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Facebook: still bad at making money

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This blog post is based on the one I posted on www.warc.com

Deloitte has produced some great research into the UK TV market to coincide with the Edinburgh International TV Festival.

The study, entitled ‘Perspectives on Television in Words and Numbers’, is full of all sorts of stats about video-on-demand uptake, product placement and other TV goodies. But one statistic in particular caught my eye. Deloitte makes the point that television as an industry remains far far more effective at converting users into revenues. The report, which is based on UK data, states: “It takes 93 days to generate a pound of advertising revenue per Facebook user; this compares to 11 days for an ITV viewer [ITV is the UK’s leading commercial broadcaster]. Social network’s CPMs are estimated at between 30 and 40 pence, far lower than the average for television. YouTube’s CPM has been estimated at 72 pence.”

It’s not exactly comparing apples with apples (a Facebook user is not the equivalent of a TV viewer), but it’s an interesting point. Facebook may be making money, and its revenues may be growing quickly, but it’s still pretty ineffective at turning users into dollars.

A further illustration of this is in the Deloitte endnotes. ITV, a UK-only broadcaster that has had a torrid few years, pulled in £987 million (around $1.5 billion) of revenue in the year to 30 June 2010. Facebook, which has upwards of 500 million users around the world, is forecast to make $1 billion in the more optimistic forecasts.

I was recently asked whether I thought social media revenues were likely to follow the same growth trajectory as search revenues did a few years ago. To recap, here’s a reminder of just how quickly Google grew in the middle years of the last decade.

Despite the forecasts of some tech evangelists, on the current evidence, it would take an almighty shift in advertiser behaviour to push Facebook along the same path. Recent forecasts from eMarketer show solid growth in adspend on social networks over the next two years from $1.4 billion to $2 billion in the US. Good, but it’s no Google! It’s fair to say that Facebook et al are still seeking the ‘killer app’ when it comes to attracting marketing investment; the equivalent to Google’s AdWords.

Of course, it’s worth remembering that Google’s rise was driven as much by SMEs and direct-response advertisers as by big brand advertisers. It created a whole new direct-response channel.

Interestingly, there are social media companies out there already making large sums of money. China’s Tencent, owner of the QQ platform, is one of them – its revenues easily eclipse those of Facebook despite being a single-market operator. Tencent’s growth, however, has owed little to advertising. Online ad revenues make up less than 10% of its turnover. The bulk of its revenue comes from ‘internet value-added services’, mostly online gaming. It makes money, in other words, from its users.

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Written by davidtiltman

September 2, 2010 at 6:01 pm

Agencies – what one client really thinks of you

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Last night I went along to the Revolution Awards, celebrating all things digital. And I ended up chatting to one of Britain’s top marketers. I won’t divulge his name, but it’s safe to say he’s the man behind some of the best-known ads in the UK of the past few years and has a pretty formidable track record across the industry.

So naturally, I decided to probe him a bit for what he really thinks about the agencies that he’s worked with. And after a few glasses of wine, he was more than forthcoming. In no particular order:

1. The best you can hope for from an agency is a couple of good ideas a year. Often you won’t even get that. And he’s talking about some of the best agencies in London when he says that – BBH and Dare are two he mentioned.

2. BBH are ‘difficult to work with’, but obviously get results.

3. He really didn’t think much of Rapp – ‘you’ll be waiting a long time to get a good idea out of them’. They are ‘just a machine’.

3. Ogilvy are another agency he thinks are all mouth and no trousers. And they should never have moved to Canary Wharf.

4. JWT are now a very weak agency in his opinion. In fact, he questioned WPP’s takeover strategy, saying it seems to have created big, bland networks.

5. One of his biggest complaints was the sheer lack of talent within agencies. There are normally only a handful of people in an agency he’d actually want to work with. That’s a common complaint, and the reason agencies are such brittle businesses – a couple of important people moves and they can be in real trouble.

6. Media agencies could have cornered the digital space (a couple of Revolution Awards actually went to media shops). But they’re not smart enough to see the opportunity.

Pretty damning stuff, really.

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April 9, 2010 at 7:21 am

Nice paywall, Mr Murdoch; now what are you going to do about Google?

