Only Dead Fish

Facebook - Challenge and Opportunity

Post IPO the pressure has clearly been on Facebook to develop new ad models, crack mobile and drive their average revenue per user but I'll say now that I don't think this kind of monetisation is going to be their greatest challenge. There seems to be some momentum behind the development of new ad products and research to prove value, and at last they seem to be thinking differently about how to apply all that data they have on their users including models built on both destination and distributed thinking - integrating Facebook data with third party data to improve the sophistication of targeting not just on Facebook, but out there on the web.

The launch of Facebook Exchange for example - the real-time bidding system that enables users who have been tagged on a third party sites to be re-targeted on Facebook and shown ads that are related to their web-browsing. With the amount of display inventory that Facebook has (a recent comScore study suggested that Facebook could represent more than 25% of display inventory on the web) this is no small opportunity to extend re-targeting strategies into a new area that was previously off-limits.

Similarly, the new Custom Audiences product allows advertisers to plug-in data they already hold on customers (email addresses, mobile numbers, Facebook UIDs) into Facebook in order to re-target them with specific messaging whilst they are on Facebook. The capability to re-target a list of people from a pre-segmented database with context-specific ads is really interesting, and early indications seem to be that it leads to higher conversions at lower cost. 

On mobile, where they have had a lot of negative press, newer 'native' ad formats are proving more effective and contributing towards a not insignificant 14% of their revenues now coming from mobile. 600 million active users on mobile (a number which continues to grow rapidly) and higher levels of engagement than desktop (Sheryl Sandberg said recently that the average mobile user is 20% more likely to come back on a given day) gives them plenty of opportunity to test and learn and a great foundation from which to rapidly scale the right model/s.

So many of their recently launched ad products play nicely into the some of the areas of digital advertising that are showing healthy growth: native advertising formats, re-targeting, and the real-time, programmatic trading of inventory. And efforts are being made to prove where the real value in advertising on Facebook may lie. Their partnership with Datalogix is enabling them to create accountability-driven tools that help establish value beyond the click, better illustrate the relationship between reach and revenue, help advertisers to understand optimum frequency (all very TV-like). Meanwhile tagging technologies are helping establish a more direct data-driven link between ad exposure (as opposed to simply ad-clicks) on Facebook and conversion.

Back in July Business Insider posted a visual drawn by a 'source plugged into the ad tech industry' which, in their usual excitable manner, they described as 'Facebook's next $10Billion business'.

The visual described an area of opportunity that I've long thought had potential: using Facebook data to target advertising on third party sites. Well now it seems that they might be about to do just that, via an ad network that extends beyond their walled garden. This is interesting because it takes a truly distributed approach in the application of their unparalleled mine of user data beyond Facebook itself. In this model, and like Google Ad Sense, you don't need users to come to your domain in order to monetise the relationship you have with them.

Which brings me to what I think is their greatest challenge. In order to pave the way for the kind of ad exhange described above, Facebook have made yet more changes to their privacy policy to ensure they can use the information they hold about you to display ads to you elsewhere on the web. Chief Privacy Officer Erin Egan is quoted as saying: “Everything you do and say on Facebook can be used to serve you ads...our policy says that we can advertise services to you off of Facebook based on data we have on Facebook.”. No confusion there.

I'm not going to bang on about privacy here - Facebook have always pushed the boundaries in this respect and often taken a three-steps-forward, one-step-back approach to settings, defaults, and use of user data. But the point is that this is always a balance, and a really tricky one at that.

In August, Danah Boyd talked about how Facebook was becoming the 'teenage version of email', saying:

“What’s so interesting about Facebook is that it’s not interesting to [teens]. That’s a big challenge for Facebook -- not because people won’t use it, but when they’re not passionate about it, you see a very different kind of user behavior than when someone is passionate about a service.”

The piece suggests that the sheer scale, size and ubiquity of Facebook is acting against it, with teens feeling somewhat overwhelmed by large friend groups, using Facebook for the more utilitarian type of conversation, and increasingly reserving the best content sharing for other networks including Tumblr and Twitter. The lack of asymmetric follow (such as that which characterises Twitter, Instagram and even email) can't help with this.

 

Whilst the article quotes Comscore data suggesting that other social sites are chipping away at Facebook's dominance with this audience, I'm not about to suggest that Facebook is in trouble. It remains far and away the most popular social network amongst teens, and people stay where their friends are so the network's ubiquity also creates its own kind of inertia. But these things are always a trade off and we've seen examples before of rapid declines in usage on particular platforms from this audience (MySpace, Bebo). So as Facebook push the usage of ever more powerful targeting tools that require deeper and more visible use of user data, there has to be a risk that they get this balance wrong. And losing the interest of this kind of early adopter audience cannot be a good thing. 

