Social Networks Matter Less to Marketers than You (and They) Might Think

Yesterday’s much-awaited announcements by Facebook regarding its new advertising initiatives were quite in-line with the rumors that had been circulating in the lead up to ad:tech. Facebook’s move comes shortly after MySpace’s announcement of its advertising platform.

With these moves, Facebook and MySpace have tried to position themselves as powerful players in the online advertising space. Some have speculated that Facebook will eventually rival with Google. Previously, everybody knew that Facebook and MySpace were building data “gold mines” but they seemed ill-prepared to extract the valuable gold. Anecdotal reports indicated that despite their captive audiences, the most popular social networks were little more than a major disappointment for marketers.


The new Facebook and MySpace offerings are designed to finally leverage the two most valuable assets social networks have to marketers:

Deep demographic and interest data. In an age where the targeting of advertising has become increasingly sophisticated, the massive amount of data that popular social networks have amassed on their users in theory seem to provide the ability for targeting on a level never before seen.

The “social graph.” Word-of-mouth is arguably the most powerful marketing vehicle because it’s cheap and highly-effective. Many marketers make a considerable effort to create brand “evangelists” who will spread the word about their brands. Social networks potentially provide the perfect platform to spark viral word-of-mouth campaigns because they connect people together.

Now that Facebook and MySpace have wisely developed robust offerings that are tailored to take advantage of their strengths, the $15 billion question is: will these offerings deliver for advertisers? I would argue that Facebook and MySpace will wind up mattering less to marketers that some might expect because their new offerings will deliver lower returns than marketers are hoping for.

Targeting: Only One Part of the Equation

One might get the impression that targeting is the be all and end all of marketing. If you can target the right people, you have a solid basis for a successful campaign. But successful marketing is a bit more nuanced. Being able to reach the right people is not enough - you must reach them at the right time. I think many have overlooked this fact when evaluating the potential of social networks as advertising platforms.

MySpace may know my age (85), my location (Beverly Hills, CA 90210), my income ($250,000 and Higher), my religion (Scientologist), my marital status (Swinger) and even my body type (Bodybuilder). The company knows that my interests include brandy, cigars and yachts, that I listen to Young Jeezy, T.I. and Kylie Minogue, that I watch the Sopranos, the Colbert Report and Dancing with the Stars, that Scarface is my favorite movie of all time and that I enjoy reading Machiavelli and George Orwell. It can probably target me with relevant advertising based its knowledge about who I am. But if I’m more focused on viewing my friend’s party pictures from Tijuana and sending a message to a girl who wants me to chat with her on her web cam, the chances that I’m going to be receptive to the advertising MySpace serves up to me is pretty slim. And that’s where social networks face their biggest challenge: they are platforms for social interaction and when you’re busy socializing, you’re less likely to be interested by advertising.

While Google AdWords, for instance, may not offer the same deep level of targeting that the new Facebook and MySpace offerings can, the effectiveness of AdWords is a result of the fact that it provides good-enough targeting coupled with perfect timing: the AdWords ads I’m served are relevant to something I’m actively searching for. The ads do not compete with my current activity. Ads on social networks inherently do.

Word-of-Mouth: It’s Not Mechanical

I think Facebook recognizes that targeting ads better is not going to dramatically improve the dismal CTRs many of their advertisers have reported and thus their Social Ads offering is designed to more deeply integrate marketing messages into the Facebook experience with the goal of being more noticeable yet less intrusive to users. As Facebook describes, “Facebook’s ad system serves Social Ads that combine social actions from your friends – such as a purchase of a product or review of a restaurant – with an advertiser’s message.” The ability for Facebook to group ads with actions from friends, including your purchases on third-party websites, is clearly an attempt by Facebook to turn its service into a vehicle for viral word-of-mouth advertising.

According to Mark Zuckerberg, “Social actions are powerful because they act as trusted referrals and reinforce the fact that people influence people.” Zuckerberg is partially correct in that social actions can be powerful but the socially-awkward CEO of Facebook seems to miss a critical point. A system that turns social actions into recommendations via a mechanical, automated fashion risks marginalizing that power. Recommendations from friends are inherently powerful primarily because they are not artificial. When Pete called me up and let me know that I need to buy The Gilmore Girls 7th season on DVD, I valued the recommendation in part because Pete is not constantly bombarding me with recommendations. The fact that he thought that the 7th season of the Gilmore Girls was so good he took the time to call me and suggest I buy it is the reason I considered purchasing it myself; I was not interested because he tells me about all of his purchases. Facebook is doing the latter as opposed to the former. While being able to view what my friends are purchasing could be addictive and entertaining, the value it’s going to offer marketers in terms of driving tangible customer acquisition is, in my opinion, quite limited. A recent study revealed that social networks are not driving purchasing decisions for online shoppers and therefore it seems quite unlikely that Facebook’s Social Ads are going to become a panacea for marketers focused on customer acquisition anytime soon.

The Bottom Line

Facebook and MySpace have created decent offerings that leverage their best assets. But in my opinion, the challenges that social networks present as an advertising medium are likely to lead to disappointment for marketers who expect that social networks can become significant drivers for commerce. This does not mean that marketers will not spend money in this space. To the contrary, many continually spend in areas that don’t deliver results. If you’ve had the opportunity to talk frankly with interactive brand marketers, for instance, most will probably tell you that the CPM advertising model rarely delivers good results. Yet CPM lives on and they continue to do deals. It’s simply part of the “marketing mix.”

The real winners in all of this are Facebook and MySpace. Facebook, in particular, has masterfully played the PR game. Its offering is sexy and appealing even if the results aren’t likely to be. In the final analysis, Facebook and MySpace may be the best marketers of all. Coca-Cola convinces consumers that its product tastes better. Louis Vuitton convinces consumers that its handbags represent membership in a special club. Facebook and MySpace have convinced marketers that marketing platforms with significant limitations are the best thing since sliced bread. How ironic.

mashable.com