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The social media bubble

Posted on: Wednesday 13th of June 2012

In a fascinating article on ‘The Facebook Fallacy’ Michael Wolff notes that:

“The daily and stubborn reality for everybody building businesses on the strength of Web advertising is that the value of digital ads decreases every quarter, a consequence of their simultaneous ineffectiveness and efficiency. The nature of people’s behavior on the Web and of how they interact with advertising, as well as the character of those ads themselves and their inability to command real attention, has meant a marked decline in advertising’s impact.”

“I don’t know anyone in the ad-Web business,” he continues, “who isn’t engaged in a relentless, demoralizing, no-exit operation to realign costs with falling per-user revenues, or who isn’t manically inflating traffic to compensate for ever-lower per-user value.”

Facebook’s big idea, he notes, is “it does have all this data. The company knows so much about so many people that its executives are sure that the knowledge must have value.”

“If you’re inside the Facebook galaxy (a constellation that includes an ever-expanding cloud of associated ventures) there is endless chatter about a near-utopian (but often quasi-legal or demi-ethical) new medium of marketing. “If we just … if only … when we will …” goes the conversation. If, for instance, frequent-flyer programs and travel destinations actually knew when you were thinking about planning a trip. Really we know what people are thinking about—sometimes before they know! If a marketer could identify the person who has the most influence on you … If a marketer could introduce you to someone who would relay the marketer’s message … get it? No ads, just friends! My God!”

But Wolff notes, “so far, the sweeping, basic, transformative, and simple way to connect buyer to seller … eludes Facebook” (as it does every other social media venture).

The reason for this is very simple. Far from being new, revolutionary and cool, social media business models are the product of a century old passed-its-sell-by-date advertising mental model. The underlying advertising driven assumption is that riches will come by successfully targeting audiences with advertising messages – and that because they have gathered data about these audiences the targeting will be more successful because the messages can be more ‘relevant’.

The underlying assumption here is that every individual – basically, an eyeball – constitutes part of an audience, so if Facebook has 900 million it has created an audience of 900 million.

This betrays a fundamental misunderstanding of what real relevance is.

Relevant relates to purpose – what the individual is trying to achieve, when, and how. This has at least two crucial aspects:

  • First, there’s time and place. If I’m shopping in a supermarket and meet a friend, I might politely pass the time of day with them, but before long I want to get back to the task in hand. Chatting with my friend becomes an interruption and perhaps even an irritation. If, on the other hand, I’m chatting with my friend in a pub, it’s almost certainly an irritation and irritation if someone tries to sell me something. There’s a time and placing for chatting. And there’s a time and place for shopping. There’s some overlap between the two, but not much. That’s why most Facebook ads fall at the first hurdle.
  • The second hurdle is even more fundamental. When I’m researching a purchase, I look for information that helps me make a better purchasing decision. Advertising is probably the last place I’d look for this information. So not only is most Facebook advertising irrelevant from the point of view of time and place, it’s also mostly irrelevant from the point of view of content and utility too.

That’s why most people ignore Facebooks ads with only five people in every ten thousand bothering to click on them (compared to four people in a thousand clicking on Google ads). Because, despite all the data Facebook has gathered about people, what it’s offering them in terms of advertising is not relevant, not helpful and not useful. As Wolff puts it, the social media advertising model is failing because of “the nature of people’s behavior on the Web, how they interact with advertising, and the character of those ads themselves” which all come together to create an “inability to command real attention”.

The social media bubble is built on the mental model that every eyeball is a target for an ad, no matter what the person behind that eyeball is trying to do at that particular point in time, or in that place.

The vision Wolff describes, of marketers being able to ‘target’ consumers with information when they are planning to buy something can come true, but only if we turn the whole process on its head: to be driven by individuals expressing their interests, in ways where they can control how their information is used, to elicit information (i.e. decision support) services that are designed to help them achieve their goals. In other words, it can happen but only if marketers move from ‘targeting’ consumers with ‘messages’ to the provision of helpful information services.

The social media bubble is deflating, if not bursting. The real internet revolution – based on individuals using information as a tool in their own hands and in control of their own data – is just beginning. And it will dwarf what we currently see with Facebook.

Alan Mitchell