So, you are tired of reading about Facebook this past week. From the controversy with GM pulling its $10M Facebook ad program early in the week to the Facebook IPO on Friday. And then the surprise wedding of Zuckerberg to his long time girlfriend on Saturday. And in all this coverage, no one put the real Facebook issue on the table.
Everyone is asking if Facebook ads provide a winning ROI and frankly that is the wrong question. Facebook should not be your social media program. It should be part of your social media program, but social media is bigger. And for that matter, social media is only a part of marketing (and other important business functions as well like customer support). To look at every single slice of a marketing program and see if there is an ROI does not make sense, at all. I’ll explain shortly.
Before I explain the ROI issue, let me first rewind the tape from this past week. I was asked to provide comments and answer some questions for a number of publications. As is always the case, my comments were taken out of context. I was asked about GM publicizing that they were pulling their Facebook ads and my thoughts on that. Here was my complete response …
“WSJ reports that General Motors plans to stop advertising on Facebook as GM marketing chief Joel Ewanick said the auto maker ‘is definitely reassessing our advertising on Facebook, although the content is effective and important.’
The news could not come at a worse time for Facebook, but states some strong commentary on both Facebook and GM.
First GM … this is the same company that went before Congress looking for hand-outs to save their fledging company. Was Ford in front of Congress? No. Is it a coincidence that Ford has an extremely productive social media program that is fully integrated into other marketing programs? No. What Ford does, that is absent from GMs social media effort, is that they have a strategy, plan, execution, and metrics that integrate ALL owned, earned, and PAID media endeavors. They do not have an isolated Facebook paid media program. Furthermore, I question if Ewanick understands that, on average, only 16% of brand postings on Facebook reach their ‘like’s’ newsfeed as revealed at the fMC on 2/29/11. He should look at Facebook’s reach generator (paid offering from Facebook) with regards to “content (being) effective and important.” The fact is that GM does not know how to integrate social media into a winning business strategy. The issue is not Facebook ads.
As for Facebook … this news is very detrimental for Facebook right before their IPO. It paints a picture that a struggling company cannot rely on Facebook to help turn them around, but the same could be said about any pure-play marketing advertisement program. The reality is that Facebook advertisement, by itself, is not a great use of precious marketing dollars. Facebook has done a poor job positioning and describing how their platform drives quantifiable business results. Facebook is not the equivalent of having a social media strategy and it is time for Facebook to communicate how they are PART of a winning solution and stop making ill-advised marketers believe they are THE social media solution.”
I was also asked what I thought Facebook going public would mean to the company and marketers using Facebook as one of their marketing channels. I provided some bullet comments as I will have an article in eContentMag.com (http://www.econtentmag.com/default.aspx) this coming week covering this topic. Here are the snippets I provided:
* As Forrester’s Josh Bernoff SVP, Idea Development tweeted this past week, “Buying Facebook shares? The original investors took their risks & will now get their rewards. Now the risk is passed on to you.” But investors are not the only ones taking on risk; marketers now have added risk with Facebook if they put all their social eggs solely in the Facebook basket.
* The fact that Facebook is now a public company means Zuckerberg and team need to answer to quarterly results.
* While Mark may continue to talk about the importance of sharing what’s going on with your connections, there will be deeper focus on revenue generation. The real question is whether Facebook can carry off both sides successfully.
* As Facebook feels increased revenue pressure, I see a potential user conflict.
* As Facebook introduces more ad and revenue tactics (such as the recently announced reach generator) it will be interesting to see how users react. It will be a delicate balance for Facebook to keep usage high while introducing greater revenue generation.
* Keeping Wall Street, brand advertisers, and users all happy and content at the same time will be one massive effort.
Here are the various places that published edited versions of my perspective and POV (point of view):
* USA Today – GM to stop buying ads on Facebook
* Media Post – Facebook Ads Need Traditional Measurement Tools To Determine ROI
* Media Bistro – GM’s Decision Not to Advertise On Facebook Not Such a Big Deal After All
* Business Insider – What Everyone On Madison Avenue Is Saying About Facebook
* New York Post – Social downshift: GM slashes $10M in Facebook ads
The real issues facing marketers is not Facebook ROI. Let’s start by looking at consumer buying behavior. Today, there are many components and influences that in totality lead to a purchase. For a moment, let’s just concentrate on digital use. We need to understand the plight of the consumer. They may hear about a product from a friend on a social community or in an email. They may look for the product or product category on Google or other search platforms. Seeing an ad on Facebook or other websites may work to remind them of their consideration. They may look for reviews online. A promotional ad may trigger an action. All of these things contribute to the purchase path and are important elements. Are we simply going to give “the last click” the credit for the conversion? Can we measure other contributing factors?
