FreshNetworks Blog

Advertising Age has today reported on an interview with Mike Murphy, VP-media sales at Facebook. Mike is talking about their newest mechanism for brands to connect to Facebook users.

An aside:
Some people have a go at Facebook for trying so many different ad models. I certainly don’t hold this against them. Right now, they:

1. have advertisers reporting poor returns when using current Facebook ad services
2. are burning cash at a rate of around $150M this year to keep the party going
3. are in a social networking marketplace which is changing very quickly, for which no one has yet figured out the best way to sell users or their eyeballs to advertisers

As a result they need to innovate FAST. Throwing mud at the wall is not the most elegant solution (and as seen with Beacon, it can be dangerous) but it’s a perfectly credible strategy in Web2.0 world where users and advertisers are prepared to try out new things.

Now back to Mike Murphy. So apparently he’s said Facebook is attempting to solve the demand-creation side (i.e. “this is HOT, get one”) of the online advertising equation as opposed to the demand-fulfilment side (i.e. search ads and text links). So that means Facebook hopes to be great at getting you to want a Nike track top because your friend just bought one, commented on one or became a “friend of Nike”. I can totally see how Facebook is well suited to this and why it can work. It’s ironic that a company leading an online revolution is reverting to old-style PUSH advertising: “getting people to buy things they don’t need with money they don’t have” but he makes a good point, saying: “the web as a whole hasn’t done a good job creating value on the demand-generation side,”

Facebook has no choice but to veer in this direction because it is a pure social network. Users visit to chat with friends and extend their off-line social lives. Users do not spend time on Facebook when they are tying to decide what car to buy or which hotel to stay at. And that’s exactly why Facebook adverts tend to get poor response and clickthroughs.

It’s a great shame for Facebook and marketeers alike that the site is not a good platform for supporting demand-fulfilment. But that’s because people are simply in a different mindset when looking for something they know they want vs chatting to friends about who they hooked up with last night. Jeremiah Owyang makes this point here using some research from Forester.

This debate goes to the heart of why we, at FreshNetworks, often advocate branded online communities over Facebook advertising campaigns. An online community is not the same as a social network and people do visit online communities when in the demand-fulfilment mind-set. For example they visit Amazon to read book reviews, Tripadvisor to read hotel reviews and thousands of other communities where comments have been posted on every product from nail clippers to luxury yachts.

Demand-creation is very important for growing any business. I do hope that Facebook’s new propositions successfully help marketeers achieve it. I am sure they will. However FriendFeed and Open Social will in time provide a replication of the benefits of this new Facebook model across a broader audience. As a result, it is far better for brands to focus on an online community that can provide the basis for both demand-fulfilment and demand-creation activities. For me that’s why a branded online community beats a Facebook advertising campaign in the majority of cases.

Some more reading

• Facebook Proposes ‘Engagement Ads,’ Educates Marketers
• What Facebook’s New ‘Engagement Advertising’ Means to Brands
• Do Privacy and Advertising Mesh?
• FriendFeed Adds Widgets; Its Path to Mainstream?

This morning we spent some time with Robert East, Professor of Consumer Behaviour at Kingston University. His research focuses on word of mouth and brand loyalty and we spent the morning talking about how you can measure these things and in particular critiqued the Net Promoter Score as an approach to this.

One of the outcomes from the session was an initial set of five principals to bear in mind when trying to measure word of mouth. We’re going to be bouncing these around and building on them internally at FreshNetworks, but if you have any comments or can add to the debate let me know:

1. Don’t confuse word of mouth with satisfaction – only a small proportion of word of mouth is prompted by a satisfactory or dissatisfactory experience
2. Measuring word of mouth by the likelihood to talk (positively or negatively) about a brand misses the critical element – the impact the word of mouth has. A better measure is based around how people act when they receive word of mouth (positive or negative) – how this changes their propensity to purchase
3. Anybody can be an advocate and pass on positive word of mouth. It’s more important to activate the whole user base than to try to find a particularly segment of advocates
4. The world is just more positive than negative – that’s the way people think about things. So you should expect more positive word of mouth than negative
5. One size doesn’t fit all – people are just more likely to talk about some products than others. Recommendations are more important for a dentist than they are for a supermarket. So you can only compare brands at the category level; indeed a different measurement tool may be needed by category

America’s top B2B firms are embracing new media. An article from the World Advertising Research Centre (WARC) suggests that more than one in three US B2B firms is spending more that 20% of their total media budget on new and digital media. This contrasts with B2C advertisers who see an average of just 5% of their media spend on new and digital media.

That B2B firms are embracing digital media faster than consumer markets is not surprising – business customers are more likely to be purchasing online at the moment and so a digital media approach to advertising makes more sense than it might do in some B2C industries. What is interesting is to dig a little deeper into the study behind WARC’s report.

The data comes from a survey of 145 B2B firms in the US, conducted by Association of National Advertisers and BtoB Magazine. This sample size is quite small and so whilst the statistics reported are interesting, I’m more interested at digging into the qualitative comment.

The survey results enables a segmentation of new and digital media techniques into a top tier of things that are currently attracting the bulk of spend, a middle tier of things that are set to attract the bulk of spend in the future and a bottom tier of things that are growing (possibly growing quickest) but will never take the bulk of spending. What falls where in this analysis is interesting for us all.

• Top tier: includes own website, email marketing, online advertising, SEO and search engine marketing
• Middle tier: includes blogs, RSS feeds, podcasts and video-on-demand
• Bottom tier: includes wiki’s, mobile, viral video, social networking and second life

So, whilst the top tier is where spend is now, and the middle tier where spend is next, it will be spotting the future trends from the bottom tier where we’ll see the fastest growth in B2B spend in the longer term.