A Crisis of Complexity

Users are spending a great deal of time within social platforms and communities, but unlike the landscape of ten years ago, stickiness doesn’t bring success or financial rewards.  While Facebook has doubled their growth in the last year, they’re still within 35MM unique in the US, and who could say how many of those unique are active… And while brands typically approach these platforms hoping to find virality, does today’s mounting clutter diminish their chances of creating meaningful connections? Finally, is there a pricing model that sets them up for success?

Right now the presumed media model is to penetrate social communities like Facebook, by way of applications.  But the glut of applications create mass clutter and present many questions when it comes to measuring engagement and activity.  The Social Gaming Network, for example, has seen their apps installed across 46 million Facebook pages. Nonetheless, their games combined only average 650,000 daily users.  Union Square Ventures reported their portfolio company Zynga’s combined application install base is 51 million, yet only averages 1.7mm daily users. Clearly an application install paves the way for neither engagement nor longevity within these social communities.  If a brand wants to truly connect with consumers, it needs to become part of the fabric of the environment. 
 
It’s been theorized that social communities like LinkedIn where participants don’t know each other will prove far more valuable to advertisers than recreational communities. Or put another way, pools of strangers create more fertile breeding grounds for marketers than those where we know each other. Ultimately consumers are consumers, and either type of network can be used for business or pleasure. But there is something problematic about proving new media models within communities where users spend a majority of their time on IM, email, photos, etc. Over the past year MySpace has lowered their banner CPM from $3.25 to less than $2.00, and Facebook’s minimum CPM is set at $0.15 (though networks like Lookery commonly sells it for $0.13). Like Google learned with their contextual search product, when supply far exceeds demand, the rates will eventually come to the market. But doesn’t a $0.13 CPM fundamentally undermine the viability of that model? And speaking to the larger question here, isn’t the media model of CPM-based advertising fundamentally incompatible within these new media circles anyway, since most of those impressions are completely transient when the user is fixated on photos and chat. This is something that plagues the internet industry as a whole and is not limited to Facebook and MySpace. It is a crisis of complexity that is difficult to generalize and, thus, monetize.
 
CPM (cost-per-thousand impressions) has always been the reigning model to monetize media.  Publishers and rep firms sold the promise of exposure to their intended, by way of demographic and contextually relevant publishing. Within that exposure, advertisers could create a connection between the brand and its target audience.  Impressions have long been the advertiser’s window to their target, and CPM-based sales were quickly adopted as the default media model for digital.
From banners, text links, to mini-sites, everything was built around advertising as a single “touch-point”.   Cost-Per-Click advertising has become very prominent through search marketing, and Microsoft just bought Cost-Per-Acquisition a lot of credibility through introduction of their Cashback program, but the industry is quickly coming to an impasse with the conflict between media (buying) and creative.

Consider the rich media ads where consumers can stream a video, play a game, download a widget or engage multiple layers of content. Or how search marketing provides wish fulfillment where the post-click experience becomes the pay-off or raison d’être. What’s become outstandingly clear over the past few years is that the ad is now merely the origin for a succession of touch-points. Advertising creative is no longer so fixated on that initial exposure, or impression, so why should the media model remain stagnant? Instead of developing a better model, the industry has opted for more of the old which, ultimately, solves nothing.

The buzzword today is “engagement”. Brands are looking to engage their audience in greater depth and interactivity than ever before. The expectation is that in spending more time with the consumers, companies can build greater brand affinity, loyalty, raise awareness, purchase intent, and all the other measures typically weighed through qualitative survey-based methodologies. It’s ironic that after 12 years of reliance on the internet’s provision of a cookie-based tracking, advertisers are finally beginning to see where the cookie falls short: you can trade 4.5 pages per visit for a 60 second video stream, but that tracking scheme won’t tell you what type of engagement is more worthwhile.

Brands can be built online, but ultimately they live offline. The connections built or hosted at brand.com are fast and fleeting, so it’s what consumers take from that experience that makes the exposure and engagement worthwhile. Most often, this is not the representation that’s coordinated across the different media channels (digital, broadcast, print, Out-Of-Home), but something that exists between the consumers themselves. What advertisers are learning through social media is nothing less than an epiphany: creating connections on behalf of consumers will help create connections between consumers. So any notion that social media doesn’t work is short-sighted.  But what doesn’t, and possibly won’t ever work within these platforms, is the CPM model. For the industry to view this business against the monthly number of impressions is like gauging your traffic against the number of hits the site hosts. It has nothing to do with anything.

Each one of those publishers has invested significant time building a brand of their own, and if they’re to align their brands with the advertisers, effectively, the sales force behind Facebook needs to find a way to motivate them. Profit-share could be a great start, and by giving the audience incremental gains, no matter how small, the community can create a system of credits and debits that would ultimately help build out a Facebook economy. Which in-turn creates an even more direct gateway for the advertisers. Whether commerce and micro-transactions reflect the type of vision Facebook has in mind for their future, they’re surely not going to get there using yesterday’s media models.