Facebook's "social" business: changing advertising patterns

Absrtact: When you read this topic today, the world's largest social network, Facebook, should have set a good IPO price, which is about to be traded on the Nasdaq. The feast has been opened. Indeed, one of the largest IPOs in the history of the United States was founded only 8 years

When you read the topic today, Facebook, the world's largest social network, should have set a good IPO price, which is about to be traded on the Nasdaq.

The feast has been opened.

Indeed, as one of the largest IPOs in the history of the United States, a company that founded only 8 years has seen hundreds of billions of dollars in valuations, 800 million users and 47% operating profits ... But that's not why investors are hot.

Facebook brings the unprecedented social commercialization model 800 million user potential personal information and commercial value can be converted into various types of advertising, and the main docking, even if you a "recent stomach pain" status updates, will attract stomach medicine ads and insurance ads "in turn bombing."

This is Facebook, working with advertisers to make profits from what you do and do. And for you, you should be more cautious when chatting with your girlfriends or sharing business plans with co-workers, at least not revealing too much personal information. At least one thing is for sure, Facebook will not disturb, but also to find a way to please "you" while maximizing the "mining" information, because "you" is the existence of its profit motive.

Investors are optimistic, it's because there's huge potential, but it's a lot to do with how Facebook can match its billions of valuations: Facebook is going to penetrate a wider corner, make it all the while, market share, product uniqueness, or maybe which month, Will be a slight sign of the current image sharing site Pinterest beyond.

In the words of the FT, it is both Google and Microsoft.

It should be noted that, just two days ago, Facebook expanded its IPO scale and shareholders were prepared to sell more of the stock, which is not a good sign.

Of course, if there is an accident: The price is undecided tonight, which may mean that the market is not ready.

"How bad it is for advertisers, compared to how Facebook is constantly improving its services to its users." "The Marketing Research Institute Forrest Interactive marketing expert Nate Elliott recently wrote on Forrest blog.

Facebook, the world's largest social networking site, is scheduled to land on the Nasdaq market on May 18, becoming the biggest IPO in Silicon Valley in its history, which could be worth $104 billion trillion. Advertising is Facebook's main source of revenue, with Facebook advertising earning 84% of its revenue last year, according to its listing documents.

However, as an emerging company, Facebook's advertising growth is not growing straight. Its first-quarter ad revenue rose 37% to 872 million dollars from a year earlier, but it fell 7.5% from the previous quarter. Facebook blamed it on seasonal trends and an increase in the number of users outside the US. Generally speaking, advertising rates are relatively low outside the United States.

Just a few days before the IPO, General Motors, the former Advertiser, had "bluntly" announced that it would stop paying paid ads on Facebook, a move that had pushed a lot of marketers to the spotlight: How to evaluate Facebook's advertising effects?

If you ask about the future growth of social advertising, there is still no way to circumvent privacy issues. How far is it for Facebook founder Zuckerberg to "make the world more open and more connected" by selling the business model of social advertising through user privacy?

Pushing "social ads"

General Motors, one of the top three major advertisers in the United States, has a vane role in the advertising industry.

According to Kantar Media, a market-research firm, GM is the third-largest advertiser in the United States following the number of ads in all media, after P&g and the US Telephone and Telegraph Company (AT&T).

The Wall Street Journal quoted people familiar with the matter as saying that General Motors spent about 10 million dollars on Facebook last year.

Although GM's decision may be a special case in the advertising world, it gave the Facebook strategy the first very obvious impact, according to Brian Wieser, a network and media analyst at Pivotal Research, a US marketing firm.

Despite Kantar Media data, Facebook accounted for a tiny fraction of GM's $1.8 billion trillion in advertising spending in 2011, with Facebook's share of the total revenue of 3.7 billion dollars (mostly ad sales) last year negligible.

GM will continue to promote its products on Facebook, but will not pay Facebook fees, people familiar with the matter said. Many companies keep free Facebook pages. And Facebook spends 30 million of dollars on free pages, including fees paid to organizations that manage the content of their web pages and maintain the General Motors page, but that will not be paid to Facebook.

The ad-charging program on Facebook mainly includes the 2011 launch of the new "sponsorship Story" (sponsored Stories) of advanced advertising and standard advertising (display ads).

The sponsorship story is to allow businesses to forward postings on Facebook to positively comment on the company's brand, according to the number of posts that Facebook has charged the merchant with 8 dollars per thousand. The Facebook ad system allows advertisers to select the crowd characteristics to launch. Zuckerberg had called the Facebook ad system "The Holy grail of advertising media" at the 2007 AD System conference.

Took care of more than 100 million dollars in advertising spending on Facebook. Digital marketing platform Marin Software A recent report shows that "senior" ads such as "sponsorship story" last year rose 26% per cent per click charges, but the same time Facebook standard AD single click Charges fell 26 %。 Standard advertising currently accounts for about Three-fourths of Facebook's advertising revenue.