You see this gets complicated in the digital world we live in. I did not even mention offline marketing activities. They contribute to the purchase decision as well and make this ROI discussion even more difficult.
Thus, it is not an issue whether Facebook ads have an ROI for marketers, but rather there is a need for marketers to use digital display ads (Facebook and others) INTEGRATED in digital strategy. A digital strategy that includes owned, earned, and paid media. If you look at consumer digital behavior, they do not just go one place and make a purchase decision. They are using different tools (search, ads, social, reviews, etc) to make purchase decisions.
“Marketing ROI” is what should be measured. We should not try to place an ROI on each element of marketing. Yes, we should measure variables that show success or lack there of, but ROI is not a realistic measurement of Facebook ads. There are KPIs (key performance indicators) that should be measured such as click-throughs and impressions. Once again, these are attributes that “build up” to a sales conversion, but they should not be specific to the ROI equation.
It is time for marketers to have a much greater degree of knowledge and understanding of customer behavior and how they are using digital in their purchase decisions. Marketers must develop a marketing strategy and plan that INTEGRATES the digital channels their target market uses. Marketers must determine how they will measure each of the piece of their strategy, but ROI should be left as a metric for evaluation of the entire marketing program.
Make It Happen!
Social Steve
SocialSteve's Blog 
“Keeping Wall Street, brand advertisers, and users all happy and content at the same time will be one massive effort.” No doubt about that! Zuck may think he’ll call all the shots at facebook, but he’s wrong. Corporations risk shareholder lawsuits if they don’t do everything possible to maximize profits. Making the statement “It’s free and always will be” doesn’t sound very profit-maximizing to me. Investors will be watching facebook very carefully, something management is not accustomed to. As far as the wedding is concerned, they seem like a nice couple who decided to make things official, but in a casual way with a small group of friends and family. I have to wonder what type of prenup agreement is in place; if someone was privy to that, I bet it would become news very quickly!
I do not expect to see Facebook charge for use. That would be very surprising. Their revenue will need to come from brands.
Best,
Steve
Two thoughts this morning. 1.) It will be a different game for FB now that they have gone public. I will be watching Sandberg to see if she can rise to the challenge. 2.) Intergrated marketing (digital) strategy key, but is going to get more difficult moving forward thanks to Big Data. Marketers are slicing and dicing demographics more than ever and preaching “one size does not fit all.” Over the weekend thanks to a new BCG study I learned that there are now six different types of Millennials. Now that calls for an integrated marketing strategy even though their one common thread is being tech savvy.
I agree – I will be looking for Sandberg to show greater leadership than Zuck now that the company is public. I wonder if Zuck will become Chief Strategy Officer and we will see a new CEO within a year? (Something Gates did late in his career.)
Best,
Steve
As a survivor of the go-go web era, I learned how easy it is to get lost in hype and silver bullet “the tool is the answer” thinking. Its all about using the right tools, and having the proper communications and positioning ducks in order too to drive a successful and measurable program across channels that delivers results, which can be framed in terms of ROI and other definitions of success. That said, Facebook’s challenge will be to find ways to extract value out of the amazing info on users that they have collected, in a way customers will appreciate and respond to. This has not really happened yet, although they certainly have tried!, and must if it is to truly live up to its $100+ billion current valuation. Privacy is a huge impediment and must be addressed in a customer-centric manner. If this is accomplished, watch out. If not, someone or something else will do it… that also has scale, say credit card issuers for one. If you have interest, I did a blog piece on technology, relevance and privacy at http://wp.me/p4aay-2e. Facebook in particular, if they were to apply a direct marketing (old school???) overlay on the data, could cut the heart out of say Groupon and others of similar ilk, and could even give Google’s core business a run for its money.
