Facebook is getting ready for its Initial Public Offering, and GM has just decided to remove all its advertising from Facebook.  (Ford thinks GM is just doing it wrong and sees better results.)  This brings to light a couple of big questions-

  •  Are we about to experience another tech bubble or double dip recession?
  • Do we understand enough about social media networks, all in the five to ten year old range, to make decent predictions about their long term prospects?
  • How can we predict mass consumer behavior in a way that can be reasonably and predictably leveraged in an ever-changing media world?

One thing I do know- anything you do has to be based on more than just advertising.

One of the things I tell clients and groups I speak to is that we have to remember is that Facebook users are Facebook’s product, not their customers.  People don’t pay to have an account of Facebook, and they randomly decide what to include (or not include) in their profiles.  While this is a great aggregation of data and hold potential for leverage for business purposes, there’s a real dichotomy on how Facebook is seen by users and businesses.

Facebook users see it as primarily a way to connect with friends and family, and maybe play a few games.  The ads on the side are annoying, and I barely notice them.  If I do, I might want to go back to one, but I have no guarantee that I’ll ever be shown  that ad again.  If I decide to click through to a friend’s update or an article that interested me first, that potentially interesting ad is gone, and I have no idea if it will appear to me again.

NPR’s Planet Money has done a couple of interesting shows on Facebook, and what success it is having at driving traffic.  They ran a simple, straight forward test to see if Facebook delivered any foot traffic to a particular local restaurant; another show is about how you can get a thousand “likes” for $75.  I’ll let you listen to the stories themselves- they are definitely worth your time.  In the end, you have to ask yourself what you are trying to get out of any time or money invested in Facebook, and whether or not you are seeing a return of any sort in that investment.

Likes on Facebook are like popularity votes, and may help the word spread about your stuff to the “likers” friends as well.  But I would argue a status update or a wall post with meaningful content is more likely to make an impact on someone than a like itself.  A “like” is akin to a “high five” – a transient thumbs up, but it means little more than that.

So it’s not surprising someone has set up a system where you can simply buy likes, like the folks that want to sell you additional Twitter followers for a small fee.  While these Likes or additional twitter followers may arbitrarily and temporarily inflate your popularity, it’s not too different than showing up with a cute date to Prom- your reputation may be temporarily enhanced, but on Monday, it’s still the same old you, and people still basically think the same things about you based on multiple past interactions.  Your reputation does not change dramatically, because day in and day out, the cute prom date is just another data point in people’s judgement equation, and your day in and day out behavior trumps all.

What does all of this mean?  In the end, I think online media has to have a business model based on adding value, not just on advertising and interruption of people with urges to buy.  Ad and Ad sells based on a large user base are great- it may be particularly effective if you are a multinational, national chain, or have an incredibly-easy to target niche.  But for most businesses in the brick and mortar world, I care less about the 900 Million people on Facebook than I do on the people in my own area, who are more likely to be my customers.  Unless I’m willing to ship product anywhere, I have to gear my online strategy closer to the kind of results I want.  Am I looking for sales, or awareness and popularity?  Am I trying to engage with my customers, or am I just trying to sell to them all the time?  Am I looking to be customer centric, or do I really just want to do whatever I’m doing, without a lot of customer feedback?  All of these are perfectly valid and important business decisions, and they are the guiding questions (among others) you need to ask when trying to figure out if a digital strategy is necessary for your business.

I think we’re going to see networks with revenue based on ad sales alone, without other functional or product based business models start to struggle, because consumers are still tired of being pitched to all the time.   (In fact, I was recently shocked and sort of appalled by an app called the Logo Game, which shows you parts of logos and has you guess the company name.  Surprisingly, everyone in our family from kids to adults did pretty well, meaning the ads and logos are making an impression, but not one I really wanted in my brain case, and would be just as happy to remove.)  The solution is not to pitch- but to provide meaningful content and value, which is what everyone is searching for- solutions to their problems and making things easier to manage in a hectic and stressful life.  That will always sell, and will endure beyond the brief flare ups in popularity and media hoopla.

In the end, it’s always about value.