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.


Research underwrites Facebook’s stratospheric valuation

May 3, 2012

Handily, just weeks before an IPO tipped to give Facebook a value twice that of Ford, some research has come to light underwriting investors’ colossal projection of faith.

Here, to give the flavour, is Mediapost’s take on it:

Social media has surpassed search, and is poised to overtake online display advertising as the No. 1 source of digital media planning and buying, according to the latest edition of a quarterly survey of US advertising agencies. The survey, conducted by Strata, the agency media software and processing firm owned by Comcast, found that 69% of agency executives now consider social the “focus” of their digital ad spending — up 32% over the past year, and now a close second behind display (71%) as the dominant digital media-buying platform in the minds of agency executives.

“The survey demonstrates that there has been a shift from search -– which has dominated the digital part of the business for the last five to 10 years -– to social,” says Strata CEO and president John Shelton.

Shelton said that view was affirmed to him this week while he was attending a technology conference of executives from small and mid-size agencies in New York City this week in which social was the main topic of discussion and nary a word was mentioned about either display or search.

“I did not hear the word ‘search’ once,” he said, “ and maybe two out of three of the vendors [presentations] and three out of four of the [agency executives’] questions were about social. Social media is absolutely their main focus right now.”

Enough said. At least, for now.


Are you a Googler or a Zuckerbug?

January 26, 2011

Think carefully before you answer. There’s a great deal more at stake than the passing satisfaction of an intellectual parlour game.

What we – consumers and advertisers alike – are being asked to debate is the future shape of the internet – the way we approach it, the way we use it. Up to now, it’s been pretty much a search-shaped universe, moulded around the success of its greatest information engine. Now we’re being asked to look at it a different way – the social network way – thanks to the meteoric success of Facebook.

Whoever wins the battle of ideas also scoops the global jackpot. Russian oligarch Yuri Milner and investment bank Goldman Sachs have already made their bet. They stand to be the biggest financial winners when (rather than if) Facebook becomes a publicly quoted company. But what about the rest of us?

Superficially, Google has little to worry about. It has just produced a record set of fourth quarter figures. To those who complain that it is, strategically, a one-trick pony, it can point to success on other online platforms. Video, of course, with YouTube; and more promising still, a potentially market-leading position in mobile with the aid of sub-brands Android and Chrome. What it does not get – CEO Schmidt’s recent enigmatic remarks about developing “serendipitous search – search results searchers didn’t even know they needed” notwithstanding – is social. An upstart rival has excluded Google from the market’s most dynamic area of expansion; from zero in 2004, Facebook’s global reach is now approaching 600 million.

Which brings me to my column, posted on marketingweek.co.uk this week, and its focus on the recently announced change in leadership at Google.

Leadership is one of the paradoxes of this sector. The products and services are highly sophisticated, the organisations which create them highly complex, but the leadership issue is often brutally simple. Continued success frequently comes down to the single-minded vision of a guru-like founder.

Zuckerberg: The $50bn leadership question

Looking ahead, that may well be Facebook’s defining issue as it moves inexorably towards public ownership, with all the grown-up demands that makes on a company’s leadership.

It is a frightening thought that one of the world’s most powerful brands is – and will probably remain – the brainchild of a 26-year-old genius with borderline Asperger’s Syndrome (to take a cue from The Social Network). His obsession with teaching the world to communicate electronically was born out of his own inadequacy at chatting up Harvard girls. Let’s see how he manages in the adult world of the capital markets, where you don’t always get your own way.


Nestlé makes the case against social media usage by brands

March 23, 2010

Feeling bored? In need of stimulation? Then turn to Nestlé’s corporate Facebook page to find out just what a pig’s ear the global brand is making of its social media usage.

In Nestlé’s case “fools” and “angels fear to tread” comes to mind. Given its history of ill-inspired corporate communications, I would have been extremely wary of handing critics any kind of social platform at all, let alone one as popular as Facebook with its claimed audience of 400 million. Here’s why.

