The myth of SocialAds, Beacon and Insights: it ain’t gonna work!

The countdown continues. After I decided to write a post on the downfall of Facebook as their stealth ad system is being revealed, we are now on another day after. The day after Mark Zuckerberg announced his 3 way ad system for Facebook. For me the counter is starting to tick a little faster now, I’ll explain in a moment why.

As always I am looking around for analysis on this. In general people seem to be either positive about the move with a warning that it is a “dangerous way to go”. Or they are negative and warning about the user that won’t like to be hassled by his friends with commercial messages.

There are a few posts that drew my attention.

Nicolas Carr really hits Facebook hard with his post called ‘the social graft’. He says:

“It’s a nifty system: First you get your users to entrust their personal data to you, and then you not only sell that data to advertisers but you get the users to be the vector for the ads. And what do the users get in return? An animated Sprite Sips character to interact with.”

Mathew Ingram describes a mental picture of some guy barging into a party at my house and yelling about free pizza or T-shirts or something, and handing out coupons to all my friends while dressed up like a giant Coke can.

He would punch the guy entering his house in that way. I would probably too.

John Battelle wrote a small entry in which he adds to a quote from a CNET article from a Facebook executive:

“The company that can process the most data will win.” I’d modify that – the company that can process the most data intelligently and in context, wins”

I think John is right and wrong. Right, because the company that can process data intelligently and in context wins. Wrong, because Facebook isn’t the right context! That is why Google wins, the not only score better on clever and massive amounts of data processing, but they use it most intelligent in a context where a user is actually begging for advertisement attention (during a search).

Business Week takes the angle of the marketeer and advertiser who is excited about the new initiative in their post called Marketeers are your ‘friends’. They quote Mark Zuckerberg saying:

“The next 100 years is going to be different for advertising, and it starts today,” Zuckerberg told the crowd of 250 or so enthusiastic marketers and advertising executives who had gathered at a midtown loft for soft drinks, hors d’oeuvres, and a demonstration of Facebook’s new ad system. “Pushing your message out to people is no longer good enough—you have to get into the conversation.”

But who wants marketers in their conversation? If not enough do, the new news-feed ads will be bad news for Facebook.

But Mark, you aren’t getting into the conversation, you are really only trespassing. And btw, the example you provide where 2mln Facebook users join a suport breastcancer cause,  is actually a very bad example. People joined to support the good cause, not to support some brand.

Dave Winer, although he is positive on the move made by Facebook, ends his article with an excellent observation:

Long-term, however they both have problems because advertising is on its way to being obsolete. Facebook is just another step along the path. Advertising will get more and more targeted until it disappears, because perfectly targeted advertising is just information. And that’s good!

I think SocialAds are a bad idea. Actually I think the current web 2.0 free (ad-based) business model is a bad idea. There are 16Bln reasons to get out of that advertisement trap. And now Facebook is doing the wrong thing for the obvious reasons. Mark Zuckerberg couldn’t have said it any better than in this quote, taken from the press conference:

People will not be able to opt out of these social ads or turn them off, at least for now, unless they stop revealing information about themselves on Facebook. Says Zuckerberg: “It is an ad-supported service. It is a free service.”

You couldn’t be more right Mark! This is the Catch 22 of web 2.0. Facebook creates a service, drawing users to it by providing it for free, provide the user with the false illusion that his privacy is safe and then leverages the user profiles and the Social Graph network Facebook ‘owns’ and protects but didn’t create himself (the users did) by monetizing with ads. I said before it isn’t going to hold, as this business model is fueled form the wrong side. But I would go a step further and argue that SocialAds are based upon an entirely wrong assumption of friendship in the wrong context!

The power, according to Facebook lies in the user becoming a brand ambassador towards his friends. The best advice you can get is that from a friend. We all know this phenomenon. You are sitting with a friend and he tells you enthusiastically about a movie he has been too. Makes you want to go yourself, right? Why does that work? Because a lot of things happen at the same time. In the physical world there are many different stimuli that affect your behavior. Things like speech, sight, hearing, touch, feeling, movement, trust, relationships, common experiences or taste, context (like the fact that you are hanging out at your home together), all come together in your brain providing you with a feeling of value to your friends story. It also provides you the opportunity to DISAGREE with your friend.

