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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.

Publishing is Dead, Long Live Publishing

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I've discovered that "Something is Dead" headlines attract a lot of attention so I couldn't resist using one myself today. With Seth Godin announcing that he's going to ditch his traditional publisher (Portfolio part of Penguin), does it mean that book publishing as we know it is dead? I find this topic especially interesting as its something that I discussed at length when I spoke at the Digital Book World Conference back in January. Here's my take.

Seth Godin is among the most popular best selling marketing authors and his latest book Linchpin sold over 50,000 copies. The publisher probably played a big role in the editing and the distribution of that book. However, for future books Godin is planning to release them over the Internet in electronic book formats as well as in the form of apps, small digital files and even PDFs. What does this mean?

  1. Seth Godin knows his readers better than his publisher does. Godin has realized that he really knows his readers. He knows what they want, he knows how to reach them and he knows quite clearly what he wants to share. He has is own marketing platform via his blog and his twitter account too. He doesn't need a publisher to play that role for him. And with the Internet he can distribute his book to his readers electronically.

  2. Seth Godin believes in the power of his brand and is betting everything on it. At the most fundamental level, this is a brand play. You've got to believe in yourself and in your words if you want something to work, he'd say himself. And that's exactly what he's doing. He's putting his money where his mouth is. Will he sell as many books? Fewer? Will he reach new readers versus just his fans? Time will tell but it is an adventurous move without a doubt.

  3. Seth Godin doesn't believe his publishers provide him enough value. By saying that he's going to sell his book online and directly to his readers, Godin is basically saying that his publishers aren't providing him enough value. He appreciates the need to have a strong editor (and he's going to hire one independently) but everything else is not valuable enough for him. Publishers should be worried and so too should Barnes & Noble and Borders. If other leading authors adopted this model they'd all be in trouble. 

  4. Seth Godin knows that the book format itself is worth a second look too. There's a secret about writing books that no one likes and having just been through the process, I've witnessed it first hand. You have to fill the pages. Even if your idea and what you want to convey only needs a 100 pages, you are obligated to stretch it out into 200 or 300 pages. That's how books are made. You have to conform to those guidelines. If the book is too thin, publisher's won't be able to charge enough for it. Godin recognizes that micro-book formats as well as audio files and apps are worth exploring as mechanisms to share his ideas. That way he's not limited by the structure of the book market.

  5. Seth Godin has figured out the economics are in his favor. I'm guessing that for every book of his sold, Godin gets probably 15% in royalties. That's not bad when you're selling 50,000 books priced at $17.13. He's made $2.5 per book sold or $128,475 in total. 

    But imagine if he sold online only where he'd probably get something closer to 80% in royalties. He'd make a whopping $685,000. Imagine if he only sold half online versus through the book chains (the distribution channels that the publisher owns), he'd still make $342,600. Or if he sold just a quarter, that would be $171,300. I don't think it is hard for him to sell 12,500 books directly. He doesn't need a publisher to be better off.

Time will tell whether other leading authors adopt a similar model. For an author, nothing is better than being able to get closer to your reader. The question is whether this model will work and whether other authors have the personal brand, the distribution platform and most importantly the courage to try something like this. I'd argue that if book publishers followed the model I outlined in this deck, they'd be less worried about what's happening around them.

Advertising on the iPad. What to expect

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ipad_usatoday.jpgA few weeks ago I was invited to speak on a panel at The Big Money Untethered Conference along with Steve Hayden (Vice-Chairman at Ogilvy), Chris Wilkes (VP Digital at Hearst) and Randy Rothenberg (IAB President). We were tasked with discussed the role of advertising on mobile devices and most specifically the iPad. I've been thinking about that panel and those questions ever since.

Rather than projecting into the future based on simply early raw impressions, I'm using data points of current iPad advertising and usage numbers to ground some of the thinking that I'm sharing here. Please let me know your own thoughts:

Engagement like TV, Measurability of the Web. Conde Nast says the average reader spends 60 minutes with each monthly issue of its magazine's iPad apps (90,000 downloads for the Wired app beating newsstand sales for that month). In comparison, the average visitor on the Web spends just 2.1 minutes per month at and 3.8 minutes per month at, according to comScore. 

What does this tell me? That the iPad has the potential to garner the same kind of continuous engagement that you can get from TV but with the interactivity and measurability of the Internet. That's an extremely promising sign if usage minutes like this hold.

Immersive iPad ads leave old school banner ads in the dust. The New York Times application served as a great advertising medium for Chase who used it to showcase its credit card to early buyers of the device. The card is aimed at the top 15% earners and people who had bought the iPad (for $499, at least) presumably have extra cash and fit into that category. That's definitely a reasonable assumption to make. Consumers clicked on about 15% of the time that the ad popped up.