Earlier this year the American Customer Satisfaction Index (ACSI) found that Facebook had the lowest customer satisfaction rating of just about any social network. So as it reaches peak audience in more mature markets could their greatest challenge be how to avoid becoming uncool?

Post Of The Month - September 2012 - Nominations

Nominations for Post Of The Month are open. I've listed a few of my own favourites below as a starter (I don't usually include talks but have done so this time with Noah's because I think it's particularly good and includes some interesting ideas). Please do add your own nominations in the comments for the best posts you've read in September. When I get a good list, I'll stick them all up for a vote. So my starting three are:

The Interest Graph for Brands from Noah Brier

We Are Five Years Old. Here's What We Learnt by Tim Malbon

Graft and Craft: What Makes a Planner from Martin Weigel

And you can nominate your own favourites below.

Post Of The Month - August 2012 - The Vote

Thanks for the nominations. Another good shortlist this month. So our vote is between:

More Than A Few Words On Digital Marketing by Bud Caddell

Where Are The Women (Redux) from Farrah Bostic

5 Ideas Trapping The Ad Industry Right Now from Mark Pollard

Setting The Digital Course Forward by Winston Binch

This Wondrous Isle by Jim Thornton

Words I Hate by Martin Weigel

And you can vote below:

Small, Frequent, Fine-Grained Interactions

I really liked this post by Graham Oakes over on the Econsultancy blog describing the challenge organisations face in adapting to the 'small, frequent, fine-grained' patterns of interaction that characterise mobile. He talks about how they erode organisational boundaries ("each one chips away at the edge, breaking up the clean line that many organisations like to place between themselves and their external environment") by breaking transactional boundaries and cycles and bringing an informality to interactions. It reminded me of Paul Adams' post from a couple of months back on how the future of advertising will be about many lightweight interactions over time. 

Undoubtedly, the growing significance of always-on platforms (and owned and earned media) makes this kind of stuff more important. And doubtless this brings new challenges of exactly the kind described by Graham and Paul. I liked Graham's suggested imperatives about devolving power to the edges, giving people the tools and insight they need, and sensible use of automation. Many of these challenges and themes arose in the research I did at the turn of the year into evolving client-side marketing structures and agency digital capability.

But I don't think this means that we've seen the end of 'campaigning' approaches. Bursts of activity that have a beginning, middle, and an end. The real challenge, I think, is how organisations can balance both types of activity and successfully combine small, frequent, ongoing, unplanned and informal interactions with big, bold, brassy, planned bursts of activity. How they might really capitalise on what Matt Locke once called the 'new patterns of culture' - slow, fast, and spiky. There's a whole book to be written on that one. 

Post Of The Month - June 2012 - The Winner

Something of a run away winner in this month's vote. So happy to announce that the winner of Post Of The Month for June 2012 is Erik Proulx with his powerful Father's day post. Well done Erik - you get the props of your blogging peers and are entered into the Hall Of Fame. As always thanks to everyone who took part. Nominations for next month's vote will open in early August (possibly slightly later than usual due to holiday).

What Facebook Knows

"This is the first time the world has seen this scale and quality of data about human communication" Cameron Marlow, Facebook

Social Networks are of-course giant data gathering machines, and Facebook is the bucket-wheel excavator of data. I wonder if we're even coming close to imagining the potential of how it all might be applied. 

This fascinating Technology Review piece by Tom Simonite at least hints at this potential in looking at the work of Facebook's Data Science Team, a team that is not short of raw material to mine. Facebook, he says, has 'the most extensive data set ever assembled on human social behaviour'. If it were a country, it may be the 3rd largest in the world but it would also 'far outstrip any regime past or present in how intimately it records the lives of its citizens'.

Facebook has not only the best mapping of human connections (over 125 Billion of them) we've ever had and the (sometimes in depth) profile data of almost a billion people, but data from the daily interactions and social activity of a large proportion of those users (and what Grant McCracken once called 'exhaust data'), the (now more than) 30 Billion pieces of content shared each month, the 300 million photos uploaded per day, the facial recognition, the location tagging, the historical time lines, the gaming, the app store. Then there's the 3.2 billion Likes and Comments generated by Facebook users every day and the huge distributed platform from the millions of Like buttons served up daily around the web (including, potentially, the capability to track the browsing history of Facebook users even when they're not logged on). And the frictionless sharing apps that have neatly switched the sharing default from active to passive and dramatically increased the data potential in the process. When an Austrian law student asked facebook to send him all the data they have stored about him, he was sent a CD with 1222 PDF files on it.