Some analysts believe that the difference between standard and premium advertising pricing trends reflects Facebook's attempts to get rid of "direct response" ads for keywords, instead of big brands buying "social" ads.

In this trend, it seems not good news for GM to stop advertising on Facebook.

Show ads affect user experience

But the situation is not so bad. After all, some people think that TV commercials today is a social advertising tomorrow.

Michael Lazerow, CEO and chairman of Buddy Media, a New York press company, wrote in early May that the situation was not as published in the Wall Street Journal. Those who spent 1 million of billions of dollars on Facebook last year will spend $5 million this year, and companies that spend 10 million of dollars last year are willing to spend 25 million dollars this year.

Michael Lazerow says 1000 companies across the United States, including 8 of the top ten brands, are using buddy media software to manage social networking sites. In the first quarter of 2011, the system managed 3 billion of billions of dollars in social advertising, and over the same period this year, the 127 billion-dollar show, which grew 42 times times a year.

Michael Lazerow points out that Facebook, on the one hand, is highly focused on the user experience and, on the other, is looking for a revenue model that accompanies users ' services, which avoids the repetition of MySpace and other large, plug-in ads on the home page.

Analysts point out that it is Facebook's ability to draw interest from its users-whether it's Twitter's Fast forward page or Foursquare-based check-in, the constant pursuit of end-user service has kept Facebook even facing privacy concerns Has grown rapidly in recent years.

But advertisers often like to "Smash" a big brand into a consumer, which Facebook knows will permanently affect user experience and business value forever.

Michael Lazerow believes Facebook's ads are new, just as Facebook's own 8-year web site is still being updated. Stopping advertising on Facebook in 2012 is no wiser than stopping TV commercials in 1945.

On average, Facebook's social ads are 55% higher than those for non social ads, according to a survey of 79 Facebook advertisers conducted by Nielsen, the research firm, last quarter.

Buddy Media data show that each Facebook share will generate an average of 2.1 dollars in sales increments.

"Many brands are still asking what Facebook can do for them, and in fact, these brands should consider what they can do for their users." The criticism platform is easy, much easier than internal organization and public publication of compelling content. Michael Lazerow hinted that many brands didn't take advantage of the Facebook platform.

Tracking AD effects

It means peeping at user privacy.

Michael's reasoning seems plausible, but the chief executive of the media company, which serves mainly Facebook advertisers, is full of traces of justification for Facebook.

One problem that always makes the advertising industry headache is that not all ads are as easy to measure as they are purchased. "The global advertising market is about $500 billion trillion, and most of them, including television media, are not easy to measure." Michael Lazerow points out.

In fact, the question of how Facebook's advertising effects are measured has been a long-standing problem.

This March, Martin Sorrell, chief executive of WPP, the world's largest advertising company, said at a meeting that clients were beginning to question the effectiveness of social media advertising Soril.

Soril adds that social media is a very attractive area where customers have little choice but to participate because it is fashionable to advertise on social media. The company's financial sector is increasingly concerned about the real value of such advertising spending, as advertising spending on social media has increased dramatically, he said.

WPP customers include companies such as Unilever and Procter and Gamble. WPP says the company expects advertising spending on Facebook to increase by one-fold this year. WPP says its advertising costs for Google this year will exceed $2 billion trillion, a figure of $1.6 billion last year.

A market person told the Morning Post yesterday that tracking advertising on Facebook was not entirely impossible. Theoretically, the user data to open to advertisers, can be data analysis, and to achieve more accurate delivery. In the field of electric business, in order to monitor the effect of advertising, electric business enterprises often use the link code in the campaign.

But it's a matter of privacy. Facebook basically does not allow third parties to investigate the effects of advertising on their websites, nor does it allow ads posted on its web site to be added to the information logger (cookies), which can track follow-up actions that people follow when they see an ad online.

and search Advertising Competition

When it comes to effectiveness assessment, the problem that cannot be avoided is competition with search advertising. Search advertising is recognized as a more accurate and cost-controllable way of advertising.

For some advertisers, ads posted on Facebook are not as effective as search ads, because people tend to search for information with buying decisions, which makes them perfect advertising targets, and people who view their friends on Facebook are not.

WPP's Lai China Interactive marketing chief told The Morning News reporter that in foreign countries, the choice of advertising network is relatively simple: the first is Google, the second is Facebook, and the third is Twitter. That's why Yahoo and AOL's advertising sales have slipped. If you ask people who watch Yahoo have Facebook, the answer is yes, in the United States, almost everyone has a Facebook account.

Lai said that Google is pay-per-click, although there are display ads, but its marketing point is to see the display after the click (CPC), to click as the final settlement, and can accurately control the cost of the day. But Facebook is still showing the concept, which makes advertisers feel hard to measure.

