Taking the Social Revolution Back From the Marketers

Posted on March 20, 2013 by jyarmis

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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