So Facebook knows a lot. What I find most interesting though about studies that are conducted using Facebook data is their sheer scale. The University of Milan 'four degrees of separation' study for example, that concluded that any two people on Facebook are, on average, separated by no more than 4.74 connections, was based on analysis of 69 billion friend connections among 721 million active Facebook users. Similarly, the "Gross National Happiness" behavioural model developed by the Facebook data team analysed positive and negative words in status updates from hundreds of millions of people to estimate the happiness of people on Facebook in a wide variety of different countries, with some fascinating results. And the Infomation Diversity in Networks work (that considered the role of strong and weak ties in the spread of information) used a large scale field experiment involving over 250 million people.

Clearly a big part of this is about developing new revenue generating models for Facebook so it's small wonder that the company is planning to double the headcount of the Data Science team over the next year. For me though, the really exciting potential around this unprecedented scale of data and Facebook's capability to store, structure and interogate it, is not just around the development of new kinds of business and communications models, but about how it might help advance social science and what we know about human behaviour itself.

Image courtesy

On The Facebook Mobile Phone

So speculation has once again been running rife this past week about Facebook launching a mobile phone. Not the first time it seems that they have worked on the idea, but it's perhaps different this time given the recognition of the need for specialist talent and the hiring of a bunch of ex-Apple iPhone engineers.

Dave Winer (whose views I have a lot of time for) believes that rather than a mobile phone, what Facebook could actually be focusing on is a social camera. He makes a good point about the significance of photo content to Facebook and the potential to create a product with real differentiation that has photo sharing built-in. I suspect however, that the prize Facebook could be going after is somewhat bigger. And here's why.

The smart folk at Addictive Mobile have for a while been using the metaphor of a 'vertical stack' as a way of understanding the unfolding strategy of the big four tech companies (GAFA - Google, Apple, Facebook, Amazon). A while back I had my own crack at what the vertical stack might look like, with an ecosystem comprised of seven key levels on which GAFA are building out a presence, and increasingly coming into direct competition with each other. The bottom layer of the vertical stack is hardware. This is where Apple have originated from, expanding into the operating systems level, through iTunes and iCloud into content and payment levels, through browsers and an app ecosystem into access, through data and closed ecosystems such as iTunes into location, identity, personalisation, and so on.

Facebook originated from this last 'context' level, developing a data-driven capability that is location aware, sharing and social graph aware, identity aware (Facebook Connect) and can power personalisation, recommendation and of-course advertising. They have moved out from this level into payment, access, and content (cloud). The hardware level, one that Amazon moved into with the Kindle and the Kindle Fire, closely followed by Google through their acquisition of Motorola and launch of the Chromebook, is a gap in their capability. It is a hole that there is good reason they might want to fill.

Steve Jobs always focused on developing a seamless ecosytem through the marriage of great hardware with brilliant software. His thinking was in large part driven by a desire to create an exceptional user experience. But there is another benefit behind this strategy - the ability to create an ecosystem unified by data, where one level informs the other levels, and where the user never has to leave.  

This, to me, is what the vertical stack is all about. Mobile is a data-rich environment and mobile hardware gives Facebook a platform for a far more comprehensive delivery of just about every other layer in the stack from location, identity and social context, through access, content and payment (through mobile money). The key difference in having this capability is that it that it can bake this into the hardware. It's not only about the ability to augment a huge app store through which they can diversify revenues, it's about making the Facebook phone the easiest possible way to make photos look great, share and access them and other content, stay-in-touch with and message your friends. It's about not having to fire up an app to do all this.

The more this kind of activity happens within a Facebook ecosystem, the better this is for Facebook. In her latest internet trends bonanza, Mary Meeker pointed out the huge potential upside still to be had in smartphones and in mobile ads. Mobile eCPMs and ARPU may currently lag that of desktop based services but with access to the rich data afforded by an ecosystem that seamlessly combines software with hardware and the kind of user engagement and time spent that Facebook has, this will surely change. Combine this with the revenue potential behind that other massive mobile-based opportunity - gaming - and you have a pretty good reason to believe that mobile hardware should form a pretty significant part of your future.