But in the on-line world you lose most of these stimuli. In Facebook you get flattened stimuli from the newsfeed: “Alex went to this movie and he liked it”, or personalised ads using the profile information. But there is no “hanging out together, no voice, taste, touch or other stimuli, no way of agreeing or disagreeing with your friend. And worse, the stimuli aren’t in the right context. I’m not looking for advertisement there. And if I get these stimuli from my friends in my personal space, what will that do to the trust I have in them? At best I’ll try to ignore it, at worse I get fed up with my friend and disconnect him. Facebook will be left with the bargain hunters (get a free coke if you…), ad blind people (ignoring any brand or ad message), brand bashers (have you seen these morons trying to sell me….) and finally nothing as users will start to see through the advertisement trap they are in and move to another place where services provide real value instead of “an animated Sprite bottle to interact with”.

The very best one being from Doc Searl here. In his post called New World Disorder he quotes The Guardian with an article by Jeff Jarvis, Chaos theory: advertising cash will soon decrease,

Advertising is no one’s first choice as the basis of a relationship. For marketers, it’s expensive and inefficient. For customers, it’s invasive and annoying. And targeted advertising is only slightly more efficient and slightly less annoying. Clearly, the direct relationship between a customer and a company is preferable. But that direct connection cuts out the middlemen – that is the media.

So true. As said before. The web 2.0 bubble is building up way too much pressure, who has a needle?

The conversation never stops

If I would have to name one thing technology has brought us the past years it would be the ability to interact with each other. There are so many ways we can connect now that we almost need to hire a PA to manage all these connections. People love to interact. Without interaction life would be meaningless (probably why prisoners are sometimes locked into isolation). As interaction provides value, we should be looking at ways to monetize on that interaction (instead of monetizing on ads). The ability to interact is in my opinion the most important value driver for any service.

There are so many examples of interactions creating value. When writing this up I remembered a Harvard Business Review study about eBay. It turns out that people that joined the eBay community buy and sell more stuff on the eBay site, than people that are not part of the eBay community. Approximately 80.000 people were asked to join the eBay community, 3300 became active users, and 11.000 became lurkers. Revenues after one year of following these people increased up to 56% with eBay profiting several million dollars from the increased trading of both active community members and lurkers.

Or what about the study here, that tells us that in 2012 4,81 Bln mobile users will sent approximately 3,7 trillion SMS messages to each other, That is an average of 769 SMS messages per year, or 2,1 SMS messages per user per day, leading to $ 67 Bln SMS revenues. BTW, the largest mobile growth is to be expected in Asia.

Why do people love to watch video’s on YouTube or look at Facebook most of their time. In my opinion it is not the “sit back and watch” or “entertain me” behavior we all display when watching TV. I bet that every time we are at YouTube or Facebook it provides us with thoughts, ideas, memories or experiences that we can communicate about. It is this communication that makes the experience valuable. Sharing this crazy video with a friend and have a laugh about it. Looking at this dorky or very cool person on Facebook and talk about that with friends. We just can’t help ourselves. We need to communicate.

A recent study in Canada shows (again) that people that download music using peer 2 peer technology (in other words download illegally) buy more CD’s than people that don’t download music. Bands are now bypassing the “old”music distribution and distribute music themselves, even leaving the responsibility to pay for it with the user. Why does it work? Because it leads to interaction. Interaction between the band and its fans. Interaction between the fans, and interaction between the fan just downloading the music and his non-fan friend which he now tries to convince how incredibly cool this band is. Focusing on the interaction in music provides an experience that in itself will create value.

