Talk Funnel

Ramin Firoozye's (occasional) Public Whisperings

On Social Ads

Posted by: Ramin on November 6, 2007

One thing that has been bothering me about social networks in their current incarnation is that their purpose often seems to be less about connecting people and more about increasing pageviews and selling more advertising (a footnote to the $15B valuation of Faceboook was Microsoft’s advertising distribution deal.)

This means that there’s very little difference between the business model of a social network and traditional media, like television or print media: attract viewers and sell them advertising. At that point, social interaction is just another means of site ‘stickiness’ — to bring users back and shove more advertising in front of them.

Seth Godin points this out as well, by reaching back into the pre-dotcom era and reminding us of Microsoft’s last big purchase of an ad-supported venture: Hotmail.

To understand this better, we have to look at the nature of advertising when it comes to social sites. There are (at least) two broad types:

  • Let’s call one informational advertising, where someone already knows what they want and they’re looking for more data (on features, popularity, or pricing) to help make an educated choice. These can manifest themselves as in-site home pages, product reviews, and recommendations.
  • The more common form is demand-creation advertising which is much more akin to what you’d see in traditional web-sites. These manifest themselves as side-bars, banners, pop-ups, or text-ads intermingled with content that most of us tend to ignore. Here the presumption is that the user doesn’t know what they want, but the ad placed before them might trigger a synapse or two that eventually leads to an I want it impulse. The goal here is to get as many impressions as possible in front of people, to improve the statistical probability that a certain percentage will click through and a (presumably) smaller percentage will actually follow-up and buy something.

Think of it as laser-beams vs. searchlights.

The problem with the demand-creation form is that there is no real a priori way of determining who may want something until you’ve put an offering in front of them. A large amount of energy and technology has gone into trying to improve the efficiency of demand-creation advertising, but most of it is based on the premise that a certain type of user is more likely than another to go from impulse to impetus.

The trouble with social networking sites is that they’re perfect for the first kind of advertising — where users help other users decide what to do, where opinions count for something, and metrics like trust or authority matter. But that’s not where the larger social networks are heading. When a site starts getting into the tens of millions of registered users and hundreds of millions or billions of pageviews per day, they become a cost-effective vehicle for the second type of advertising. Like a television broadcast, the number of viewers becomes the prime metric.

Some might say that sites like Facebook or MySpace cater to both types — but there’s a fundamental disconnect between the two approaches: Informational advertising is driven by what the user needs whereas demand-creation advertising is driven by what the advertiser wants.

This impulse that what a user says is not to be trusted is deeply ingrained into modern marketing. Clotaire Rapaille in The Culture Code makes it his very first Principle:

Principle 1: You can’t believe what people say.

Former Facebook engineer Karel Baloun in Inside Facebook points out that the same principle applies to determining the ‘arcs’ that connect Facebook members. The system (at least in its early incarnation) made the decision as to who constituted an active ‘friend’ instead of trusting users to self-report.

The irony is that demand-creation advertising presumes that the user’s own proclivities are immaterial, that if left to their own devices they wouldn’t necessarily seek out and purchase the advertiser’s goods — hence the need for demand-creation.

This brings up the larger question of what the user’s profile and social graph are good for when it comes to these two approaches. In the informational scenario, it can be used to help narrow down the search effort and cut through unwanted information. In the demand-creation scenario, however, I would argue that a user’s preference is of very little use. I’d even argue that it’s counter-productive — by prematurely filtering out eyeballs that are just as likely to be affected by the impulse as any other person. (If there’s any filtering that should be done in this case, it should be for people who demonstrate a proclivity for clicking on an ad from the moment they see it — in other words, to try to locate the more impulsive buyers. An ad network that measures the number of milliseconds from an ad view to a click to a buy and can identify the user will probably have much better luck with that user the next time around.) None of this has anything to do with a user’s profile or social graph.

You can argue that a car manufacturer may want to focus its advertising on a certain demographic to improve its odds of success, but the entire premise of demand creation is to put an offering in front of as many eyeballs as possible, to count on that moment of serendipity where the message connects with the viewer and gets them to the I want it moment. That’s why advertisers who can afford demand-creation continue to pour marketing dollars into broad-based activities like football games, general-interest magazines, and television programs — where the demographics are so diverse there’s really no point in trying to narrow-cast anything. It’s all about volume.

Facebook and MySpace have announced their plans for SocialAds technology, where advertising can be targeted at specific users based on their profiles. But what they’re doing is mixing demand-creation with informational. In the Facebook Ads announcement today:

Zuckerberg said the company’s advertising startegy is “based on getting into the conversations that are already happening between people … Nothing interests a person more than recommendation from a trusted friend.”

But take a look at the list of participating companies in the Facebook Ads launch and you’ll find companies who spend the majority of their marketing dollars on widely appealing demand-creation campaigns:

Partners joining the stage at a launch event in New York for Facebook Ads included senior executives from Blockbuster, CBS, Chase, The Coca-Cola Company, Sony Pictures and Verizon. Other brands and companies launching with Facebook Ads include CondéNet (Epicurious.com and flip.com), Crest Whitestrips, Dove Cream Oils®, Herbal Essences, The New York Times Co., and Saturn.

If an advertiser’s goal is demand-creation they’d be better off ignoring the targeting and go for wide-beam coverage. On the other hand, information-based advertisers would be better off creating well-designed, information-rich, searchable sites that cater to a user’s needs instead of wasting funds on side-bars or text ads. As an end-user, I clearly don’t want ads I haven’t explicitly asked for — but let’s not forget, the premise of demand-creation advertising is that I don’t know what I want so what I do want is irrelevant.

Social Advertising — demand-creation advertising narrowly-focused based on a user’s preferences — is inherently contradictory. It’s a searchlight masquerading as a laser-beam and it doesn’t do anything to benefit the end-user.