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So after all that talk and months of planning, Rupert Murdoch’s NewsCorp has finally unveiled his grand scheme to make his newspaper websites turn a profit.

And it is, er, a paywall.

NewsCorp’s The Times will charge £1 a day or £2 a week for access.

Bit of a disappointment really. I was at least expecting some form of tiered charging system, a la the Financial Times. But on a global level, a micropayments system, similar to the ones used in online gaming, does seem to have traction.

Can it work? I asked that months ago on my old Media blog. And frankly, we’re no nearer any answers. It seems crazy to think that people will pay £1 to read a news story they can read anywhere else for free. The BBC is still out there, of course, and even if it goes through with plans to scale back its online content, there is still the Guardian, which has pledged itself to a free-access future. The Times is really going to have to show it can deliver value-add content, or rely on a very loyal minority. And let’s face it, Murdoch’s online track record isn’t exactly sparkling.

Still, the sums involved are pretty substantial, according to the Guardian:

Assuming that only 5% of daily users convert to the paywall system – a standard metric for paywalls – that would bring in £1.83m if they each buy a £1 daily pass. At a 10% conversion, it would net £3.66m per month for the two papers. If more people of those choose to buy the weekly pass, the revenues would be lower.

Compare that with the £40m made by The Guardian’s web division in the last financial year, according to outgoing CEO Carolyn McCall.

The big question now is what to do about Google. We all know that if you paste a headline into Google you can bypass a paywall – just try it with the Wall Street Journal. Should The Times block Google and protect its paywall but hurt search traffic? Or should it be like the WSJ and just pretend nobody knows about that?

There’s been a lot of sabre-rattling toward Google from NewsCorp, suggesting it might seriously pull back from Google. Instinctively that feels like a mistake, and something that could seriously set The Times back years. From personal experience I know that news sites get more than half their traffic via search. What’s more, The Times seems to be looking for one-off payments rather than tying people in to annual subscriptions. That approach will require regular traffic through the site.

One thing’s for sure, though. If Murdoch starts making money from this, there will be a lot of others following him. And the more of them that do so, the less free competition there will be for The Times.

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March 26, 2010 at 11:32 am

Six reasons internet measurement is rubbish

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The greatest fallacy in digital marketing is that the internet is the most measurable medium. It’s not. Yes, it’s the medium with the most data (absolutely phenomenal amounts), but making sense of that data to get a true picture of what consumers are actually doing (ie measuring it) is still far from an exact science.

Last week I journeyed into the heart of data geekery, spending two days at the biennial I-com conference in Lisbon, a conference dedicated solely to online measurement. I’d be lying if I pretended my brain didn’t hurt by the end of it. But several themes emerged over the course of the conference that deserve recognition outside this specialist world. For marketers (precious few of whom actually attended the conference), sorting this stuff out will be vital if they’re ever going to spend serious money online. And for publishers, this stuff is key to the way they will sell online performance.

1. Even the things you think you know, you don’t. One of the key problems with measuring online activity is that the data comes from machines, not humans. Linking up what we know from humans (ie panels) with the data deluge from the internet is tricky. The result is that we often assume the machine data tells us things it doesn’t.

Take unique users for example. Sounds like a pretty basic piece of information, and something most campaign metrics seem to look at these days. But as one speaker pointed out, measurement of unique users is usually based on cookies. Now people use multiple devices to access the web (mobile, home computer, work computer etc etc), and each has a different cookie. Also, they are increasingly using multiple browsers on single device, adding even more cookies. Some users, said the speaker, had around seven separate cookies. So what does that make a unique user?

2. Clicks are pointless. This isn’t new news, but that doesn’t stop click-through rates being used as a measure of campaign success. Yes they’re easy, but they mean absolutely nothing unless an ad is purely a direct-response piece. What’s more, click-through rates are declining fast; that means campaign measures based on clicks are looking at a diminishing audience. Also, there are, said one panellist at the conference, no correlations between click-through rates and other brand scores.

3. The last click tells you little. All the action is still around the last click – this particularly applies to search, where search engines make their money from people clicking on links. But much of the hard work in terms of taking people through the purchase funnel comes much earlier – and this bit is really hard to measure. Doron Wesley from Cheil/Samsung admitted at the conference that the brand had not even started to look at so-called ‘attribution’ – working out where and when a consumer interacted with a brand online and what the influences on purchase were. If a brand like Samsung can’t do this, not many others can either.