Why then, when people display such obvious needs to communicate, do web 2.0 business models not leverage this interaction directly? It is because the web enforces disjoint metrics upon us. Actually Google is probably largely responsible for this. Their PageRank has made us all into traffic slaves. When providing commercial services on-line it is all about having a high PageRank, about users being able to find your service and then view it. In order to be noticed, what better to do than provide cool services for free? But someone always has to pay the bill. And the way to do this, orchestrated by large media companies like Google, Yahoo, Facebook, is to create advertisement revenues. The metrics are easily manipulated leading to possibilities to fraud the system. Before you know it we are back into the advertisement bombarded TV world again. But advertisement does not increase the value of interaction. It doesn’t provide real value when two people are connecting (”this message was sponsored by..”). And people have found effective ways to get around it, using the remote control zapping away, or using DVD recorders to fast forward advertisement. On the Internet, most users will simply ignore ads, like a blind spot. This leaves only those that create massive amounts of traffic to their sites to actually earn some revenues in advertisement (there is always some fool clicking on an ad). I’m not naive, advertisement will always be there, but I don’t think it should rule our interactions.

The things is, people will interact, no matter what. Why not focus on increasing the value of the interaction itself. Let people pay for the interaction, instead of trying to monetize something on the side that doesn’t ad value to this interaction. It goes against all rules of web 2.0 business models. It might be a barrier for people to join a service when everything else is free. You are probably scaring of both investors and advertisers with this approach. But, if you provide real value to a user, and you are able to get that message to him, isn’t it worth a try? You know there is one piece of knowledge that supports you taking that disruptive step. The conversation never stops.

Short update:

Just after posting this I saw Tom Foremski posting a message that there is a growing distaste by VC firms of web 2.0 companies.

For example, Kleiner Perkins Caufield & Byers, Silicon Valley’s leading VC firm, has stopped investing in Web 2.0 startups. “We have absolutely no interest in funding Web 2.0 companies,” says Randy Komisar, a partner at Kleiner Perkins. He mentioned this during an after dinner conversation last week. He said he had recently told John Battelle, one of the organizers of the rapidly growing Web 2.0 Summit conference, that the term no longer had the same positive cachet it once had. In the VC community it clearly has a negative one.

Sounds like we are perhaps on a turning point? Maybe this will trigger startups to step out of the usual business model and come up with exciting new services and equally exciting new revenue models.

Toni Ahonen:Mobile the 7th Mass Media

Marketingfacts pointed me to a video + presentation of Tomi Ahonen in Amsterdam, called “Mobile the 7th Mass Media”.

In his presentation he talks about Mobile being the next Mass Medium and provides many examples of successful mobile stories, most of them in Japan and Korea.

He start with stating the 8 needs Mobile fulfils:

Communication, Consume, Charging (Money), Commercials (Advertising), Create, Community (Social Networking), Cool (Fashion), and (Remote) Control.

He then proceeds in showing how the Mobile phone is the next (7th) Mass Medium with 6 characteristics that are preferable over the six other Mass Media (Print, Mass Media recording, Mass Media cinema, Mass Media Radio, Mass Media TV, Mass Media Internet). It is Personal, Always On, with Build in Payment system, is always available during a creative impulse, and provides the most accurate audience info.

While he is an authority on the subject, and he brings his presentation well and with many live examples in the market, I cannot help but feel that he is sometimes a bit too fast in projecting the success of some of those market examples to the rest of the world. There are also (technical, UI, service) hurdles still to be taken, but he dismisses them for now as “don’t focus on the limitations”. Instead, concentrate on the possibilities. In itself a wise saying, but I would add that the limitations should still be solved in the end.

Most of his market examples are taken from the Japanese and Korean market. There are two concerns there for me.

1. These markets are years ahead in terms of technology, mass adoption and maturity (actually, he often uses Finland as example as well, and that market is also ahead of the rest of Europe as the homeland of Nokia)
2. The cultural differences between Asian and for example European countries are very large. It is therefore difficult to draw conclusions on market results in Asia and project these directly to the European or American market. I’m sure Toni understands this, but it is not covered in too much depth in his presentations.

