Mobile Fix – Facebook names the date
Simon Andrews, founder of the full service mobile agency addictive!, says the Facebook IPO question boils down to: Will GAFA change their ad model to look like current ad models or will advertising change to reflect how people use these tech businesses?
It’s reported that 18 May is the date for the Facebook IPO. The financial world seems divided – some believe the $100 billion rumoured valuation is perfectly sensible based on the huge audience. Others wonder if the ad revenue will ever justify anything like this valuation.
Lex in the Financial Times has a typically thorough look at the issues and concludes that “it is hard to imagine the required levels of growth or margins if Facebook does not become ubiquitous or cannot deliver on the promise of a superior sort of internet advertising. If it cannot, a $100 billion-plus valuation will be about as meaningful as having 3,000 friends”.
So the Facebook IPO raises an important question: Does the future of advertising look a lot like the past? Or is it going to change fundamentally?
Viewing of good old fashioned TV has never been higher – and ad revenues continue to do well. While press circulations are under pressure, the ad revenue is holding up reasonably well. And outdoor, radio and cinema also continue to prosper.
All the media owners are investing in digital extensions of their business, but it’s hard to see anyone trying to reinvent themselves. And why would they? The ad industry that feeds them their revenue doesn’t look that different to the world portrayed in Mad Men – albeit with fewer lunches and poorer tailoring.
The one thing that has changed is that the agency reception is now filled with people from GAFA as well as Twitter and a million new start ups – all of who have a business model predicated on monetising their eyeballs with ad dollars. But because the ad opportunities don’t currently look like those that Mad Men would recognise, they are struggling to get real traction.
As we mentioned a few weeks ago, for all of Martin Sorrell’s bullishness about the WPP spend on Google, Facebook and Twitter, they still only account for around 3% of his total media spend.
So the Facebook IPO question boils down to; Will GAFA change their ad model to look like current ad models or will advertising change to reflect how people use these tech businesses?
We are seeing some interesting examples of new advertising models working. Zynga have come up with a genius way of monetising their $200 million buy DrawSomething; getting people to draw brands. Smart Car used twitter in a really clever way in Argentina – once the page is open hold down the J key.
P&G are supporting their Olympics presence with a fantastic TV ad – except it’s not on TV (yet?). With around three millions views and lots of social buzz the two minute film looks like a modern way to do marketing. They have over half a millon likes on Facebook, so should be able to build a profitable dialogue with those fans. And with the film proven to work they should now invest in TV to build the audience. Or should they spend the money with Facebook to get the film seen?
The right answer is probably both, but the client is seeing that good content can earn good audiences for free. Is the value of someone choosing to view that film worth more than someone seeing it in the middle of a TV show?
But brands need scale – the basic model of FMCG products is that each evening a billion people around the world see the ads and the next day a million people buy the product. A YouTube channel and lots of Facebook likes isn’t going to get you shelf space in Tesco anytime soon.
We do see that the digital formats the Mad Men agencies do get (good old banners and buttons) can have a future, as they can deliver scale. And they can deliver on brand metrics. We suspect that Facebook ads work in the same way as the majority of TV ads – we don’t really notice them but they are processed without much conscious involvement. Robert Heath, the thinker behind this theory has a new book Seducing the Subconscious, which is well worth reading.
If we can prove that Facebook ads can and do convey brand messages, there is a big future. But if we find that the current ‘quiet’ ad formats on Facebook don’t work hard, then there is a big question mark, as ‘louder’ ad formats could drive users away.
And old school agencies should be concerned – clients are working with a whole set of specialists who really get Facebook and they are getting lots of investment. Could these specialists threaten the role of traditional agencies?
The other side of the argument is eloquently explored in a Forbes article, which suggests Google and Facebook might completely disappear in the next five years. It sounds ludicrous until you start remembering huge web businesses like Excite, Alta Vista, MySpace and Friends Reunited that have virtually evaporated.
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