your advertising dollars out of Facebook?
On the eve of Facebook‘s historical initial public offering, automotive manufacturer, GM, made a big public stink about pulling ten million dollars of media spend out of Facebook because they felt that Facebook advertising doesn’t work (more on that here: Advertising Age – GM Cuts Facebook Ad Spending, But Ford Steps on the Gas). The subtext to this move is not about one brand leaving Facebook advertising, but a sentiment that Facebook advertising doesn’t work.
It’s all very silly, isn’t it?
This morning at the Canadian Marketing Association‘s Annual Summit 2012, Jordan Banks (head of Facebook in Canada) started off his presentation by saying that Facebook has accomplished only one percent of what it has set out to do, and that because of its massive user base close (900 million connected consumers strong), it will do some things right and some things wrong moving forward. His point being, that advertising on Facebook works when done in tandem with other activities, and even the advertising platform as we currently see it to date could very well morph, change and adapt.
Media is just media.
I don’t know the innards of GM and their media planning or strategy, but this decision does require some context. While Facebook loves to trot out the nine hundred million users, it’s important to note that the average user only has about one hundred and twenty connections. So, while Facebook cumulatively is massive, it’s really millions of very little connections that are primarily there to share personal and social information. Is that type of user ready to engage with a small little banner box in the same fashion that they would on a news site or a blog page? It’s doubtful. The role of the advertiser is to make that little box of advertising as compelling to the user as the social content that they’re really there for. In short: that’s a tall and hard order to deliver.
Where else to put your money.
If GM realized that they are severely under-indexed on search engines or that they have a massive opportunity with email marketing, and that those strategies are both proven and can earn them more with an acquisition model than Facebook advertising, than this news announcement was nothing more than some kind of political press release to question Facebook’s viability. If GM has the perfect media mix and they’re struggling to find advertising return on investment with their Facebook ads, it would be interesting to know how often they tested, iterated and played with the format before deciding that it was simply not an effective ad platform them.
Facebook is not (just) an advertising platform.
If the media game is to simply blast a message in front of someone who is on their Facebook page, all is lost. There are probably much better places to advertise. If the game is to create a better marketing story and to leverage the power of Facebook (human beings who have self-identified themselves and are connecting in a sincere way with people they either know or want to know better), then the opportunity is not only massive, but it is still very nascent.
Your Facebook marketing is probably at 1%.
If Facebook feels like they’ve only accomplished one percent of their goal in helping the world to connect, rest assured: your marketing is at about the same percentage level. What does this mean? It is still early days. Facebook is about to get a major cash injection, and while they say that it’s business as usual, we’ll see if being public changes their need to adopt faster and more efficiently to a mobile world, and one where the public will demand cash profitability driven by our collective investments in the company. The most exciting brands on Facebook are doing much more than advertising. They are marketing in the channel and leveraging the social graph to connect outside. They’re driving content, contests, apps, connectivity and more within Facebook’s walled garden and pushing consumers over to microsites, websites and other media channels. These brands are connecting through valuable content that people will not only care about, but share within their own, personal, networks… and that’s a powerful place to be. If a brand thinks that Facebook is just about advertising, they are (without question) not understanding Facebook (and the potential of it). At all. And, these same brands are completely missing the point. If all they want is a page to splatter an ad across and those Facebook pages don’t do the trick, then by all means, they’re making the strategic decision to not advertise on Facebook.
Ask yourself this: is your brand looking for a place to advertise or a place to connect, share and grow?
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This is very insightful. Saying advertising on facebook doesn’t work like GM was expecting it to work doesn’t mean it actually doesn’t work at all. It seems to me they’re still in the “whoever yells loudest, wins” mindset – and to write off facebook this early in the game seems arrogant.
Joel,
Thanks for your thoughts as always on an interesting move by GM and the realm of Facebook.
Facebook will need to adapt advertising to their app without intruding on peoples news feed. I also think they’re going to have to change the way ads are seen.
