Darcel Disappoints
Growing legions of marketing consultants are pushing social media as the
can’t-miss future. They argue that pitches are more likely to hit home
if they come from friends on Facebook, Twitter, Tumblr or Google+.
That’s the new word of mouth, long the gold standard in marketing. And
the rivers of data that pour into these networks fuel the vision of
precision targeting, in which ads are so timely and relevant that you
welcome them. The hopes for such a revolution have fueled a market
frenzy around social networks — and have also primed them for a fall.
The drama swirls around data. In the “Mad Men” depiction of an
advertising firm in the ’60s, the big stars don’t sweat the numbers.
They’re gut followers. Don Draper pours himself a finger or two of rye
and flops on a couch in his corner office. He thinks. His job
is to anticipate the needs and desires of fellow human beings, and to
answer them with ideas. What slogan would light up the eyes of the dour
airline executive, or the dog food people? Fellow humanists dominate Don
Draper’s rarefied world, while the numbers people, two or three of them
crammed into dingier offices, pore over Nielsen reports and audience
profiles.
In the last decade however, those numbers people have rocketed to the
top. They build and operate the search engines. They’re flexing their
quantitative muscles at agencies and starting new ones. And the rise of
social networks, which stream a global gabfest into their servers,
catapults these quants ever higher. Their most powerful pitches aren’t
ideas but rather algorithms. This sends many of today’s Don Drapers into
early retirement. Others, paradoxically, hunt down new work on social
networks like LinkedIn.
Yet this year has brought renewed hope for the humanists — or at least a
satisfying burst of schadenfreude. Facebook made its public offering in
May at a valuation of $104 billion, only to see the share price tumble
as many began to doubt the network’s potential as a medium for paid ads.
Corporate advertisers are devoting only a modest 14 percent of their
online budgets to social networks. According to comScore, a firm that
tracks online activity, e-commerce soared 16 percent
from last year, to nearly $39 billion this holiday season. But
advertising from social networks appeared to play only a supporting
role. I.B.M. researchers found that on the pivotal opening day of the
season, Black Friday, a scant 0.68 percent
of online purchases came directly from Facebook. The number from
Twitter was undetectable. Could it be that folks aren’t in a buying mood
when hanging out digitally with their friends?
A more likely answer is this: When big new phenomena arrive on the
scene, it’s hard to know what to count. We’ve seen this before. During
the dot-com bubble in the late ’90s, investors threw billions at
Internet start-ups that promised to deliver targeted ads to millions of
viewers, or “eyeballs.” But eyeballs didn’t produce dollars, and the
high-flying market crashed. Many naysayers gleefully concluded that the
Internet itself had failed.
Yet as these cyberskeptics crowed, a company called Overture Services
was pioneering an innovative advertising application for the new medium.
When Web surfers carried out searches, it turned out, they welcomed
related ads. And if they clicked on one, the advertiser paid the search
engine. Google soon implemented this system on a mammoth scale and
turned clicks into dollars. Advertisers could calculate their return on
investment down to the penny. In this domain, the insights of a Mad Man
counted for nothing. Search ran on numbers. The quants rushed in.
While the rise of search battered the humanists, it also laid a trap
that the quants are falling into now. It led to the belief that with
enough data, all of advertising could turn into quantifiable science.
This came with a punishing downside. It banished faith from the
advertising equation. For generations, Mad Men had thrived on widespread
trust that their jingles and slogans altered consumers’ behavior.
Thankfully for them, there was little data to prove them wrong. But in
an industry run remorselessly by numbers, the expectations have flipped.
Advertising companies now face pressure to deliver statistical evidence
of their success. When they come up short, offering anecdotes in place
of numbers, the markets punish them. Faith has given way to doubt.
This leads to exasperation, because in a server farm packed with social
data, it’s hard to know what to count. What’s the value of a Facebook
“like” or a Twitter follower?
What do you measure to find out? In this way, marketing resembles other
hot spots of data research, including brain science and genomics. In
each one, scientists are combing through petabytes of data, trying to
discern whether certain genes or groups of neurons cause something or
simply correlate with it. It’s not clear, because these are immensely
complex systems with millions of variables — much like our social
networks. Even as researchers swim in data that previous generations
would have swooned over, they struggle to answer crucial questions
regarding cause and effect. What action can I take to get the response I
want?
Debates rage as quants accuse one another of counting the wrong things.
Take I.B.M.’s Black Friday study. While the numbers indicate that few
shoppers clicked directly from a social network to buy a laptop or a
fridge, some may have seen ads that later led to a purchase. If so,
valuable influence went unmeasured. “I.B.M. is looking at a single point
in time,” says Dan Neely, the chief executive of Networked Insights, a
marketing analytics company. Neely’s team followed Macy’s Black Friday
campaign on Twitter, which started weeks before the big day; it
generated a viral flurry on the network, he says. Clearly, many big
advertisers are still believers: last week, Facebook shares got a boost from reports that Walmart, Samsung and other boldfaced names have recently stepped up social-media advertising.
But gauging the effectiveness of these ads is still a challenge. “It’s
hard to measure influence,” says Steve Canepa, I.B.M.’s general manager
for media and entertainment.
That, in fact, may be the ultimate lesson to draw from the social media
marketing miracle that wasn’t. The impact of new technologies is
invariably misjudged because we measure the future with yardsticks from
the past.
Dave Morgan, a pioneer in Internet advertising and the founder of
Simulmedia, an ad network for TV, points to the early years of
electricity. In the late 19th century, most people associated the new
industry with one extremely valuable service: light. That was what the
marketplace understood. Electricity would displace kerosene and candles
and become a giant of illumination. What these people missed was that
electricity, far beyond light, was a platform for a host of new
industries. Over the following years, entrepreneurs would come up with
appliances — today we might call them “apps” — for vacuuming, laundry
and eventually radio and television. Huge industries grew on the
electricity platform. If you think of Apple in this context, it’s a $496
billion company that builds the latest generation of electricity apps.
Social networks, like them or not, are fast laying out a new grid of
personal connections. Even if this matrix of humanity sputters in
advertising and marketing, it’s bound to spawn new industries in
consulting, education, collaborative design, market research, media and
loads of products and services yet to be imagined. Maybe, just maybe, it
will even be able to sell soap.
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