Taking the Social Revolution Back From the Marketers

Facebook recently bought Microsoft’s advertising platform, Atlas, as it seeks to offer greater functionality and insights to its advertisers.  This was a subject of great discussion in the Internet Oldtimers  group of which I’m a member.  Friend and fellow member Tom Cunniff made a provocative statement which encouraged me to respond. While the rules of the group are “what happens on the list stays on the list” — we are free to talk “out of school” — Tom was gracious enough to let me reprint our exchange here. (By the way, if you’re an advertiser or publisher looking for deep insights into the whole advertising space, on- and offline, Tom is your man.)

Tom:

According to CNET, “The deal could help Facebook develop its own one-stop shop for advertisers and agencies to buy, sell, optimize, and track ads across the Web. The idea is to help Facebook give marketers tools to target ads based on social habits that it captures, and to better understand how social activity influences consumer purchases. (…)

The expectation (is) that Facebook will create an ad network that lets it sell ads outside of (FB). Facebook is already plugged into tons of Web sites through Facebook Connect, and each time people share or “like” an item on a site, Facebook’s data trove gets a little bigger. Facebook can connect that data with the information from within Facebook — the social graph — to create a social ad network that is potentially more effective than Google’s AdSense.”

Personally I don’t believe social activity influences consumer purchases much at all. It has value, but no more or less than a billboard: it’s drive-by media.

Boy, that last line got my blood boiling.  So I responded:

Tom, you’re absolutely right and you’re completely wrong.  And we’re about to ignite a debate that should get us a keynote at ad-tech or even better.  :)

You’re right that  today’s social activity doesn’t influence much consumer behavior.  Even worse than the drive-by billboard — that has some value — it’s more like somebody giving you the hard commercial pitch during your cocktail party.  Not only do you not want to hear it, it probably produces some negative brand value.  Marketers may be able to gain some deep insights but, channeling my inner Nassim Taleb, I’m not sure that this increased data produces improved selling.  But that’s a discussion for another day.

But here’s where you’re wrong.  I have believed for a long time now, over five years, that the ultimate expression of the social revolution is that the consumer will gain increased power.   Today’s consumer is largely at the mercy of marketers.  The marketers have all the goods, all the insights, all the power.  And how are they using that?  Among other things, price discrimination.  There used to be things we all saw (largely) the same price on — things at the supermarket, things in the department store — and things that we all saw (largely) different prices on (cars, hotels, airlines).  There was some price discrimination — the same item might cost different at Neiman Marcus and Walmart — but many things were very similarly priced.  Now, with the “advances” of online, the things that were priced differently are being driven closer together while paradoxically the things that were priced similarly are now being priced differently.
As to the latter, we’ve seen the recent exposes that Amazon, Staples and many others charge different prices based on competitive calculations.  The price you see likely isn’t the price I’ll see.  But I don’t think that’s durable.  Look at what’s happening to those items that were priced differently. Take cars.  I can’t vouch for the accuracy of the data (or my memory) but in the pre-Internet days something like half of all cars were sold at sticker price.  You didn’t know what someone else paid for the same car and dealers were able to exploit that lack of information.  Now the price you pay for a car is much more close to that which another person pays and some manufacturers are even dabbling with no-haggle pricing, basically saying you’ve got enough market information that you’re going to be able to negotiate effectively and therefore we’ll just bake that realization into our whole approach to pricing.  Take hotels and airfares.  Some of the booking engines will automatically give you a lower price if someone else makes a reservation at that price.  There are whole web sites now devoted to this kind of thing.  Yapta’s one and while I can’t remember it, there’s one hotel site that has you send them your reservation and they’ll actually shop it around to get you a lower rate.
I think the real power of the social revolution is that it will actually give consumers a more equal footing.  We’ll have more information and while the marketers won’t get the value of their increased information, because they’re asymptoting to no more value, we’re still on the steep part of the curve.  In fact, I believe this is where the “Facebook killer” will come from.  Facebook had an opportunity to be the champion of the individual as contrasted with Google’s championing of the marketer.  But they made the easy monetization choice and cast their lot with the advertisers.  Someone’s going to step into that role.  It could be a visionary startup.  If I were Steve Ballmer at Microsoft, thinking I’ve missed the social revolution, I might make that play, hedging bets with their Facebook relationship/investment.  It could even be someone like IBM, effectively an arms dealer equipping both sides of the battle.  They’re actually the leading player in the whole Open Social movement these days, taking over when Google inevitably lost interest. (It didn’t rule the world in the first 72 hours.)
Tom:

In my opinion, we routinely make the mistake of confusing direct response (DR) with brand marketing and try to make them the same. But, they are fundamentally different.All the pricing stuff you referenced is absolutely right in commerce but doesn’t have much at all to do with brands. In a transaction, more information is almost always a good thing — “you can buy the same thing across the street for less” is literally worth something to know.In a brand relationship, more information is often neutral or even slightly negative (“yeah, I know you prefer jalapeno ketchup but I hate jalapeno so…”).There are many things in our life that are not a considered purchase, and that’s actually an *awesome* thing. I can walk around the supermarket tossing stuff in the basket without thinking about it. I can either zone out — “hmm, with a better drum track this Muzak version of Live and Let Die would be really good” — or I can invest my time in thinking about something else.

In social, there’s this weird illusion that because Jonathan “likes” jalapeno ketchup his friends will somehow “like” it too, because he’s an influencer. But the reality is that at best — at the very best — a friend who hasn’t had jalapeno ketchup in awhile might see that you “liked” the brand and think “what the hell, I’ll pick up a bottle”.

Again, I’m not saying this has zero value. It just doesn’t have much more value than a billboard. It’s drive-by media.

Me:
I’ll accept your premise that DR and brand marketing are different, or at least that’s an argument for another day.  I could be provocative and say we’re getting closer to that thing to which every brand marketer pays lip service to but secretly laughs at:  your brand is what your customer says it is.  I believe that to a point but for the sake of this argument, I want to go in another direction.
Where I want to go is declaring that social/big data/mobile is moving us towards a world where DR components are increasingly prominent.  In the good old days, I was a loyal United customer.  Now I’ve got price comparison ability, unbundled services and shared experiences and what before was a brand/loyalty purchase is  +today, for me, much more of a DR-like transaction.  The “loyalty” programs are being devalued and instead we have new loyalty providers.  I get my points less from an airline or a hotel but from a credit card or from Founders Card, effectively a collection of like-minded customers who have banded together to achieve collective economic power that may not have been available to us individually.  We’re growing more DR-like and the brands we’re loyal to are those who aggregate our clout across the brands to which we once might have been loyal.
Tom:

The idea of brand loyalty was largely cooked up by ad agencies and embraced by marketers who want to believe it.In reality, in nearly every product or service category there are two or three “acceptable” brands a consumer might buy. Most customers have a preference, but can easily be swayed by a coupon or other offer.

More than anything, your brand is the product. Apple isn’t cool because of its ads — its ads have been cool because the products have been cool. The iPhone and iPad launch ads were basically product demos. Here’s the product and a hand using it, on a white background. And some cool music.

The closer a brand’s products are to being a commodity, the harder it is for advertising to differentiate them and the lower brand loyalty is.

But I would argue that the real reasons deals are becoming more prevalent are because:
A) that’s what marketers were erroneously taught that this is what “digital best practices” are; and
B) most companies over the past three decades have become much better at taking costs out of products than at putting innovation into them.

Tom again:

More than anything, my argument rests on efficiency — both for the marketer and the consumer.Let’s start with marketers. There is no doubt that word of mouth is effective, and that social media mentions have value (even as drive-by media). The question for marketers: what is the most efficient way to generate this?

I would argue that the two most efficient tools to generate these are:
1) Superior products; and
2) Mass marketing

Consider Apple vs. Dell. Apple has invested zero in social media. ZERO. Dell has been a poster child as an early adopter of social media.

Apple has invested heavily in creating superior products and in mass marketing. Dell has invested heavily in social media.

Which brand has more positive word of mouth and social media mentions?

Now, let’s consider consumers. There is no doubt that there are more ways than ever to research products, and that advertising is generally viewed with skepticism and sometimes derision.

However…

Deeply researching only those products that are in your kitchen would take a large number of hours for scant return. It’s just not efficient. So, how do we choose? We know what the big brands are because they advertise — which also ensures they are the ones we can easily buy at our local store. All of these brands have some sort of reputation, good or bad.

Typically, a quotidian purchase gets very little consideration at all. And this is *good*. The downside risk of choosing the wrong brand is scant, and the upside reward of choosing a better brand at the supermarket is marginal at best.

This flips *entirely* for high-consideration purchases. Trust me when I tell you my wife and I researched our new kitchen appliances to death. Same for our car, same for travel. Why? There was big upside to getting it right and big downside to getting it wrong.