Search is an interesting one, because on the surface it is so measurable. But in truth it is still extremely difficult to measure search’s total impact. How do you measure ROPO (research online, purchase offline)? Or even the branding impact of search activity?

4. People can’t even agree what needs measuring. Many years ago, when I first started writing about online marketing, an agency boss told me that the medium needed reach and frequency measures like TV to get marketers interested. Imagine my surprise when I find the exact same argument is raging in 2010. In Lisbon it was the GRP system that holds such sway in the US that caused debate – does the internet need to adopt GRPs to be able to get marketers interested? There’s no consensus here – everyone knows the internet needs some sort of standard measurement currency, but nobody can agree on what that should be.

5. Increasingly the action is in social, but that’s even less measurable. Social media is increasingly used as a PR tool. Terms such as ‘engagement’ and ‘conversation’ abound. But what does that mean and how do you work it’s delivering.

The last couple of years have seen all sorts of buzz-tracking services launch, and some were at the conference. But they didn’t really have an answer when one delegate asked why, when he asked five different word-of-mouth measurement companies to track his Superbowl ad, he got five different responses. These services sell themselves as tracking tools, but actually they are hugely reliant on human input to categorise brand mentions on social media. They’re better than nothing, but they’re still flawed.

6. Don’t even start on mobile. The mobile expert that appeared on stage simply described mobile measurement as ‘icky’. Nuff said.

As Geoff Ramsey, CEO of eMarketer, put it:  “Right now, we’re in the dark ages.” And as one of the few clients at the conference told me, without a proper currency online that allows some sort of comparison between media, he cannot advise heavy spend in digital.

So next time you hear an agency lazily praise the measurability of online media, it’s time to ask a few hard questions.

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March 17, 2010 at 1:58 pm

Digital marketing – the ad world’s ginger stepchild*

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I’m busy writing up this year’s Digital Media Top Asian Brands report. This is the third year Media has looked at consumer attitudes toward brands and their online activities. It’s based on some pretty meaty research from TNS covering Hong Kong, China, Singapore, Taiwan, Malaysia and Thailand.

Obviously I’m not going to give anything away before the data is published, but there is one very interesting finding that deserves to be aired and discussed. The data shows quite clearly that people really don’t like most of the established forms of digital marketing.

I’ll publish the full chart post-publication, but the key finding is this: across these Asian markets, the seven least trusted forms of marketing (online and offline) are all digital. Ads in video games, mobile SMS, email ads, banner ads and, interestingly, search ads are among the marketing channels with very low trust scores.

At the other end of the table, the most trusted marketing channels also include a few digital options. Unsurprisingly, recommendations from friends and family is the out and out leader. But expert reviews on websites, manufacturers’ websites, consumer opinion on blogs and consumer reviews on

Maybe digital does belong to PR after all!

Watch this space (and the Media magazine and website) for more data on this. I’m doing a feature on it too.

*No offence intended to those of red or strawberry blond persuasions. It’s just a phrase!

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March 5, 2010 at 5:45 pm

The future of mobile? Look to India

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Mobile. I’ve lost count of the number of times I’ve been told how important mobile will be in Asia.

At conference after conference, the mobile vendors are there explaining why mobile is so important. Why internet penetration is being driven by mobile phone usage in markets like India, China, Vietnam and Indonesia. Why mobile offers the chance to target emerging consumers in geographically vast countries. Why these consumers are more receptive to mobile marketing than most others. And it all makes sense. But for a variety of reasons (lack of co-ordination, lack of metrics, all the usual stuff) nobody seems to be making big money out of it.

But there seems to be something stirring in India. There was a really interesting article in today’s FT about the Bollywood mogul Amitabh Bachchan and his new vlog. Every day ‘Big B’ will record an audio blog. Nothing unusual there, perhaps. But the way consumers will be able to access this blog is by dialling into it. So that’s a marketing channel and a means of monetising your audience all in one.