"Facebook's thinking is not doing what the search engine does, it's doing it in a traditional way of exposure." If Facebook can also search, its CPM (display ads) will not sell. Facebook is still billed as a CPM, and the click of the display ad is an estimate, only a reference. "Lai said.

But Facebook can do it in the face of a specific interest, compared to a one-way internet that has progressed. Lai pointed out, "the traditional site is not know who you are, and all people know my site, this is the premise." ”

An internationally renowned cosmetics group Electric Business Department of the market, said yesterday, Baidu is now a click on the cost of more than 1 yuan, and Google because China's market share is lower, then less than a dollar. These search engines can control the monthly, daily input. and social advertising is subordinate to the group's Digital (Digital) department, more emphasis on brand promotion.

This also reflects the value of social advertising and search advertising.

Break through the aesthetic fatigue

A marketing promoter who has been involved in Chinese social media since 2009 may be able to comment on the value changes of social networking sites.

Successively in the Consumer electronics business and video industry engaged in three years of social advertising work to the newspaper reporter, said that the use of social media people often have three types of people, the first category is not care about conversion rate, through this form of momentum. Such advertisers tend to smash money and think the effect is better. The second category is "enclosure" to pursue group visibility. Advertisers often spend huge sums to create corporate accounts and attract fans. The third group of people is not very recognized the value of social media, the effectiveness of the assessment is much harsher.

But in the community, fans tend to have plenty of water. Chinese communities are full of fake fans, fake reviews, navy, and even stolen numbers. So if the account can be set up peacefully, there is a certain degree of difficulty. The person said.

At the end of 2009, the person's electric-business enterprise set up a new "social media commissioner" position in the marketing department. It was once seen as a "killer" by marketing executives who had just been airborne from the United States. But just a year later, this is nothing new, and it seems that all businesses are recruiting social media commissioners, all of them in the company's official account.

In 2010, the company began to set up a public homepage on Renren, known as "China Facebook," and has 34,847 friends. To May 2011 Renren listed before the listing of listed documents, as at the end of March, Renren activated the number of users reached 117 million.

"The budget for social advertising is still a decimal. The idea of advertisers is still to use social media to do activities. On social networking sites, it may be that everyone plays with one thing. But how many brands are here to impress people? " Lai said.

"Facebook uses plug-ins, APPs, questionnaires, games, and so on to attract you. But that's it, for two years, that's all that's been playing. You play three months, half a year later, you don't want to play. "Lai said.

For advertisers, there needs to be constant innovation. What is the breakthrough? Only deep excavation of consumer behavior habits. Lai points out.

The balance of privacy

If you finally ask about the growth of social advertising in the future, still can not circumvent the privacy issue.

Nate Elliott points out that Facebook has so far found no advertising model that is proving to be in the best interests of advertisers, or a huge advertising revenue that matches a huge user base, with ads for every active user of the company falling below $4 trillion in 2011.

Over the past five years, there have been many changes in the way Facebook has been advertised. Do you remember letting advertisers set up brand pages? Beacon advertising system? Zuckerberg certainly wants you to forget about them.

The Beacon advertising system is a new way of posting social information on Facebook and a core component of the Facebook advertising system that organically links businesses to users and makes them more targeted. Through the beacon system, users ' purchases of third party websites and other online activities are sent to Facebook friends in a way that prompts them for information. But the system is considered a violation of user privacy and has attracted a lot of lawsuits.

"Why do you put so many ads on your personal page, this involves user privacy issues?" "Lai said.

In its IPO file, Facebook interprets the ad model as: "Advertisers can ask us to set up targeted ads for specific users based on user statistics and the interest shown in user sharing ... Advertisers can publish marketing information in the ' social background '. A social background is a message that highlights the connection between a good friend and a particular brand or business, for example, a friend who ' praises ' a product or goes to a restaurant. ”

It takes a tricky balancing act to push the ads properly, and to give users the impression that Facebook is still fun, rather than becoming a business selling user information.

"In America, all people are using Facebook to find things that are messy," he said. Even looking for a job is through Facebook. This should be something Facebook should focus on. If the user's adhesion is so high, users are searching on the Facebook platform. "Lai said.

"On top of that, when the war on mobile phones hits the ground, the ads on mobile devices become more sophisticated." "The growth of advertising from mobile platforms will also be a big opportunity for Facebook," Lai said.

Facebook said in its paper that Facebook usage on mobile devices had increased, with March's monthly user volume rising from 425 million last December to 488 million. But Facebook's mobile version offers limited advertising space, so the increase in user volume for mobile products has not generated more advertising revenue.

Facebook said that as more and more users were using Facebook on mobile devices, the recent trend towards a single day of active user growth outpaced the increase in advertising volume.