July 2012 Archives

Facebook Earnings. What it means for marketers

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Today's Facebook earnings call was illuminating on several fronts. However, two pieces of information stood out the most. They both in my opinion represent the future of Facebook. Everything else matters less.

1. Mobile monetization will be through sponsored stories. That's smart and insightful. No mobile experience can truly support a variety of ad formats. Mobile banners are certainly not the right approach for Facebook. And their own other ad units will significantly degrade the mobile experience. Sponsored stories is the only ad format that doesn't do that. Sure there are privacy questions that remain with the use of sponsored stories but if there's any type of advertisement that I'd be willing to accept amidst limited real estate that's a cell phone, it would be a sponsored story telling me about actions that a friend or a brand has taken. This will scale up in time especially when you throw in location specific sponsored stories (not just on the targeting end but localizing the sponsored stories based on where you are.)

2. Investors and even many marketers don't understand the potential. The second key takeaway for me was that most investors do not understand the potential of the Facebook social graph. In my mind, it's like the intangible brand value associated with iconic brands. You have to put a dollar value on its very existence as it can be monetized in ways yet to be reflected in the marketplace. Mark Zuckerberg seemed to hint at this issue when he said, 

"Imagine a day when you buy a new car and log in to the car's computer with Facebook and it lights up with [music, friends' addresses and retail locations] targeted to you based on your friends and interests," he said. Then he added, "Our vision for the platform is bigger than most people perceive."

Can you put a valuation on this potential today? Do you think many investors are thinking about this? Probably not but that's what's going to be at the heart of Facebook's future because 1) no one else can create social experiences in a similar fashion without access to the Facebook social graph 2) as the generation that's growing up with Facebook starts to have real spending power they are going to expect their social graph to travel everywhere with them...into their cars, refrigerators, televisions and hotel rooms. I'd suggest that marketers don't understand this potential completely either otherwise more companies would be thinking about creating Spotify and Pandora type applications on the platform and leveraging the social graph in more unique ways into their own products. Facebook on its part needs to share of its payments and mobile strategic roadmap.

What does all of this mean as a digital marketer thinking about Facebook?
Well first and foremost, I was hoping for more details on the Facebook advertising products and how the company plans to further evolve them. Lawsuits aside, Facebook continues to bet heavily on social advertisements even though that may limit its revenue growth. That's a relief. The last thing I would want is for Facebook to over-monetize the way MySpace did and degrade the experience for users and advertisers. The downside to this is that these are ad units that the marketing ecosystem isn't too familiar with. A lot more education and measurement will be required as a result. No surprise that the Facebook headcount has gone up dramatically. I suspect a lot of the new employees are sales people who will probably share the details of the evolving Facebook advertising strategy in 1:1 meetings.

Secondly, a lot can be gleaned by what a company chooses not to talk about during an earnings call. The company didn't talk about why the Fortune 100 advertisers aren't spending more on Facebook and what the company is doing to address that challenge. It maybe early days for this but I'd love to see Facebook be more transparent in how their advertising machine is performing and what the major barriers to driving more advertising growth are. I loved hearing about the three brand examples. I think that's really an important step to transparently demonstrate the impact that Facebook advertising can have. I want to see more and more specifics though and a much deeper Nielsen partnership. Maybe even something tied in with Catalina or an SymphonyIRI. Talking about the brand studies is valuable, but it isn't enough. More is needed.

Lastly, but not the least what's obvious is that Facebook is being coy in how it plans to use all the data it has about its users and its advertisers. Along with the social graph,  I believe this data trove is one of Facebook's most valuable assets. An asset that can be monetized as a real-time research product for brands (with anonymous data of course). Arguably, the data can even help governments, businesses of all sizes, researchers, students and scientists. How my brand is talked about relative to competitor brands on FB can be a leading indicator of brand health and sales in a way no other measure maybe.  How people live their lives as reflected by their online conversations with certain friends is massively powerful insight for companies. Facebook has access to that data and the metrics that they share publicly today are severely limited and arguably not always credible (Like counts, Chatter analysis and PTAT data). There's a lot more that could be shared. The earnings call pointed out that Facebook is no rush to open this data to marketers. That's a pity.