This isn’t the first time I’ve seen India going its own way in the mobile sphere. At last year’s Spikes Asia, I moderated a session on mobile at which Nokia’s Sandy Agarwal talked extensively about Nokia Life Tools, a mobile phone service launched in 2008 for rural customers in India and now being rolled out elsewhere. The features are pre-loaded onto an entry-level handset and work via text message (no point making it internet-based as its target consumers are out in the middle of nowhere). It gives users information such as weather updates and market prices. He made the point that there were huge opportunities for brands to get involved in these services (though I guess he would say that).

Why is there so much innovation around mobile in India? It is huge, obviously, and internet penetration has been much slower to gain ground than in China, meaning that the gap between mobile penetration (413m) and web penetration (33m) is vast (figures for early 2009 from the ADMA Yearbook). That means mobile is almost a standalone medium, rather than an adjunct to digital, and so is more likely to develop its own marketing ecosystem. At the same time, it’s now a market with enough scale to make money out of using some sort of micropayments model. That makes it a good testbed for these types of service. Then there’s good old-fashioned Indian entrepeneurialism – as the FT story makes clear:

The Tata Strategic Management Group, a consultancy, estimates that the number of what it classifies as middle-income households – those earning between Rs110,000 and Rs240,000 per year – in India will rise from 75m today to over 103m by 2015. This would make middle-income consumers the biggest group in Indian society for the first time in the country’s history.

Products, such as Mr Bachchan’s vlog, are aimed directly at this group. In a country where internet penetration remains low but mobile phone use is burgeoning – India now has 550m mobile phone users – the vlog unites India’s fascination with celebrity and its growing communications revolution.

Going back to the FT story, it’s interesting that it’s a celebrity taking this step rather than a brand. But marketers in India should certainly be watching out for the results of ‘Big B’s’ vlogging venture. Mobile in India may not have the bells and whistles of the iPhone-crazed markets in the West, but for anyone interested in connecting with emerging consumers it is probably far more relevant.

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March 1, 2010 at 6:32 pm

Social media is crap – AdAge says so

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Awesome article on AdAge this week on the limits of social media. It’s by a guy called Jonathan Salem Baskin, and he warns brands against blindly piling cash into social media and out of channels which, though unfashionable, have at least delivered results in the past. He also takes a swipe at the social media ‘gurus’ forever lashing out at the luddite marketers who just ‘don’t get it’. Here’s a choice excerpt:

I know all too many CMOs who find criticizing the social-media lobby something like debating the dialectic with avowed Marxists – you’re never right when the very premise of your existence is wrong, and it gets old being told that your visceral concerns are a result of your failure to perceive class struggle or to tweet enough. Nobody with responsibility for a bottom line has ever felt comfortable with social media as a replacement for traditional advertising. Arguing that consumers “buy more” if you “sell less” just smacks of another five-year economic plan for the glorious motherland.

While he’s obviously hamming it up a bit for effect (as I have done with the headline), he makes a very good point – and one that goes for media owners as well as brands.

A case in point – my own dabblings in Twitter last year for Media. When we set up a Twitter account we were just experimenting with the medium, watching what other media owners were doing and seeing what worked for us. Coming from a publishing background, where what you want is people reading the words you’ve sweated blood over, we began by pushing out our headlines with links to the stories.

At the time, I remember being told by the experts that this was the wrong way to go about it. That we wouldn’t be respected if all we did was pump out links. That we were no better than an RSS feed. One of our competitors even tweeted that we had completely misunderstood the site. But what did we actually want to do with Twitter? While it’s great to make a few people feel warm and fuzzy and engaged, we didn’t have the staff to devote to doing this consistently. They were too busy doing proper journalism. The stuff they’re paid for. What we wanted was for people to read our copy, driving clicks that allowed us to sell ads.

A year on? When I left Media the Twitter feed was one of the website‘s biggest drivers of referral traffic. We abandoned automated headline/link tweets early on to be a bit more ‘bloggy’, but the purpose of the feed is still to generate clicks through to the content. Funnily enough, most serious publishers do exactly the same. And it seems to work with what a lot of people in our business use Twitter for – finding and sharing interesting information.

And the competitor? Funnily enough they’re pumping out links to their own content now.

So kudos to Mr Baskin for having the cojones to suggest the Emperor may not be as fully clothed as we’re told.

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February 24, 2010 at 3:04 pm