Call it the curse of Ernest Saunders if you like (except Guinness, much worse afflicted, has entirely recovered). Saunders was at one time a senior Nestlé executive involved in what can only be described as a corporate cover-up of deaths in the Third World which had occurred after consumption of the corporation’s infant milk formula. It should be said the formula itself had little to do with these deaths, which were caused in the main by the toxic water it was mixed with. And it should be added that this product was never for sale in the UK or Scandinavia, where for a generation students and the sons and daughters of these students have kept aflame the “black history” of Nestlé poisoning babies, much to the bafflement of local management teams who, in all probability, have never had anything to do with the product.

Now I’m sure you can guess where I’m going with this. Yes, once upon a time campus malcontents had to restrict themselves to the student demo, the rag and various forms of samizdat based on John Bull printing technology to propagate their message. But now they’ve  got a global internet platform expressly made for their requirements. That, at least, was the specific intention of Mark Zuckerberg when he launched Facebook in 2004. In the event, it has found a much wider application than the student common room, but let’s just say 18-25 year old ABC1s remain a core audience.

Things have moved on for Nestlé’s corporate reputation as well, but not in a positive direction.

I may, judging from the abundant criticism, be naively unique in believing that Nestlé’s behaviour is no worse than than that of most other multinationals. It’s not ITT subverting the Allende regime in Chile; it’s not BP overthrowing Mossadeq in Iran. And it’s certainly not IG Farben supplying the Third Reich with ZyklonB. You’d never believe it, though, after visiting Nestlé’s Facebook wall. Here’s just one piece of highly representative “fan” mail bobbing about in a welter of unremitting criticism:

Laurence Donoghue: “We don’t want a Q&A session, Nestlé, about how you think what you’re doing isn’t criminal. It is and you are a nasty, immoral stain on humanity. We want you to stop buying palm oil not only from Sinar Mas, but from third party companies as well. Frankly I’m sick of Nestlé exploiting and degrading the earth and the people who live on it.”

Palm oil plantations, by the way, are the new infant milk formula scandal. Thanks, it seems, to Nestlé’s wicked connivance with loggers and planters, the orang-utan is threatened with extinction; and all in the name of tawdry commercial advantage. This one should run and run.

I also note in passing that “fans” – in a final two-fingered salute to Nestlé’s revered brand values – have been making light of its logos. “Killer”, done à la Kit Kat, is one of the more eye-catching examples. And there’s not a thing Nestlé can do about it. After all, removing it will only make matters worse. As for legal action…don’t even think about it.

I leave it to Louise Greeves, consultant at social media agency NixonMcInnes – recently quoted in NMA – to pass measured judgement on Nestlé’s venture into social media:

“It should be about empowering the community and being honest about mistakes. This exposes a real need to train staff in social media and not see it as something that brands can put junior staff in charge of.” Junior – I suspect – no longer, Louise.

Now, I know what some of you might say. We’re all missing the point here. Actually, Nestlé’s comms team is being fiendishly clever by drawing the poison from all this juvenile ire and confining it to a relatively small “space” where it can be harmlessly dissipated. Come again? Nestlé’s doing what? No, Louise is right first time: Nestlé simply hadn’t thought through the corporate implications of what it was doing.

All of which moves us neatly on to one of the main motifs of the annual ISBA conference, held in London last week. Should advertisers ever tangle with social media?

There are examples of timely first aid out there. ISBA director Debbie Morrison mentions one in Pitch, featuring Dell. The PC manufacturer was able to turn around an irate blogger, complaining about poor service, by using Twitter as a customer service and sales platform.

But these edifying examples are few and far between. Social media have a proven track record – placed in the right hands – of virally advancing causes. It was a point eloquently driven home during the presentation given at the conference by Thomas Gensemer, the new media comms expert who helped to get Barack Obama elected. It is less obvious how brands can monetise these sites, or indeed what they are doing there in the first place. No one wants a spammer.

Don’t just take my word for it though. Here’s Nigel Walley, founder of Decipher, in his splendid peroration at the conference:

“The greatest thing you can ever do with new media is to say: No. It’s time – and the recession is a backdrop to this –  to call  “emperor’s new clothes” on 50% of what has happened in new media in the last 10 years. Stop being diverted by the fluff. What you’ve got to ask yourself is this: would firing your digital agency do anything to your business other than reduce your costs?”

And if you don’t feel inclined to believe Walley, then take another look at the case of Nestlé.


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