Facebook began as a social networking project for Ivy League students and has
become a phenomenon in marketing that has transformed digital advertising and
marketing. The social network has already surpassed 1 billion total users.
Today, the average American spends 6.75 hours on Facebook per month, more than
they spend on its closest competitors combined.
Samsung
managed to launch a successful three week marketing campaign on Facebook for
its Galaxy S III which generated an ROI of nearly 1200%. According to Carolyn
Everson, Vice President at Facebook’s Global Marketing Solutions, the $10
million campaign generated $129 million in sales. Samsung was able to use
Facebook to specifically target smartphone owners with their ads during the
three weeks that Apple was releasing the iPhone 5. Successful campaigns like
Samsung’s are made possible due to Facebook’s massive reach. According to
Everson, the social media giant reaches three times the Super Bowl audience every
day.
One
of the advantages of advertising on Facebook is that it allows you to target a
specific group or demographic with ease. Most Facebook users have filled out
their profile and this includes information that can reveal their age, gender,
location, languages, religion, or level of education. This information can be
used to reach your target market with your advertisements. Advertisers can also
use Facebook to target their ads towards users based on their searches or web browsing
history. This is made possible by Facebook’s advertising platforms, which allow
ads to be targeted based on many aspects of a person’s life such as the places
a person visits. This allows advertising to reach a more specific audience than
ever before.
Bradley Horowitz, Vice
President of Social Products at Google, believes that Facebook has gotten the
concept of advertising all wrong and accused his competitor of being a “social
network of the past.” Horowitz feels that social media should be a space for
people to socialize. He says that it would be rude to interrupt a conversation
between two people to tell them to buy a sandwich from you.
“When you and I are
having a conversation, the least opportune thing you could do is have a guy with
a sandwich board run between us and try to sell me a sandwich. I’m trying to
connect with someone. I’m trying to communicate in that sacred space of social
connection. It doesn’t matter if I ‘like’ the sandwich. It doesn’t matter if
it’s personalized with my favorite mustard. That is the wrong moment to try to
dangle a sandwich in front of me.”
When
Business Insider asked about his plans for Google+, Horowitz explained that he
wants to create an integrated experience for users with Google+ as the
foundation. His plans are to create a social network that encompasses
everything you use on the internet, like in Google’s case, a search engine,
Google Chrome, G-Mail, YouTube, et cetera, with Google+ as the foundation that
links everything and personalizes the user’s internet experience. Horowitz
feels that this is how social networking should happen in the future.
He
also says that the way we look at advertising online must change. Rather than
fill a person’s newsfeed with advertisements for products they like, social
media must “fulfill a need that the user has when it’s useful to them.” In
other words, Horowitz believes that successful social media marketing must move
away from ads and focus on recommendations from friends during searches. If
someone decides to browse for a place to eat lunch and they were to see that a
friend of their recommends a restaurant, this would have a much more
significant impact on the person’s decision than a sandwich ad that popped up
in their newsfeed. Google is already working on this concept. As far as public
knowledge is concerned, Facebook is not working on any such thing.
However,
Facebook is developing new ideas that could help them move into the future. This
year, Facebook tested a new feature that it is expected to introduce to its
users in 2013. The new “want” button was tried out by Pottery Barn, Wayfair,
Victoria’s Secret, Michael Kors, Neiman Marcus, Smith Optics, and Fab.com. This
new feature allows a page’s followers to “want” a product by simply clicking on
the “want” button on a photo of a product. The feature works just like the “like”
or “recommend” features. If you “want” a product you can “unwant” it later on.
You can also let your friends know why you “want” the product. Gene Munster,
Managing Director and Senior Research Analyst at Piper Jaffray, predicts that
Facebook will reach $10 billion in commerce-related revenue by 2015 if it
launches the new feature in 2013. He also added that commerce-related revenue
will become 30 to 40 percent of Facebook’s business in the long term.
One concern that seems
to persist in the minds of Facebook users is privacy. Facebook’s management of
the issue has not helped. Users complain of frequent changes to the privacy
policy that sometimes go into effect with little warning. Facebook has developed
a reputation among the press of simply selling their users’ privacy to
advertisers. Regardless of how accurate this depiction of Facebook is, the company
is in a precarious position regarding this issue.
One
of Facebook’s more controversial applications is the Photo Sync option it
offers to its smartphone users. The app automatically synchronizes photos taken
with the phone to a private photo album on Facebook. The idea is to provide
users with a back-up of their photos in case they ever lose their phone.
However, many have raised concerns over privacy and feel that the application
goes too far. Facebook can use the photo’s geolocation data to track you and
know who you are posing with in the photo.
A
similar application for Apple devices has already caused harm in Anderson,
Indiana in October. The application copies every photo to every Apple device
that the user has access to. A middle-school teacher who authorized a group of
students to use her school-issued iPad was surprised when the students found a photo
of herself “from the neck down, with partial exposure,” according to the
Anderson police department. The teacher was not penalized because the photo was
not nude and because the students accessed an application, iPhotos, which they
were not authorized to use but nonetheless, this is an example of how far these
kinds of applications can go in infringing the user’s privacy.
Facebook
faces a dilemma. The company’s business model depends on the information they
can gather about their users and sell it to advertisers but social network’s
users have a strong need for privacy. If Facebook gives in to demands for more
privacy it risks losing advertisers, their primary source of revenue. Generally,
Facebook users have been somewhat tolerant of the lack of privacy in Facebook’s
business model but this is an issue that is beginning to bleed the company.
Facebook
is currently facing a class-action lawsuit in the United States, where it is
charged with violating privacy rights by publicizing users' "likes"
without giving them an “opt out” option. A judge has given his approval to a
second attempt to settle the case by paying each user involved in the lawsuit
up to $10 each out of a settlement fund of $20 million. Facebook has many more
cases like this one. The privacy campaign group Europe-v-facebook has filed a
list of 22 complaints against the company in the European Union and plans on
taking Facebook to court. If these settlements and lawsuits begin to pile up,
Facebook may become bogged down financially due to the legal costs. This is the
dilemma facing their model. If they give in to privacy demands, their
performance will suffer, but if they appear to move in the other direction,
they will strain their users’ trust, which will also affect their performance
as a company.
Facebook’s
strategy has worked until now, but it can backfire at any moment because of the
delicate balance it requires the company to keep between users and advertisers
in order to remain profitable. Bradley Horowitz understands this strategy’s flaw
and that is why he is avoiding this business model with Google+. Facebook can
learn from this project. Facebook should keep in mind that past success does
not guarantee future success.
Facebook
is likely here to stay. However nothing guarantees that they will continue to
hold the largest market share in the social media market. The experience of
using Facebook is also likely to change for its users. Facebook must innovate
new ways to become profitable other than just using its users’ information to
bombard them with advertising. We will likely see more changes to Facebook than
just the new “want” button. But Facebook will continue to face competition from
Twitter and Google+. It’s hard to tell who will be the leader in social
networking a few years from now but it depends on Facebook’s ability to
innovate and think more outside the box than they’re doing right now.