Don’t get me wrong, I am a strong believer of mobile community development and the value they can have for both the user, the community, the service creator and the advertiser/brand owner. I think that mobile phones are by far the best mass media devices, and even better, they have payment systems in place and users that are already used to paying for services and content (major barrier on the Internet). And yes, there are also European successes, but there are less (in numbers and volume).

Making mobile services successful isn’t a fairy tail with a happy end in all cases. There are may startups trying and failing. We need more time to experiment, improve and enrich the technology, but even more important the overall experience before it will truly become a mass adopted success worldwide.

I believe the mobile phone is becoming our remote control to life, but if this extension of our personality and life is pressured by too much unwanted ads or commercial activity we might see that the momentum that is being created now will be slowed down instead of moving faster.

And I feel there are still a few threads out there that might slow down the fascinating growth at the moment:

1. Premium SMS services work really well right now, but would the same apply for data services later? And with more successful services on the way there is always the danger of price erosion. If I only pay for the Carrier fee to send a Twitter to the rest of the world, I will probably not like it much if I have to keep paying for premium SMS services when interacting with a brand. Arguably, Twitter is probably more something for middle aged men and woman now, but similar services will be discovered and used by teenagers.
2. Don’t forget the power of the Mobile Phone carriers that still make loads of money on traffic and data bundles. They still control perhaps the most important aspect of the value chain (access). Unless they are willing to drop prices here, mobile Internet (unlike mobile messaging) will still have to overcome the barrier of high subscriptions fees. Same thing goes for the Phone manufacturers. We need open standards, open platforms, payment systems across carriers and phone types, and not walled gardens. If these walls can be broken down, I am convinced that innovation will lead to a much better user experience which will in turn speed up adoption.
3. The influence Internet will have on Mobile users. On the Internet everything is free. The user experience is becoming richer and richer. Internet services will extend to mobile services and there lies a danger in the value model. Unlike going from Mobile to the Internet, it won’t be easy for Internet service creators to extend a free service to a payed mobile service, especially since many are already making mobile access to the Internet service free.

Having said all this, I am still inspired by the examples of Toni and would definitely enter this exciting market and start experimenting with mobile services. The endless possibilities, the always on, the presence information, the easiness to quickly send messages to the world, the always hungering for message by its user (how often do you check your mobile for new messages?), what better test ground could you have for new services!

Matching advertisement to consumer profiles part 2

Michael Arrington at TechCrunch has written a nice post on a user profiling in a social community Piczo. The idea is to let the user decorate his profile page in a similar way teenagers do with their bedroom. Hanging posters, playing music etc. Everything is tagged, you can share the decorations with others. This is beneficial to both the user (for he gets cool decorations) and for the advertiser (for he gets better profile information). Not a new idea, but I like it anyways. It’s good because the user takes the action and is in control. He decides how to decorate, and if the matching is done rightly, there might be a better connection between the user and the advertiser. Interesting to see if this will spread advertisement virally, as advertisers obviously hope. It sorta ties in nicely with one of my earlier post on matching user profiles to advertisement (here and here). Bottom line, profiles are not that accurate when used in advertisement matching, but user actions might be a better indicator. I had an interesting on-line conversation on it with Jordan Mitchel. His company works on context and behavioral advertisement.

Tara Hunt video presentation on Social Capital at Eday

Just saw a very nice and complete overview of all the different presentations at Eday in the Netherlands. Thanks to Frank Janssen of FrankWatching for this. One that stands out for me is the presentation by Tara Hunt, called “how to make a gabillion dollars on community marketing”. Tara Hunt and Chris Messina, are the founders of Citizen Agency. Her message ‘People don’t buy brands, they buy hope, stories, memories, necessities is well known. The video can be watched here, skip past the first minute or so if you don’t speak Dutch. The presentation can be found here, although it isn’t any good without Tara presenting it. I reported on the Rolf Skyberg presentation on “web 2.0: how did we get here and what’s next” and on earlier, but there is lots more to look at in the overview. Enjoy.