When the BBC asked Facebook for comment on the rumours, they were referred to a written statement which began: "Our mobile strategy is simple: we think every mobile device is better if it is deeply social". Only time will tell whether this cryptic sentence refers to a strategy that delivers this through making proprietary devices. But as part of a long-term future, you might well say that there is very little reason why it shouldn't. 

Is the 1,9,90 Rule Outdated?

The BBC have just released some interesting research around participation online. The findings (the result of a "large-scale, long-term investigation into how the UK online population participates using digital media today") have raised a little controversy since they seem to indicate that the long-term model or view of participation online, the 1,9,90 rule, is outmoded.

The so-called 1% Rule has been around (as far as I can work out) since 2006 when it was mentioned in a blog post by Ben McConnell of the Church Of The Customer blog who talked about how "small groups of people often turn out to be the principal value creators of a democratized community". Shortly after that, usability expert Jakob Nielsen defined it further, describing the 'participation inequality' apparent in most online communities where the majority of users (90%) are 'lurkers' who don't contribute, a small minority (9%) contribute a little, and an even smaller minority (1%) of users account for almost all the action. Over time, this seems to have morphed into a 'creators' (1% of people create content), 'editors' (9% edit or modify that content), and 'lurkers' (90% view the content without contributing) framework.

The BBC claim that their research (I've embedded a presentation of the research findings below) shows that the number of people actively participating online is significantly higher than 10%, with 77% of the UK online population now active in some way and participation now the norm rather than the exception. The key driver of this, they say, is the rise in 'easy participation' - activities that once required significant effort but are now seamless and every day. 60% of the online population fall into this category. Interestingly, they also found that despite participation becoming much easier, a significant minority (23%) did not participate at all, a passivity not as closely related to digital literacy as some might expect. This leads them to conclude that digital participation is best viewed through the lens of choice, the decisions we make based on who we are rather than what we have, or our level of digital skill.

Shortly after the BBC released these findings, GigaOm weighed in with a post saying that the Beeb had got it all wrong. In claiming that the 1,9,90 rule was outmoded, they said, the BBC were missing the vital point that the 1% rule was "never intended to dictate a single pattern across the entire web: it was a rough guideline for expectations inside any given online community or service." It shouldn't be a surprise that 77% of people participate online, they went on, since people behave in different ways in different places. The fact that people can be highly active and participatory in one community whilst a lurker in another, means that it's perfectly possible for 77% of the online population to be active whilst the 1% rule still holds true for many individual online communities.

I can see their point. But in fairness to the Beeb, the researchers do point out that their 'passive, easy, intense' model shown above is neither a progressive one (ie. people do not progress from being passive to being easy and then intense participators), nor is it a universal one - so you may indeed be intensely active in one facet of your digital life (likely the things you are passionate about), whilst far more passive in others.

This spectrum of behaviour makes a whole bunch of sense. I can quite see from my own patterns of digital participation that I exhibit a personal form of participation inequality across not only different facets of my life and interests, but across different platforms. And I can quite see how the rise of 'easy participation' might have driven a potentially dramatic shift in overall levels of activity. Think about the fact that in 2006, when the 1% rule was first mooted, Facebook was still quite nascent, there was no Twitter, or Tumblr, or Instagram, or Google+. Equally, there was only a handful of open APIs. There was no frictionless sharing, no Google +1 buttons, or Facebook Like buttons next to just about every piece on content online. Given all this change in such a short space of time, it's hardly surpirising that, as the BBC say, participation is now the norm rather than the exception.

So how do we square that with a model of participation inequality where a very small proportion of a specific online community will actively contribute, and which intuitively (for me at least) still feels right? The first point is that the 1% principle was never designed to be a fixed rule - whilst the broad ratios might be similar, it always accounted for the fact that different communities naturally have different levels of active participation. Wikipedia, for example, has around 80,000 active contributors against a monthly user base (based on Comscore) of around 400 million, meaning that the ratio of highly active to passive is a lot less than 1%.

But I wonder if it's also a question of definition. The BBC researchers defined digital participation as "creating and contributing online so others can see". It's a very broad definition encompassing all forms of activity from publishing a blog post to simply clicking a Like button. And as they ackowledge in their model above, there is a big difference between intense and easy forms of participation. Many of the current forms of 'easy participation' that we now take for granted didn't exist when the model was first originated. So perhaps, reflective of the more sophisticated ways in which we participate online now, it is indeed time for a more sophisticated version of 1,9,90. One that acknowledges that whilst a very small proportion of people within a specific community (and maybe it is still around 1%) will be creating content, a slightly larger proportion of people (and maybe it is still around 9%) will be editing or modifying in some way, a larger proportion still will be simply sharing or bookmarking that content. This sharing still counts as active participation, but much of this is activity conducted by people who might once have been categorised as passive 'lurkers'. 

