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June 24, 2011 7:58 pm
At a conference for baby boomer-oriented businesses, a group of grey-haired entrepreneurs who hoped to sell medication dispensers and cruises to tomorrow’s elderly sat in the audience, foreheads wrinkled with suspicion, as two men from Dell and NBC preached the value of Facebook.
Many of the largest global companies have discovered the value of communicating with customers on their fan pages and building awareness of their brands with the “like” button, they said. Small, niche businesses, even those whose customer base still reads newspapers, must follow suit or risk languishing in offline oblivion.
“If I were to focus on one thing as a marketer, I’d focus on Facebook,” said Mark Graham, an executive at NBC Universal.
The world’s largest social network is becoming increasingly commercial as Facebook learns how to turn its popularity into profits in anticipation of its initial public offering next year.
But the rising volume of sales pitches on Facebook bears the risk of alienating users, said Astro Teller, a Google executive speaking on the baby boomer business panel, who said he was expressing his own opinions, rather than his employer’s. “We’re being set up to be spammed,” he said, by both advertisers and over-sharing friends, a concern echoed by several others in the audience. “I predict social media will be an arms race between the spammers and the consumers who want to be protected from spam.”
Since Facebook has emerged as the most visited site on the internet, with roughly 700m active users spending an average 6.2 hours and minutes there per month, businesses have wanted in on the conversation. Businesses are expected to spend $3.4bn on social network advertising this year, and $8.3bn by 2015, according to research from BIA/Kelsey.
Social marketing workshops, such as the one at the baby boomer business summit, abound. Managing social networking sites has become so time intensive, a cottage industry has sprung up for companies that want to outsource the task.
Historically, Facebook has been intensely protective of its users’ experience, and held off selling advertising until a few years ago.
Now, Facebook has been actively wooing large brands and advertising agencies to increase their presence on the site, and this week announced its latest ad product and its intention to convene an advisory board of top marketers to guide its ad strategy. Small and medium-sized businesses are also being increasingly targeted by Facebook’s local advertising team.
And next Friday marks the deadline Facebook has set for all third-party developers to begin using its proprietary virtual currency, Facebook Credits. This means all financial transactions by popular social gaming companies or film providers on the site will now have to go through Facebook’s payment system, for which they will pay a fee of 30 per cent of each transaction.
Facebook’s main moneymaker by far is online advertising. Almost one- third of all display ads on the internet, which includes basic text and visual ads, but not Google search ads, are on Facebook, according to comScore. The company is expected to control 50 per cent of the market by 2015, according to BIA/Kelsey. As the IPO approaches, Facebook is investing most in building more social ads products.
“The way we look at the world from an advertising perspective is that everything is better with your friends,” said Carolyn Everson, Facebook’s vice-president of global marketing solutions. “If a friend has a great compelling experience with content like the Nike ad, as a friend I’m actually really interested in that content.”
Early attempts at this were clumsy. “They would say, ‘your friend Joe just bought a toaster, do you want to buy one too?’ That was creepy,” said Ray Valdes, an analyst with Gartner. “You need a scalable engine that can deliver the right ads to the right person at the right time in a way that’s not creepy.”
Facebook has been encouraging brands to communicate with its customers on their pages, engaging them in conversations rather than blasting them with one-way propaganda.
For example, Best Buy generated 3,000 comments on its page by asking people to complete the phrase, “If I had five minutes in a Best Buy store, I would buy _____.”
These messages then go out to all the people who have previously “liked“ the Best Buy page, appearing in their daily news feeds, slipped in between messages from a user’s friends and family. This kind of consumer engagement is free on Facebook. But the company is finding ways to convince brands to pay for new versions of it. This week it announced the launch of “comment ads”, isolated boxes on the side of a user’s homepage where brands can pose a question and users can type their responses directly into the ad, which then enter their friends’ news feeds.
Another relatively new ad format is “sponsored stories”, where brands can take a customer “like” or comment, repackage it into an ad with the person’s profile photo, then deliver it to the home or profile page of his or her friends. Comments or “likes” on those also get fed into the news feed.
While social ads have been shown to have more impact, there has been a backlash from users who are upset that their social actions on the site, and their photographs, are being used to hawk goods. Unlike some other features on the site, users cannot opt out of sponsored stories. A class-action lawsuit has been filed against the company in New York for the use of children’s names and images in ads.
The various new products will certainly increase brands’ reach, but as people’s news feeds get crammed with even more notes and invitations from friends and companies than the hundreds that are typically there every day, a question of effectiveness arises.
“If you interpose a commercial message in the middle of that communication, is it intrusive, does it irritate people?” asked Sir Martin Sorrell, chief executive of WPP, the world’s largest marketing services group. “I think they have to be careful.”
As marketers get better at navigating Facebook’s advertising channels, another concern is that users will get better at tuning them out. The rate at which users actually click on Facebook’s ads is very low, just 0.04 per cent. “The spammers are going to get louder and louder,” said Mr Teller of Google. “And we’re going to have to get better at filtering ourselves out.”
For now, any irritation users feel does not seem to be translating into any significant numbers leaving the site.
“This is a time of exploration and experimentation,” said Mr Valdes at Gartner. “People will have to move the needle forward and move it back as they find the right combination of what works with users expectations.”
Additional reporting by Tim Bradshaw in Cannes
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