I pay no attention to the ads on my Facebook. All the content I want to engage with is in the middle of the screen, not on the sides. it’s like a blog in someways. It’s been known that most readers hardly ever glance over at your sidebar. They’re too concerned with the content in the middle.
None the less I can’t wait to see what the 99% they have yet to achieve looks like.
My apologies for calling you Joel, Mitch!
It seems to me that Facebook is like any other media. A very small percentage of the population pays attention, an even smaller percentage will click on the ad…because the reason we are there is to to quick and expeditious in either reading or getting the information we want. When we are sitting in front of a newspaper, the process is deliberately slow because its part reading, part relaxation. When we are sitting in front of a facebook page, its simply to keep up with our friends, not so much to know about new products. Google probably lies somewhere in the middle and therefore in my mind would be a better place to spend electronic media dollars vs Facebook.
Interesting debate you’re raising Mitch. I agree that we haven’t yet seen the true business nature of Facebook. I’m particularly interested in finding more about the real interests for small business trying to reach smaller audiences by using the FB advertising platform. GM spending millions and not being happy about the results is one thing. A small business doing the same in a more modest spending effort is another. I like to think that there will be some benefits for certain types of small businesses to spend some of their advertising budgets on Facebook. What is your take on small businesses versus large brands in terms of advertising on Facebook.
Maybe the question is not why GM stoped advertising, but if GM is alright in terms of good products, company culture, new challenges, etc.. It comes to my mind that it´s quite recently that the co went bankruptcy. Why did it happen?
Any way, as you say is it advertisement or sharing and growing? + listening, + socialicing…
I´m currently consulting a small jewelry designer (see my link for further info). It´s amazing how engagement is working and how the facebook platform is providing leads and sales. Why? Good product adapted to Client needs, great differentiation, high entrepeneur commitment, good brand image, great dual conversation, working her online and offline marketing in parallel, trying to be as social as possible….
Thanks
So Facebook advertising doesn’t work? Or is it a matter of “we can measure that Facebook advertising doesn’t work, and we don’t like that”?
Facebook advertising probably “doesn’t work” as much as any other display advertising “doesn’t work,” except the other channels are harder to measure.
GM’s television spend probably “doesn’t work” either, but since they aren’t dealing with exact numbers, it’s easy to pretend that it may work. Or may not.
Buddy
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Mitch, I totally agree with spirit of your post however, maybe I missed something. There is no debate that there is a larger facebook marketing strategy beyond paid ads however if “paid” ads are ineffective what does this do to facebook’s ability to leverage it’s massive user base to create revenue? Ultimately that is why this is news and why investor’s might be wary. You’ll remember there were some exciting investment opportunities in internet companies in the early 2000’s that eventually became known as the dotBomb! Not that any of these companies were comparable to facebook but at the end of the day, they didn’t have a legitimate way to make money and this is the most important factor for an investor/shareholder. Large investment firms are passing on what might be the most exciting IPO in decades… what does that tell us?
Great post, Mitch. Facebook focuses primarily on user experience. There may have been/are some lofty goals with respect to an ad revenue model, however there is, in my mind, little fault to be found in focusing on UX… that’s why people love to be there. It’s not necessarily the “best” network in terms of size/scale/scope of each person’s network and, therefore, the spread of your ad. All that said, FB advertising can and is successful in a certain context and when compared against, say, adwords for certain targeting needs. That advantage is steadily going away as more people/brands advertise there, so increasingly I’m stepping away from the channel as a viable ad network as it is, but for now there is some value in getting in front of those eyeballs. Maybe not for GM…
I always find it interesting to hear someone say that a particular form of advertising doesn’t work. My first question after hearing that is: “what did the advertiser do wrong?” Yes that is kind of harsh, but it is after all, just a medium. It is what you do with that medium and that market that determines the success of the campaign. It is not the fault of the particular medium. The medium is a inanimate object. It is the people behind the marketing that will make it work, or cause it to fail. Placement, target, reach, frequency, design, copy, etc…those are the things that are controlled by the human element. So what did GM do wrong? Not test the message adequately before pouring $10 million into one medium? Assume that their Facebook megaphone would be louder than my small circle telling me what they are having for dinner? I don’t know what they did wrong. That’s why the question has to be asked.
I’m amazed at the amount of commentary from folks who either don’t use Facebook ads or don’t track media metrics.
I’ve found Facebook ads to be a highly effective lead generation tool for high dollar, high consideration, durable goods. The cost per lead and cost per close are on par with paid search and re-targeting. Your results and GM’s results may vary.
Anecdotes like ‘I don’t look at FB ads’ and ‘I never click on FB ads’ are a poor way to judge effectiveness. Yes, CTRs are low, but CTR is a trivial metric for DR or lead gen advertising. Cost per lead and cost per close is really what matters.
The jury is still out on the branding efficacy of FB ads. There are a lot more analytic hoops to jump through in order to connect the dots.
I always find it interesting to hear someone say that a particular form of advertising doesn’t work. My first question after hearing that is: “what did the advertiser do wrong?” Yes that is kind of harsh, but it is after all, just a medium. It is what you do with that medium and that market that determines the success of the campaign. It is not the fault of the particular medium. The medium is a inanimate object. It is the people behind the marketing that will make it work, or cause it to fail. Placement, target, reach, frequency, design, copy, etc…those are the things that are controlled by the human element. So what did GM do wrong? Not test the message adequately before pouring $10 million into one medium? Assume that their Facebook megaphone would be louder than my small circle telling me what they are having for dinner? I don’t know what they did wrong. That’s why the question has to be asked.
There are obviously many bright and experienced minds working on the GM business inside the organization and at their various agencies. This is a company that has literally been on the brink a few times during its storied history. But even the brightest among us cannot expect a return without a proper investment – which means more than just money.
As you have said countless times, Mitch, social channels are in addition to not instead of traditional channels but one could argue that Facebook and a few others are now part of traditional media. GM with their deep (government bailed out) pockets know more than most companies that a multi-platform approach is a wise route.
In the meantime, watch your FB news feeds for more “sponsored” stories. And when companies are allowed to infiltrate our personal pages, we’ll then see if the 900 million user love affair continues.
The GM headline news should be “GM could not find their own Scott Monty and left Facebook.”
Mitch,
The insight about FB being a massive collection of small group connections is the key to your genius in this post! I also think, as you imply, that this is the key to unlocking value in advertising there. Right now, I don’t see it. Like Jordan above, I also generally ignore the ads on FB. But I have also seem businesses engaging very specific communities and driving surprising revenue via FB connections. But that’s not advertising, it’s just good community development and management.
For my day to day FBing, I use a fake name, a fake city, and I speak 3 fake languages. I also use FB Purity which completely erases all ads, blinkers, tinkers and other triggers for directed marketing. I wonder how many of the 900 million do the same? And if I am indeed not alone in altering my fb identity and/or hiding all ads, it may explain why advertisers miss the mark: 900 million users is great but adveristers hoping to reach me in Zonguldak (my current hometown) are not going to find me there.
It’s tricky to effectively measure the real value of the “soft selling” Facebook advertisers have to employ. Depending on your industry, you may or may not need to build any kind of brand recognition, or social integration for that matter.
Thank you Mitch for sharing your insightful post, and community comments. Your parting question “Ask yourself this: is your brand looking for a place to advertise or a place to connect, share and grow?” is extremely helpful 😉
What I find funniest about GM is how they announced it and the timing of it all. It was such an arrogant “look at me” move to do it the day before the IPO. Christopher, you mentioned they couldn’t find their Scott Monty, like Ford did, and I think that’s a huge part of it, but I think the other part that’s equally as damning for GM is the culture and spirit of the organization. Even after bankruptcy they seem as arrogant as ever. (I work for a automotive dealer group and privy to a small slice of the operation)
Even if you wanted to exit and yank your 10 milly, do it with some class. You never know who you’ll need one day and I can’t wait to see what kind of consideration they get should they ever have to crawl back to Facebook when the ad model evolves.