A few asides: Forrester's Technographics tool has long made the distinction between different types of participation online; renowned VC Fred Wilson has written before of the 'web/mobile laws of physics' he encounters in many of the successful startups they see whereby 10% of the registered user base or number of downloads (in the case of an app) will use the service each day, rising to 30% each month; and recent Pew research indicates that 'power-users' of Facebook, typically a proportion of around 20%-30%, account for a disproportionate amount of activity but within that there are different power users depending on the activity - one group dominates friending, another dominates ‘liking’ activity, and another dominates photo tagging for example.

So perhaps the Beeb do have a point - whilst participation inequality may still hold true in online communities, maybe it is time we developed a more sophisticated model to take account of the myriad contemporary forms of particpation not only across the whole web, but within the confines of specific communities. Thoughts?

Brands As Publishers

Content marketing is not exactly a new thing. Neither is the idea that everyone is a content producer or that we're all journalists now. But I wonder if we're still underestimating the huge shift that this brings to marketing in terms of approach, timescales, process and resources.

This presentation from data visualisers Jess3, whilst obviously skewed towards storytelling in social media, makes some good points about this shift and includes a quote from Josh Sternberg about how "brands aren't set up to be publishers. They don't necessarily understand the editorial process or have the stomach for the length of time it takes to build an audience"

The Practitioner's Guide to Creating Content Like a Publisher

View more presentations from JESS3

One of the real changes in marketing has been the increasing focus on 'always-on' channels, and (to use the Paid, Owned and Earned way of looking at the world), on Owned and Earned media rather than just Paid. This CNN piece talks about how Nike's US spending on TV and print advertising has dropped by 40% in just three years, even as its total marketing budget has increased to a record $2.4 billion. Not every brand is a Nike of-course, but as I've said before the interesting places in Paid, Owned and Earned is how they work together and the spaces where they overlap, and this requires different content thinking.

For me, part of the challenge here is around resource. What Red Bull do with content is amazing (they are one of the top five sports content producers on YouTube globally, for example). But the Red Bull Media House employs 400 people worldwide. In the absence of this type of scale, organisations have to get smart about skilling up existing resource and using things like content curation in interesting ways.

Another part of the challenge is about mindset. As Sternberg points out AmEx’s OpenForum took four years to get 1 million people aboard, and now gets about 150,000 unique visitors per month. Without this kind of long-term view and commitment, projects like this just get suffocated or shut down.

And yet another part is around approach. The most interesting part of Coca Cola's shift toward 'content excellence' is the 70,20,10 approach that focuses 70% of output on low risk, bread and butter stuff, 20% on innovating off what works within that, and 10% on newer, high risk ideas. Without this kind of flexibility to budgeting and resourcing, building a proper content plan that is enduring but adaptive is impossible.

The role of agencies in all this is up for grabs. I'd say that the smart ones are already working in ways that take them beyond the kinds of processes and mindsets associated with simple campaigning, and are making themselves an essential part of this process. There are compelling reasons why not just thinking, but also process and practice need to be different.

I was struck, listening to David Hieatt speak at the recent Google Firestarters, how much the Hiut Denim brand and company is being built around a compelling story right from the beginning. Have a read of this inspiring interview in which he talks about some of the themes he touched on at the event ("I believe that your first 1000 customers are your real fans. They can help you get to the dream. They need to know the dream and the plan to get there"). In many ways this has always been the case, but the way in which companies use content to tell their stories, the kind of skills they are building, and the way they are working with their agency partners is fundamentally changing. We can all get excited by the latest social tool or app but this, to me, is where all the exciting stuff is happening right now.

Post Of The Month - February 2012 - The Vote

Thanks for the nominations everyone. Our shortlist this month is between:

Is The Problem For Brands That They Now Build Down To A Price Rather Than Up To A Quality? by Rob Campbell

The Religion Of Common Sense Marketing from Ross Farquhar

What Has Advertising Ever Done For The Economy? by James Best

Data Should Be Used As Evidence And Not Illustration by Simon Kendrick

What Is Strategy? by Mike Arauz

The Participation Paradox: How to Survive It. How To Propser From It by Martin Weigel

A New BBC Social Media Strategy For England by Robin Morley

And you can vote below: