New Development at Facebook and the World of online advertising

Posted by Rahul Sethi on 9:00 PM



In the past few weeks there has been a lot of discussion on Facebook, its valuation ($15 billion), why Microsoft has probably paid such a huge sum to acquire a minority stake, et al.

Here are a few developments at Facebook  that would excite investors and social media enthusiasts alike.  Facebook tries to be worth its while.

            

Engaging Communities in Advertising

-  ciSocial targeting. In simple words, that means placing ads within social contexts. It’s important to note that products and services are consumed primarily within a social context. Authorities in the world of marketing are excited about social targeting because one of the main concerns for any firm is when, how and to whom they should market their products – and evidence from a recent study by Shawndra Hill, a Wharton Business School Professor suggests that social networks may be one way to answer the question of relevance. She says "We provide strong evidence that whether and how well a consumer is linked to existing customers is a powerful characteristic on which to base direct marketing decisions. Our results indicate that a firm can benefit from the use of social networks to predict the likelihood of purchasing.". The study concludes that consumers linked to a prior customer -- adopt a service at a rate three to five times greater than baseline groups.

             

In addition, social networks can also be used to highlight key target audiences based on non traditional, almost psychographic kind of segmentations on the basis of interests, activities, and opinions – this is generally the shortfall of conventional segmentation and targeting. So there definitely is a lot of buzz happening on the ‘social media marketing’ scene (which WATConsult, the brand i work for specializes in).

    

Contextual Advertising on Social Networks

-       It allows advertisers to choose the key words for which it seeks to generate clicks and simultaneously gives the advertiser an idea of how many people fit the description of being likely to click on that key word. (a handy research tool for marketers and an exciting tool for advertisers to view since they anyway get the option of targeting specific audiences and now they can also know what they are looking at in terms of sheer numbers). I do confess however that the numbers can be slightly overestimated since not everyone will probably click on the links. To counter that Facebook has used a Google style fee collection method of Cost per Click (CPC) and also Cost per Thousand or Mille (CPM). 

 

How exactly does it work?

 

-       To give you an idea, for advertising WATBlog on Facebook with keywords such as web, advertising, technology, blogging, India; FaceBook estimated that there are about 1,300 people who are likely to click on our link. In a sense this kind of estimate is good if delivered because in the future it will lead to added credibility in terms of accuracy for the Facebook advertising brand. Observing this also gives a sense of where advertising as a whole, and particularly web advertising is heading (if not already there) – advertising HAS to be contextual and this is the first big social network player after Google who has demonstrated that (although I am sure they learnt a lot from Google’s text book).

 

 

Niche or Mass?

 

-     I I have to confess however, that in terms of sheer numbers, 1,300 people for all the key words we highlighted is very small – miniscule in fact. So maybe advertising on FaceBook is great for niche companies (like ours) but probably for mass companies, the numbers may not deliver , at least not in India. Also one notices that in a bid to deliver more numbers, companies may start adding more keywords to their preferences (eg. WATBlog may start to add ‘engineering’, ‘computer’ etc – basically keywords that are not clearly related to WATBlog) and this may lead to loss of contextuality (which is the core USP in the first place)

 

 

Where the power lies? (Or does it?)

 

-       Another leaf that FaceBook has taken out of Google’s learning is that makers of ads are allowed to customize their own ads. Everything from the headline to the description. Seeing this, one is overawed with respect to the barriers to entry (or lack of them) for advertising now! Anyone can be an advertiser and the emphasis is on creating a buzz – notice now that this kind of advertising is not doing much branding. The onus of branding lies with the page that the user is clicking on. So again, to reiterate, on the internet, your web page is probably your strongest branding tool (unlike in terms of mass marketing consumption products and related categories)

 

 

The Replacement for Client – Agency Meetings!

 

-       One can also see that FaceBook produces real time analysis for its advertisers (very similar to Google Analytics, thus they are constantly getting feedback on their advertising. So you don’t need any client agency meetings – saves time and also this is hard core quantifiable data. Again the onus is on the advertiser as to what he makes of the insights provided to him. This is an amazing feature of the internet in general – the onus and the power lies with the consumer  (in this case FaceBook’s consumer is the advertiser) and thus the advertiser creates, dictates, and executes content. The fact that content is in the hands of the consumer is easily the biggest plus of Social 2.0 (among other things) and its great to see FaceBook bringing in its core strengths and features into monetization exercises as well – a learning for e – businesses, especially content driven e – businesses.


 

 

What is likely to be seen in this space with respect to Facebook in India?

 

-       I see smaller advertisers generating a lot of traffic from Facebook especially in India and this is again due to contextuality and low barriers to entry – you need about $5 or Rs. 200 a day minimum to advertise on FaceBook (mass media in India is more than expensive. About Rs. 3.5 lakh for a 10 second TV slot on Prime time television,  a full page ad in a Newspaper is a little more expensive – I don’t know the figures so I wont speculate!) Again notice that Facebook looks to grow its ad revenues the same way that Google did! – by involving small players to pay small sums by offering them superior services. That is one place where conventional advertising agencies have failed – they have  failed to tap in on clients that may have small budgets for advertising but in terms of volumes, they are a large chunk of any economic market. Thus (side tracking a bit) – conventional advertising service agencies in the future are going to have to figure out ways to service small clients in volumes (possibly using the web and their strong brand equities). This is crucial in an economy like India which is growing and slated to have a per capita income of Rs. 20 lakh by 2020 (this economy is also probably high on the table in terms of entrepreneurship – so how to service all those mushrooming small companies with a budget for marketing themselves). I see an opportunity for conventional advertising because companies like Google and Facebook are still focusing on generating that ‘Buzz’ while ignoring the branding that backs the buzz – that’s where conventional agencies can capitalize on their expertise. Scale still would remain an issue they would need to sort out.



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