Could Facebook really be the advertising emperor after all?
Facebook will replace online display advertising as we know it - and will become the highest grossing media property in history.
Ben Elowitz
That is a prediction calculated to gladden the heart of Mark Zuckeberg, whose IPO took a hit when General Motors announced it was pulling all of its advertising from the social network amid doubts about Facebook as an advertising vehicle.
The proposition comes from Ben Elowitz , co-founder and CEO of Seattle-based next-generation media company Wetpaint, and author of the Digital Quarters blog about the future of digital media.
Elowitz, writing in a blog on AdAge , says Facebook needs a huge change in its advertising revenues, "Fortunately, I think we're about to see a huge discontinuity, "he says.
The key is in a single idea, says Elowitz, and Facebook is singularly able to deliver on it: SELL RELATIONSHIPS, NOT IMPRESSIONS.
The first 100 years of brand advertising was built on a captive audience with interruption advertising in TV, radio, print, and online, blogs Elowitz .
" That created a $540 billion market to reach a mostly-right audience at the mostly-right time, with a sometimes-right message delivered via occasionally-great creative. The basic idea being that if you reach those people with enough frequency and decent creative, they'll eventually hear your message."
But , says Elowitz, never has has any brand had an advertising platform that could create a relationship with a consumer before she makes a purchase.
Until now. And that is Facebook.
A relationship is worth a hundred or a thousand times an impression – or more – depending on how you monetise it.
"The ability to sell relationships puts Facebook in a completely different business than every other media company – and their product is orders of magnitude more valuable. To undermine that premium would be absolute folly. That's why Facebook should never, ever sell impressions".
Back in 2007 MySpace flooded the market with banner ad inventory and watched their value plummet to pennies per thousand views.
But says Elowitz…"by creating truly original ad products that have no comparables in the market, Facebook will be able to create and sustain its own price point. And because Facebook is the only game in town when it comes to selling consumer relationships at full scale, they have a lock on that market.
"Scarcity of sources with huge reach and a product that cements relationship for life could be a killer combination."
Elowitz says advertisers are waiting to invest in brand advertising on the web.
"To date, they've allocated only 40% of their online ad spend to branding, even though more broadly brand advertising garners 90%. As a relationship broker, Facebook is the one who can convince them to spend. Relationships can be built more effectively on social media than through any magazine spread."
Facebook's greatest competitive advantage is the incomparably rich dataset it owns about each and every one of its 900 million users.
Elowitz says this is a huge opportunity for the entire digital media industry.
"Online advertising has become a commodity (thanks, Google!). Facebook is digital media's one best hope to reverse that trend and make online advertising more valuable than offline advertising by tenfold."
Elowitz's idea drew immediate and sharp comments on the AdAge website.
From Wayne Rowe in Toronto: "Millions more people abandon FB every month than join. And the majority of new accounts are late adopters trying to sell things and third world countries giving it a whirl. Facebook is history.
"This proposed advertising model is a techie dream scheme, but completely lacking in the fundamentals of how advertising actually works. "
From Marcelo Salup in Florida: "I think that the entire premise of the argument is flawed. Most consumers don't want relationships with 80% of the brands they use every day. Think milk, cereal, coffee, toothpaste, shoes, underwear, soap, shampoo, eggs, toast... these are transactional brands. Most of the time, one buys them in auto pilot.
What makes anyone think that they can "sell" my relationship with something? Even whores don't kiss!
From Phil Goodman in Carlsbad, California: "When will everyone realize that you can't sell commercial relationships on social media? ".
From Chris McLoughlin, New York: "This is well articulated nonsense. While marketers like to pretend that they have "relationships" with consumers, no consumer wants a "relationship" with a marketer. Consumers ask what a brand can do for them, why it delivers value, or what problem it can solve for them.
"The essence of effective marketing is a clear, engaging, and efficient answer to these questions. TV and print have always facilitated that kind of communication really powerfully. Digital display does it less well. And because Facebook is a terrible creative medium it does it worst. "
I myself tried to contact Ben Elowitz in Seattle, but it was the July 4 holiday week. I believe the idea is well worth exploring - and wanted him him to give me an example of exactly how this relationship concept might work in practice. When we touch base, I will let you know.