Marissa Mayer & Yahoo. What's missing

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I've read more than a dozen stories about Marissa Mayer's move to Yahoo. Many of them miss the fundamental point. Let me get this straight first though - I think Marissa Mayer is an awesome choice for Yahoo and she has a lot to offer the company. It is also great to see another woman take the reigns of a large technology player. It's about time.

But most of the stories in the press discount what Yahoo needs most and why Marissa Mayer is such a smart choice. There's no use in Yahoo thinking of itself as a media company or a technology company if it doesn't understand user experience deeply. That's why Steve Jobs was special. That's why Mark Zuckerberg at Facebook is too. That's also why two decades ago David Filo, Jerry Yang and Marc Andreessen stood out at Yahoo and Netscape. The Yahoo CEO needs to understand how real people want to engage with digital products. But more than that the person has to have a specific vision for how people will engage with them in the future. No focus group will answer that for the CEO. It is the most critical skill/intuition that any leader who works in technology must have. The Yahoo CEO needs to use that to guide every decision. And it is different from having product chops.

Not enough senior executives have that brain muscle. Many of them (no offense meant), grew up being forced to spend inordinate amounts of time looking at excel spreadsheets and powerpoint presentations in MBA programs or early job assignments that stifled creativity. Not enough spent those years creating wireframes in Visio, pushing pixels in Photoshop or sketching in notepads on their weekends. Not enough were liberal arts major or sociology graduate students. This may not matter for brick and mortar organizations that change slowly and have much deeper barriers to entry and where business processes and efficiences drive the business. But it isn't in the case with digital. A Yahoo CEO cannot be rooted in media, technology or even content. Yahoo desperately needs a user experience visionary. It has all the assets in the world and if there's anything that Facebook, Flickr, Instagram and Pinterest has taught us, its that this is not about the technology either. 

Steve Jobs described the need perfectly when talking about Bill Gates in a story on how Microsoft lost its mojo. Here's the quote from the Vanity Fair story that captures his view -

Bill likes to portray himself as a man of the product, but he's really not. He's a businessperson. Winning business was more important than making great products. Microsoft never had the humanities and liberal arts in its DNA."

Yahoo needs to recover. A lot of us still remember the day the directory was launched and want Yahoo to succeed desperately. The board  of Yahoo did its job in choosing someone who has a history of making great products and focusing on the user experience. Now its time for Marissa to do hers.

Facebook can sell soup and lots more if...

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I was rather amused when a Wall Street analyst predicted that Facebook would disappear by 2020. I thought he was dead wrong. Since then a Comscore/Facebook study has been released, Facebook has announced its real-time bidding exchange and has shifted its focus in payments. I think this is just the beginning both for Facebook as a stock and as a powerful platform for marketers. Here's why I'm more bullish than ever about the platform with some thoughts on what Facebook needs to do to really prove that analyst wrong and convince marketers that its integral to their futures -

  1. Give us real ROI measurement: Most Facebook skeptics (think about a certain auto manufacturer) may not realize that just because the platform measurement isn't as strong as they'd like it to be, it doesn't mean the platform doesn't work as an advertising medium. It is hard to argue against the scale, targeting capabilities and raw engagement that the Facebook platform can provide now. You couple that with a strengthening mobile experience, and you know you have a strong marketing platform on your hands. If I were Mark Zuckerburg though, I'd strike a much deeper partnership with Nielsen, Symphony IRI or ComScore right away so that the measurement ghost can be laid to rest once in for all. For example, I'd love to learn how Facebook engagement can drive brand health and offline sales for CPG brands. I know display advertising and search advertising do that effectively already. I need to be able to do that with Facebook as well. Facebook must invest in this area today.

  2. Be audacious but stay grounded as well: Wall Street in turn needs to focus a little less on what Facebook is today and instead on what it can become. There's no question that user growth is stalling but that was bound to happen. The world's population growth isn't keeping pace with Facebook adoption. It had to plateau sooner rather than later. When Wall Street thinks about Facebook, they can't just focus on the current ad revenues in the market place today. They need to think about the potential alternative revenue streams through a user base that's so large and so loyal. 