Despite all this, a problem for Facebook — and for all of social media — is that there’s only so much consumers can hear before they stick their fingers in their ears. Personally, the more people I follow on Twitter, the more unusable it gets. The more feeds in my RSS reader, the more unusable it gets.

Attention is scant, and fragmented. On a fundamental level, I get that being “always on” makes it more likely that a customer will randomly bump into my message. But when everyone is “always on” it’s also damned noisy.

The final word
It’s my blog.  I get the last word. :)  Tom and I perhaps agree more than we disagree.  The current forms of “social advertising” are fundamentally flawed.  The reason why Google is so wildly profitable is that its advertising space is highly contextual.  When I search, the fact that someone will actually pay to put their message in front of me means they think they have something to offer to me.  In a social context, you may have great information about me but the context is wrong.  I’m not on Facebook to be advertised to.  Advertisers are not enhancing my social interactions.  We’re still years away from it but I believe the social revolution will flip the relationship between marketers and customers in profound ways.  But that’s enough for today.
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Social Ennui: Presaging the Real Revolution

A friend this morning did it.  He set me off.  His offense:  calling social media “old wine in new bottles.”  (And why is this a pejorative anyhow?  Isn’t old wine better??  At least for my readership.)  I couldn’t disagree more violently.

Before, however, I get into the heart of my rant, let me observe that it’s going to be harder to prove that in 2011 than even in 2010.  Why?  Because I think a state of “social ennui” is setting in.  For those of you who are unilingual, ennui is French for “boredom.”  Gartner would call this phenomenon the “trough of disillusionment.”  Everyone’s on the social media bandwagon now.  You’ve got 1,000 Facebook friends, you’re a social media consultant.  Social media will solve disease, global warming, make us all happier, richer and more content.  Better looking, too.  People are way overpromising and underdelivering.  But, as I’ve observed earlier in this blog, that’s the nature of technological change.  We overstate the impact and benefits in the short-term.  God, is that going on here!  But interestingly, we understate the impact and change in the medium-term.  And I again fully expect that to be the case with “social media.”

Social media is in the still very early stages of something that’s going to end up flipping relationships and changing others.  No, we’re not going to throw out everything we know.  The new rarely ever does that.  Yes, we still ride horses.  But the advent of the automobile changed what and how we use horses.  The most earnest horse supporter would point out “but the Amish still live without the car” or “well, I could use the horse if I wanted to.”  Meanwhile, the rest of us would just humor, or ignore, them.  More importantly, though, the car didn’t just change the way we use horses.  It changed the way we live and work.  Distances were expanded.  And gaps were closed.  The suburbs were created.  At first, people probably observed “now I can get from point A to point B faster.”  That’s the stage we’re in with social media.  Only later did people say “or for the same amount of time, I can now go a lot further which changes where I can live.”  And the really smart people said “this is going to change the nature of our society and I can build products and solutions that capitalize on this newfound mobility.”

So, what is “social” going to change?  PR is in the early stages of changing radically.  I have made the argument for over a decade now that while we called the discipline P-as-in-public-R, it had largely become M-as-in-media-R as the pathway to the public was through the media.  PR firms were evaluated based on their friendships with key reporters and their ability to secure covers on Forbes and Fortune.  The Internet was already in the process of changing public relations (if not the PR industry).  What is a press release, anyhow?  The idea was to tell your story to intrigue a reporter who would write about it and tell the public.  But Google indexes press releases.  The public is seeing that release.  Don’t write for the reporter, who’s overwhelmed by these outreaches anyhow.  Write for the public.  (No, most aren’t even doing that.)

But there’s more.  Social media changes “public relations” in profound fashion.  Not only do you have a direct path to the public, and your customers and competitors also have those same direct paths, your paths to the “influencers” have been augmented in significant ways, and new influencers have emerged who influence both traditional influencers and your buying public.  Yeah, that’s a lot of change.  I won’t get into the whole social media “you’ve got to be part of the conversation” discussion here.  First, that’s a whole other post.  Second, if I hear one more person say “you’ve got to be part of the conversation,” I’m going to slap them.  That’s exactly why we’re suffering from social ennui.  Lastly, the whole discussion is already over-discussed.  You don’t need yet another perspective, however nuanced, from me.

