Forget General Motors – Nielsen’s online currency metric will bail out Facebook

May 22, 2012

With Facebook’s share price in an 11% freefall (when I last looked), thank goodness for OCR. That’s what I say. And maybe it’s the mantra nervous Facebook investors should be chanting, too.

OCR? No not Optical Character Recognition, silly – Online Campaign Ratings. It’s the new Nielsen media metric with which the research giant hopes to corner the elusive online ‘currency’ market. And it’s being backed by one of the ad industry’s biggest traders, WPP’s GroupM – which is a good start if OCR is to gain credibility.

Acquiring a universally accepted trading ‘currency’ – sometimes referred to as a “gold standard” – is an important breakthrough for a new medium. No matter how fast it has been growing, or how trendy it has become, its effectiveness will be (rightly) disputed by advertisers and media traders alike in the absence of any agreed benchmark. The result being a tethered and volatile ratecard.

It might seem a fine distinction, but there is a world of difference between what we have at the moment – which is a medium whose value is defined by analytics – and one which is regulated by currency. Analytics are proprietary: they do not command universal respect and are therefore open to debate. The finer points of currency may certainly be subject to academic criticism (look at the BARB ratings system governing UK commercial TV) but no advertiser or trader seriously questions its status. If they did, we might have a pocket version of the euro-crisis on our hands.

With a currency in place, a behavioural change takes place in trading. The key word is “guarantee”. In the network TV market, for example, all three elements to the media deal – media owner, advertiser and trader – have sufficient confidence in the system to make “upfront” or forward commitments into the future, usually a year ahead. The guarantee is the delivery of a specific kind of  audience in sufficient numbers; failing which, a financial penalty will be imposed on the media owner and, increasingly, on the trader.

In that sense, AOL’s recent decision to offer guarantees on online advertising delivery, covering certain agreed demographics such as age, gender and social type, was highly significant.

As is GroupM’s proposal to make joint TV-digital “upfront” buys, the plan being to compensate any shortfall on the TV-side with OCR-defined ratings acquired from digital platforms.

So what has all this got to do with the Facebook share price? With over 900 million registered users, among them half the population of America, Facebook forms the backbone of the online display advertising market. No advertiser can easily afford to leave it off the schedule. Dean Evans, chief marketing officer of Subaru of America, is typical in his attitude: “If half the US population is on Facebook, you have to work it to learn it.” Hence Nielsen’s decision to make Facebook data its OCR “tentpole”.

But what if one of the world’s biggest advertisers defies the orthodoxy, and pulls out of Facebook display – what then? There’s no doubt that General Motors’ announcement last week has had a profoundly destabilising effect on Facebook, all the more so as it came shortly before the much-hyped market flotation.

Actually, GM spends very little of its advertising budget on Facebook display: about $10m a year out of an estimated $3bn. Indeed, it spends more on its Facebook pages ($30m a year in content provision), to which it says it is still firmly committed. But that’s not the point. What if other advertisers, taking GM’s lead, start a Gadarene rush to the Facebook exit? GM’s announcement has, in a nutshell, reinforced a growing conviction within the investment community that the Facebook IPO is “Muppets’ bait” (to use Business Insider founder Henry Blodget’s singular phrase).

In point of fact, many fellow advertisers (particularly those in the auto industry) see GM’s surprise move as motivated less by an ideological stance on Facebook display ratings than by its global chief marketing officer’s desperate determination to wring $2bn out of marketing costs over 5 years. Joel Ewanick (for it is he) has a well-attuned eye for catchy headlines, and few could have been more catchy – as the lengthy piece in the Wall Street Journal clearly demonstrated – than his bombshell last week before the IPO.

But now that the second shoe has dropped, we have a better idea of what Ewanick is up to. He has just announced (to his favourite journalists at the WSJ again) – and presumably at his new media agency Carat’s behest – that the Super Bowl is way too expensive as well, and he won’t be participating in that either. Some doubt that he means exactly what he says. They believe he will only pass on the Super Bowl in the sense that Nike passes on the World Cup. But let’s put that aside for now. Taken at face value, what Ewanick is telling us is that neither Facebook nor the Super Bowl sell enough GM vehicles, because they are both massively overpriced.

That may well be trivially true. But display advertising has never been simply about shifting metal (or any other branded product for that matter). It’s also about maintaining and propagating your image. The question for Ewanick is not whether he can afford to skip Facebook and the Super Bowl, but for how long.

Facebook in decline? It’s a matter of trust

June 22, 2011

The trouble with urban myths is they have a habit of gaining credibility if enough people retweet them. No, not the one about Jemima Khan and Jeremy Clarkson. This one is practically cosmic in its significance. Facebook, they say, is perched on the edge of vertiginous decline and will never make the 1 billion users its avid investors are banking on for an IPO.

The rumour appears to have begun with a plausible article, whose headline says nearly everything you need to know: ‘Facebook sees big traffic drops in US and Canada as it nears 700 million users worldwide’. I don’t want to become entwined in a discussion which has all the nit-picking allure of a symposium on the Arian heresy conducted by the early Roman Catholic church. So I won’t. The gist is that Facebook’s tsunami-like growth in developing countries conceals an actual audience decline of 6 million people in the USA during the month of May.

So far as the statistics are concerned, they seem to have been robustly rebutted by Henry Blodgett over at Business Insider. His distilled point is that the so-called decline ignores mobile use, which in fact increases steeply as high school kids and students pack up for the long vacation. So investors and advertisers can relax. There’s no decline at all, just a bit of a hiccup.

Whatever, it’s started people thinking – and many of these people seem to be older-profile Facebook users. A poll conducted by OnePoll among 1300 UK users for Marketing magazine reveals that a majority of over-45 year olds are considering exiting from Facebook. Youngers ones aren’t that chuffed either – more than a third said they had thought of quitting recently.

This may indeed illustrate Facebook fatigue, but more likely reflects growing alarm about Facebook’s perceived abuse of privacy (58% said they were unhappy about Facebook’s use of personal information).

Either way, Facebook should be concerned (although it says it is not). Forget the statistics. What matters here is engagement. As growth inevitably slows in the more advanced economies such as the USA and Britain, so Facebook will have to expend more effort on creating greater dwell time, by launching new and more useful tools. Alas, these tools come at a certain cost, if they are to be of use to advertisers – they involve ever-more sophisticated manipulation of personal information.

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