I think more of the issue is how Facebook allows marketers access to information on users such that companies say, “that is a platform that I can drive measurable results.” I am not against Facebook, I think it is a powerful platform, BUT I think Facebook needs to be more sensitive to delivering greater value to brands IF they want to drive revenue. I also think Facebook can do so without disenchanting users. Consumers will give brands information IF the brands can make it worthwhile, personable, and relevant for users.
“The average shopper now consults 10.4 sources prior to purchase, twice as many as a year ago” (Source: Google / Shopper Sciences, Zero Moment of Truth Macro Study, U.S. April 2011)
Excellent Sean – thanks. Just goes to show how many touch points there are before a purchase. Beware of where you attribute a sale.
Is this supposed to be new? Of course Facebook isn’t a strategy, neither was MySpace or AOL. It’s a channel, nothing more.
Hello Michael,
Wake up. Do you see the frenzy Facebook is creating? Everyone first move on social media is “we need a Facebook page. We need a Twitter account.” ONE platform is NEVER a strategy, but Facebook DOES play an important roll within the strategy … much greater than MySpace or AOL will ever be. Suggest you read some of my other posts on INTEGRATION before you question.
Yes, I see definite shortcomings in Facebook, but you cannot discredit them completely.
Steve
Just found this blog and you raise some interesting points. It’s hard to rely s on Facebook when only roughly 16% of your fans see your posts.
Glad you found the blog and stopped in to join the conversation.
Sounds like the issue lies in the fact that people are looking at ‘the last click’ (as you call it) instead of the value added (measured by increased revenue). But who says that’s the case? Maybe they measured ROI by a change in revenue (at least revenue in the department that they are advertising). If the cost of maintaining a FB ad campaign is more than the increase of revenue after implementing it, I don’t see how it’s worthwhile to keep on that track. Sure the ads add to the overall path of the buyer, but they don’t add enough to cover the costs.
Hi, I disagree with you. Each marketing channel should have their own ROI to measure the effectiveness. If we don’t measure each of them, we won’t know which is the best marketing channel. I agree with you, consumers, will search, click, browse before comes to make final decision. But in the process of search, click and browse, do they really click on Facebook ads, if not why waste money on Facebook, rather we can allocate the same fund to more effective marketing channel.
According to eMarkert, up to 88% worldwide facebook users never click on Facebook ads. Do we still need to waste our time and money to advertise on Facebook, the answer is definitely no.
I agree that each marketing channel should be measured. There is a difference between measuring and ROI. Each marketing channel will NOT have a sales component. ROI has a sales component. As I have stated in many posts, social media should be measured for awareness, consideration, loyalty, and advocacy. I have defined how to measure these categories. But social media should NOT measure sales.
To your point about Facebook ads, click through is NOT the only measurement of display ads. But I do agree that Facebook ads have poor effectiveness. I detail why in the post https://socialsteve.wordpress.com/2012/06/11/social-media-evolution/ – see item #3.
Best,
Steve
If you read the book “Social Media ROI”, there is a way to measure the Facebook ROI from sales. I don’t against awareness, relationship building, but we need to measure both sales ROI and awareness together in order to get the effectiveness.
There might be a way to measure – but social media is poor for sales. Social media is used best for awareness, consideration, loyalty, Nd advocacy. If you aim social media at sales expect poor results.
Hi Steve, if social media is poor for sales or not, it depends on how we use it. There is no one size fits all. If the world tells that social media is used for awareness, consideration, loyalty, etc. doesn’t mean that it can’t work for sales. It depends on industry, countries, culture, companies, products/services. We need to be open our mind and be flexible in marketing, everything is possible.
Look – you can use social media for sales, but I will tell you people do NOT like to be sold to from a social perspective. I get strong results for my clients by avoiding social sales and I have empirical data to show these results.
As I said, it depends on situation. There is no one size fits all. It depends countries, products/services, companies. If you get strong results for my clients by avoiding social sales, and I can my strong results by using social media to do sales.
As I said, there is nothing wrong with your way and my way, it depends on situation. In Malaysia, people will like to go directly. Customers do looking for products/services on Twitter, Facebook and Linkedin, they will ask directly where I can get this and that.
As a marketer, we need to be open minded.
Kent – marketers – open minded yes. Driven by empirical data, a must.
Yes, agree but you only accept what you believe (your empirical data), I have another set of convincing empirical data as well to prove that social media can do sales. 🙂 Will you accept it? Or your open minded just accept one set of empirical data? That is not considered open minded.