But we still haven’t scratched the surface of the change to come.  Longer term, I am fiercely interested in the emerging discipline known as VRM.  Vendor relationship management.  Its most powerful advocate is Doc Searls, he of the Cluetrain Manifesto (can you believe that was almost 12 years ago?!).  I actually arrived at the concept independently.  I was asked a few years ago to do a presentation on Social CRM.  I talked a little about how “social” provides new insights into the customer relationship equation, providing new insights previously unavailable.  I went on that putting “social” in front of everything reminded me of Internet 1.0 when we put an “e” in front of everything.  eBusiness.  eMarketing.  eThis.  eThat. Until we realize the distinction was no longer differentiating and in fact no longer valid.  (It’s interesting.  Even my spell-checker wants to flag eBusiness as a typo.)  It was business.  It was marketing.  And so ultimately SCRM is just the next iteration of CRM.  But, I hypothesized, the big change came when users flipped the relationship and started managing their vendor relationships the same way the vendors manage their relationships with us.  SCRM leads to VRM.  When after the presentation, someone told me about existing early thinking about VRM, I was both disappointed (I thought I was about to invent my first category) and thrilled (there’s momentum!!).  As an analyst, this is an important moment.  We can do all the theorizing we want but unless someone’s actually building this stuff, it’s not terribly interesting.

While VRM is far from mainstream now (for many, this will be the first time you’ve even heard of the notion), there’s an interesting community growing up around it and some large retailers are dabbling and monitoring.  The concept here is twofold.  One, the big vision for the field, is that tools will be developed that will enable customers to manage their relationships with vendors and that the relationship is ultimately owned by the customer, not the vendor.  CRM will never give a full view of the customer because the customer deals with multiple channels and providers.  VRM is the only way that picture can be developed…and customers will share that view with vendors who offer value in return.  At its most extreme, imagine an easy-to-create-and-manage iRFP (individual request-for-proposal) process.  Yes, it’s hard to imagine and even harder to do but if done, wildly powerful.  The more selfish view for retailers, as I heard another friend express to a major retailer, “what if you knew what a customer was looking for when they walked in your store.  What if you really knew?”  Today, at best you’re making a guess based on past purchase patterns, incentives you’ve provided, etc.  But if you know the totality of what they were looking for, you could sell solutions, not products.  You could upsell.  You could target.

You might argue this is hard and will never happen.  I won’t argue with the first part but I will argue with the second part.  On second thought, I will argue with the first part.  The pieces are all out there.  Assembling them isn’t very hard.  At its most basic level, Groupon and LivingSocial are VRM 1.0.  Assemble large numbers of customers and demand a deal.  That model has been proven reasonably successfully.

You might also argue that “this isn’t social media.”  I don’t want to get into the “this is or isn’t social media debate” but I would say that this is only possible with the existence of social media.  We’ve made it very easy for people to create, assemble and manage their buying preferences and signals.  Wish lists, tweets and Facebook statuses, GetGlue updates, FourSquare checkins and Quora questions can be combined to put together an interesting picture of what you’re doing/thinking.  When meta-tools evolve  to assemble these into coherent solutions, tying together product discovery, acquisition, utilization and support, we will be on to something exciting.

You might argue that consumers are lazy and that they don’t want to manage their relationships.  OK, you’ve got me there.  You’re right.  This is the real stumbling block.  The tools had better be REAL easy to use with REAL economic value in exchange for participation.  This will require serious software work that assembles what consumers are already doing with social media, parsing and assembling it and making reasonable suggestions and solutions out of our piecemeal, bottom’s-up approach to information sharing.

There are already real players in this space.  Look at Kynetx.  I pick them not because they’re totally on point with VRM, although they can and will get there.  I pick them not because they’re necessarily the best solution out there; I haven’t spent enough time looking at vendors to make a Magic Quadrant.  I pick them because my old friend and foil, Craig Burton (VP of Marketing for Novell, when Novell owned PC networking 23 years ago) told me about them a year ago and brought me in to meet them.  The problems they’re trying to solve are real and exciting, and great for us users.

VRM is the next big thing.  Even as social ennui sets in and we wonder what all the hype was about, there’s real change coming around the corner.  This isn’t old wine in new bottles, or at least it won’t be.  If I were a mainstream marketer, I might take the old wine position for now.  I wouldn’t want to try and sell my company on this from the inside right now.  They’d look at your strangely.  (Well, they probably already do that.)  But in my role, as outside provocateur, I’m going to yelling this one louder and louder.  A decade ago, we were yelling that the Internet was going to change everything.  Pets.com and Webvan died.  The naysayers snickered.  And then we went and changed everything.  We’re going to do it again.  Come along for the ride.

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