15% can you believe that? If you're familiar with banner advertising, you'll know that 15% is a huge click thru rate. At first, I thought that was a typo in fact. I don't believe that click thru rates will continue to be this high but it does bode well for advertising on the medium. It is also a sign that if the ads are targeted sharply and are immersive compelling experiences, they'll attract users for deeper engagement.

iPad Brand Advertising at Premium Prices.  The USA Today said that it is charging Marriott about $50 for every thousand times, or impressions the ad appears. The CPM for the USA Today's regular website is less than $10. And in contrast, in a printed world where there is the least inventory, the average CPM for a full-page color ad runs around $103.

What does this tell us? That iPad experiences are deep, immersive experiences for which advertisers are willing to pay a premium. Now it is hard to say whether the Marriott is getting bang for its buck and arguably it is advertising at the moment to reach those early adopters, but if their advertising experiences are translating into bookings more than web ads (which they might well be), this could be a sign of more to come.

Fewer advertisers serve the publishers better. The Wall Street Journal chose to partner with just six advertisers at the time of the launch of their iPad application. They were able to find the six advertisers in a week and each one was charged $400,000 for two print ads and one digital ad in addition to the iPad placement translating into revenue of $2.4 million for them. The pitch was that this would be a deep brand advertising experience and not one about impressions.

It is early days for the iPad and it is difficult to tell the kind of engagement different applications will get. The media publishers are also in the process of building their own brand on the platform. As a result, publishers are smart to limit inventory and not over sell the opportunities to advertisers. It'll serve them better in the long run. 

Custom content leads to custom advertiser interest. As shown with the recently launched Sports Illustrated iPad application, custom and more in-depth content leads to the perception that the iPad application is a differentiated product warranting the higher price point. The Sports Illustrated app costs $4.99 and includes an original documentary, multiple photo galleries, athlete interviews and uniquely interactive panoramic photos.

The moral of the story? If you want your iPad app to sell well at a higher price point, you've got to make sure that you're giving the users something special. Otherwise, they might as well just buy the cheaper Zinio version of the magazine. Something else that's important - as the Editor of Sports Illustrated recently pointed out - advertisers love the iPad apps with custom content. He explained that he was on a sales call recently in Chicago showcasing the iPad app. It turned out to be his best sales call ever. Toyota and Gatorade are already advertisers.

Subscription or Advertising. The answer is not clear. The success of the iPad as a publishing platform for newspapers and magazines alike is ironically making it harder for publications to choose the right revenue model. The Wall Street Journal is probably the furthest along where they have free online sections of the newspaper available on a free iPad app as well. Once you sign up for the paid subscription, you get the other sections of the newspaper too.

The USA Today had originally decided to start charging for its iPad application after the first 90 days. However, advertiser reception was so strong that they have just decided against doing so. Instead, they are going to continue giving the application away for free and are bringing on new advertisers like Barnes and Noble, Chrysler and Capital One. CPMs continue to be in the $50 range and the app has been downloaded over 500,000 times. Conde Nast with Wired Magazine has just changed their subscription fees - now its $4.99 for first time downloaders and $3.99 for issues after that.

My hunch - advertising will trump subscription formats with the iPad in the long run.  As the iPad and other similar devices get critical mass, holding onto expensive subscription plans will be a challenge. However, in the longer term when inventory increases dramatically and there's less scarcity, the downward pressure on CPMs will force the publishers to rethink subscription fees. It'll be the same story as with the web all over again.

Twitter launches Ads, New Business Model

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twitter_revenue1.gifSomething we've all been eagerly (maybe too eagerly) waiting for has finally happened. Twitter has finally launched Promoted Tweets which is a Google AdWords like program to further monetize its business. On first blush, I like the promoted tweets program unlike the third party sponsored tweets programs that I've blogged about in the past. But first let me explain how it works.

Companies can buy search result terms so that their chosen tweets appear at the top of the page when a user searches for that keyword. So for example, if I were to buy the keyword "television" every time a user searched for television, he'd see my ad. My ad wouldn't be like a Google Adwords customized advertisement though. It would be a previous tweet of mine that I would have selected to appear as the ad for that search term. The promoted tweet would be clearly labeled as a promoted one and wouldn't get lost in the stream as time passes. It'll stay at the top of the page. 