    I would suggest that Facebook is on the verge of having its iPhone moment. It has all the ingredients to launch something truly transformative the way Apple did with the iPhone (and I don't think it should be a phone). Something so big that it changes the entire company. That's going to happen and it'll lead the next wave of revenue growth for Facebook. Similarly, focused brand initiatives like Shipyard may result in similarly transformative initiatives for brands. However, for Facebook to really tap into this opportunity, it must match its audacious goals with humility. Having just the former or the latter won't be enough. The truth is that cars will still be sold, toothpastes bought and bank accounts opened without Facebook. FB needs to prove everyday to marketers that there are better ways to get consumers to do that stuff by marketing on the platform. In the way that Google has mastered.

  3. Payments, payments, payments. Did I mention Facebook payments? The revenue potential through payments. All of a sudden, it may put Facebook in the same league as American Express or Visa. Imagine knowing how 800 million people communicate, influence each other and then actually act upon that influence via payments over time. That's the power of the Facebook payments opportunity - in creating a closed loop experience that helps Facebook and its brand partners understand how a consumer goes from a thought to social influence/validation and then on to purchase a hundred times in a year. Once their payment platform takes off (now with real currency), the idea of a Facebook credit card or mobile payment mechanism (think PayPal mobile payment type solution) isn't that far off. Facebook can become an Amex, Mastercard or Visa competitor. I'm excited about this direction. I don't know if it'll fulfill the social commerce promise but that may matter less.

  4. Fulfill the real-time marketing vision with better insights: Real-Time marketing is about going from insights to action and measurement all in a matter of minutes. Readers of my blog may know my real-time marketing point of view. But there are few platforms that can enable this more powerfully than the Facebook platform. What's missing is access to stronger, deeper and more powerful insights. Facebook needs to open up its insights to brands. It has all the data anonymized. Just make it public or sell it to brands and agencies. Once we have access to those unique insights in real-time, operationalizing against them will be easily and hugely powerful with tools like Buddy Media's platform. This is another area where Facebook needs to invest significantly and quickly. With all the IPO money, it should ramp up its insights function dramatically. Marketers are used to getting a lot more data (anonymous of course)about its consumers. Give it to us. We get a lot of great data from Twitter, we need anonymized data from Facebook.

  5. Learn more aggressively from others: I'm starting to feel that there's one company that represents the future of Facebook. It is doing a lot of what Facebook can be doing but isn't as yet because of its size and all the distractions that come with an IPO. And that's a relatively small company called Lockerz. They take the user from influencer and social discovery, to content engagement, onto commerce and finally to loyalty all at once. You could argue that they're vertically integrated. Facebook needs to learn from them. I'm waiting for the Facebook rewards system, a smart social commerce framework and mechanisms to connect the digital world more harmoniously and smartly with the physical world (Facebook places has a lot of maturing to do). I'm not totally convinced that I need another verb or "want" button. In a similar fashion, I believe Twitter is an extremely powerful platform. Rather than trying to compete with it, Facebook should think about ways to complement Twitter and dare I say integrate with it too. The same applies to Google Search (Google plus maybe another story)

  6. More credible public metrics: Last but not the least, Facebook needs to move to more credible public, metrics. I've never been excited about the "like" metric as it is a reach metric that would be confused for an organic, affinity one (the truth is that you can quickly increase likes by purchasing Facebook ad units in a certain way). People Talking About This (PTAT) is also another less credible metric as it is heavily influenced by paid digital media investments. If Facebook has any public metrics, they must be truly credible, authentic and sincere the way the rest of the platform is. Only then will marketers take the platform more and more seriously. The sooner the platform moves in that direction, the better it will be. I would suggest that the metrics need to be so powerful, so compelling and so smartly designed that they travel around the Internet and elsewhere too just as the Like button has. We're still in a world of GRPs (gross rating points) with reach and frequency measures. Facebook has the opportunity to really fix this and maybe bring other major digital players along for the ride, it should take that lead. Is it around virality or more authentic people talk about us? I don't know, maybe.
The next few years are going to be exciting for the marketing ecosystem and Facebook in particular. I for one believe that it'll be around in 2020 but how much of a force in our lives and with our brands depends on the decisions it makes over the next twelve months. Facebook can sell soup and lots more if its as smart over the next twelve months as its been over the last.

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