General Motors caused a tremor last month when it pulled its paid banner ads from Facebook. Because the timing of the news was so close to the social networking site’s IPO, there wasn’t much talk about what the world’s largest automaker’s decision might signal about the effectiveness of ads on social media as a whole, or whether other brands are likely to reconsider their social spends.
But with Facebook’s stock hitting an all-time low yesterday (it closed at US$ 26.90, the lowest price since the stock began trading at US$ 38 on May 18), some say the tremor has turned into a full-blown earthquake. It comes as a shock to many that petabytes of big, personal data don’t easily translate to dollars.
A Reuters survey released today reveals that 4 out of 5 Facebook users have never bought a product or service as a result of advertising or comments on the social network site.
What does this say about social media being a choice destination for advertisers and stakeholders?
From Facebook to Stadiums
“Investors are already scrambling out of related stocks, including social game company Zynga; the so-called "Facebook of China" RenRen; and Internet radio company Pandora,” writes USA Today reporter Matt Krantz.
Last week GM, which also happens to be the world’s third largest advertiser, penned a new ad deal not with Zynga, Twitter, Pinterest or Linkedin, but with Manchester United soccer team. Chevrolet's bowtie logo will now appear on Man U's team benches and in its stadium. It’s an advertising strategy that dates back more than a century.
Can pre-digital really be the best way for GM to spend its dollars in order to build relationships with the inhabitants of a socially networked, Web 2.0, mobile world?
The flabbergasting answer, especially if we’re talking about paying for ads and not getting results on Facebook as the alternative, is yes (Note: GM has also announced that it will no longer be sponsoring Super Bowl ads for much the same reason -- not enough bang for the buck. Some attribute the Man U move to that).
In a recent blog post, Forrester Research Analyst Nate Elliott wrote:
Somehow Facebook still hasn’t stumbled upon a model that’s proven consistently successful for marketers, or that brings in the massive revenues to match the site’s massive user base. One global consumer goods company told us recently that Facebook was getting worse, rather than better, at helping marketers succeed. And companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget -- a shocking fact given the site’s dominance among users.”
What makes GM’s decision to stop buying banner ads on Facebook even more intriguing is that the automaker has said that connecting to a younger demographic is key to its future. And of Facebook’s 901 million users (April 2012), those who spend the most time on the site are young and mobile, exactly the audience the brand most wants to reach.
Not only that, but Facebook has loads of data on GM’s target audience: its members, on average, have created more than 800 pages. You’d think that would give the site and its advertisers plenty to go on when it comes to getting the right ad in front of the right person at the right time.
Big Data Doesn't Equal Good Data
Not necessarily, according to Jeffrey Davitz, founder and CEO of Solariat, a “social response” engine that analyzes millions of posts at the speed of social and finds opportunities for meaningful brand engagement.
Though he isn’t referring specifically to GM’s decision to pull back from Facebook, Davitz makes a point of emphasizing that “big data” doesn’t necessarily translate to high value data. In fact, he calls much of the data on Facebook and Twitter “big, sucky data” and claims that the way it is typically being leveraged is unlikely to help predict an immediate, actionable response with any regularity, which is, of course, what internet advertisers want (and what they can actually measure on the web with much greater accuracy than with most other types of advertising).
Davitz isn’t suggesting that social media as a revenue generator is dead. What he says instead is that in order for social media advertising to be successful, it has to know what a user wants and when. This can be accomplished through “listening” and targeting customers at their precise moment of need.
Say, for example, that a woman in Cleveland is wondering which brand of single cup coffee maker she should buy and she posts a question on Facebook. “I’m buying a coffeemaker, should I go with a Keurig or Tassimo?”
This is the optimal moment for a marketer to engage the Facebook user -- the desire is there and a decision is imminent. This is an instance at which social media can rival, and possibly even beat, Google.
But that can’t happen until technologies like Solariat become adopted.
What’s kept that from happening thus far?
In some cases brands aren’t yet aware of the fact that user intentions are findable in Social Media. There’s also a “creepiness factor” that brands need to get over. Davitz argues that consumers won’t mind that they’re being eavesdropped if they benefit from a little, helpful, infrequent intrusion.
“Everybody can win,” he says.
And finally, the Facebook generation, whose attention GM was batting for, lives their lives out loud on the web. They don’t expect privacy anyway.
Social media isn’t dying. Instead either it, or the brands that use it, just have to get smarter. Technologies like Solariat might speed up that process.