Some other factors to keep in mind about promoted tweets:
  • Only one promoted tweet will be displayed per search results page
  • These tweets will have the regular features (reply, re-tweeting & favoriting)
  • Promoted tweets that aren't resonating with users will disappear
  • Resonance will be measured by actions taken by users (re-tweeting etc)
  • The promoted tweets will only appear in search results for now
  • In the longer term they may appear in the stream and in third party apps
  • Starting out advertisers will bid on keywords on a CPM basis
  • Over time, bidding may also account for the resonance in the pricing too

5 Reasons Why I Like Promoted Tweets
1. Twitter is using organic tweets as the ads. That's a novel concept and very much aligned with the ethos of twitter. I like that. The ads will be more accepted by the community too as a result.

2. Twitter is launching this only with the search results pages. That's good. Twitter wants to see whether the community accepts the ad model before expanding it. That's a sensible way to launch the program.

3. Twitter recognizes that ads are an irritant and are restricting the number of promoted tweets to one per keyword term. That's good too though it'll block out small advertisers for whom the keywords will get expensive really quickly. 

4. Twitter is trying to use the promoted tweets to drive further engagement on its own platform in a similar fashion to how the engagement ads help Facebook increase traffic to the Facebook pages. Smart strategy and it makes total sense.

5. Twitter is introducing this as a limited beta for a few select advertisers (our client Best Buy is one of them). Rather than role it out en masse the way Google Buzz launched, Twitter is being more careful. Sensible again.

So it looks like Twitter is going to have three sources of revenue after all - the promoted tweets program, professional accounts for business users and a data fee from search engines indexing tweets. Twitter certainly seems to be make the right choices and certainly in the case of Promoted Tweets I strongly suspect advertisers will embrace the program in droves.

Note: Best Buy, a Razorfish client, is one of the launch partners and we were peripherally involved in the testing of the new advertising platform. Image above is courtesy

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Buddy Media and Facebook Social Platforms

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So Buddy Media has recently launched a social platform for brands allowing them to manage relationships, content, applications and tracking across key social platforms like Facebook and Twitter. Their new offering makes a lot of sense as brands (and their agencies) struggle with managing their "owned media" presence on the social platforms. It takes more hours, more dollars and more effort than we'd like. 

While some of these platforms may appear expensive at first (hosted model with monthly licensing fees), they can save significant time and money over the long run. Here's a Media Post story describing the Buddy Media platform and quoting me sharing my impressions We are one of the launch partners. What excites me the most about the platforms is that it really allows brands to very quickly change their FB presence based on how customers are interacting with them. It shortens that time span significantly and can turn a Facebook Fan Page into an engagement and customer response play too.

Some of the other vendors in this space doing good work are AppSavvy, ContextOptional and Involver. They're all discussed in my book too!

MySpace tries to recover its cool - WSJ

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wsj-main_Full.jpgI was quoted in the Wall Street Journal last week discussing MySpace's efforts to win back its audiences, spur engagement and attract new advertisers. They definitely do have an uphill task though I'd warn you not to write them off too quickly. The traffic drops that they're seeing aren't that dramatic and they need more time to show that their more entertainment centric strategy is going to work. Here's the quote:

MySpace lost its way over the years as it got caught up in a race with Facebook, launched disparate initiatives and let technology and new-product developments lag, ad executives say.

Those missteps cost MySpace much of its buzz on Madison Avenue, says Shiv Singh, vice president and global social-media head at Razorfish, the digital-ad agency owned by Publicis Groupe.

"Marketers want to align their brands with the newest and the greatest. Currently, that is Facebook and Twitter," Mr. Singh says.

"Hardly a day goes by without a client asking me, 'What should I do with Facebook?' I don't get anywhere near as many questions about MySpace," he adds.

They've certainly lost the attention of advertisers today but that doesn't mean they can't win it back especially if they focus more, launch innovative ad products and rebuild the somewhat tarnished brand.

Does SIM mean big ideas matter less?

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ideascartoon1.jpgThere's a lot of talk in the advertising industry of how big idea advertising is losing its importance. Rather everyday ideas, small and nimble ones that can activate consumers and influencers alike across the Internet seem to be getting as important. On our own internal social media email list, we've been having a raging debate on this too.

We're certainly moving to a world where it is important to listen, inform, activate, entertain and respond to consumers in a more continuos fashion.  This requires the clustering of marketing activities in new ways, having a continuos low-burn marketing effort in place 365 days of the year. It also means deploying new strategies and campaigns in real time based on the engagement with the previous ones or any particular event. It is constantly in motion as advertisers chase consumers across the different digital platforms and channels and try to keep pace with their changing needs, preferences and locations of engagement. It is about speed and relevance. 

I think it is fair to say that the notion of 365 day marketing or continuos marketing in a SIM world is a necessity. More and more brands think in these terms for digital marketing and practically every marketer will need to have a baseline 365 component to all their marketing plans.

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