Facebook Dodges Tough Questions

 

Written by Kim Davis

4/9/2013

Mark Zuckerberg, Facebook's 28-year-old founder and CEO, rarely gives press interviews. He surely can't regret, however, giving access to Vanity Fair's Kurt Eichenwald, who asks few hard questions and gets no revealing replies.

After I had waited for just a moment in a lounge area, Zuckerberg invited me in. The office was modest, with four glass walls, letting passersby peek in at the Facebook C.E.O. Zuckerberg was open-faced, smiling, and unfailingly polite.

Eichenwald supplements his facetime with the boy-king by interviewing Marc Andreessen, a venture capitalist and Facebook investor and director -- hardly the voice of unalloyed objectivity. Oh, and he also spoke with some ad clients and senior executives and reviewed "reams of data."

So what do we learn from this exercise?

• Zuckerberg and his close circle think of Facebook as a "feedback loop." Well, duh: That's a concept we've been using right here, since Internet Evolution was founded in 2007.
• Revenues "jumped" in 2012. However, as Eichenwald tells us a paragraph later, the rate of revenue growth has slowed yearly since 2009.
• "Advertising" on Facebook is about engagement, not encouraging quick clicks to buy.

There's the conundrum Eichenwald's article doesn't even recognize, let alone address. Look at this comment by Nestle's head of marketing, Tom Buday:

I kind of scratch my head a bit when I hear a lot of the conversation that's going on in the industry these days, questioning whether entire social-media platforms like Facebook… work or don't work in regards to advertising. We know this is working well.

I bet Facebook is working out very well for Nestle, whose Facebook page has more than 800 thousand Likes. The page is frequently updated with recipes, nutrition information, competitions, news about social initiatives, and yummy pictures of desserts. It's evidently a fantastic platform for Nestle.

My question -- and it should have been Eichenwald's -- is how much advertising Nestle needs to buy on Facebook to support this page. Moreover, I wonder how much advertising Nestle is likely to buy going forward, if the word-of-mouth effect is as powerful as Facebook's supporters, like Eichenwald, presume.

After all, we know that some retailers have figured out how to increase sales by using Facebook's free tools rather than buying ads. After all, Facebook is supposed to be good at generating engagement through shared content, and it's quite possible to achieve that without buying ads at all.

And then there's the pesky fact that Facebook's users are increasingly accessing the plaform via the mobile app rather than the website, and the mobile world -- with its relatively small display space -- is notoriously a turnoff for advertisers.

Some analysts say mobile plays to Facebook's touted strength: Sponsored Stories that appear in the News Feed, rather than banner displays or pop-ups. Eichenwald is totally drinking the Kool-Aid on this:

As time passed, advertisers began to recognize that Facebook was not simply a passing fad. And that led companies to begin scouring the landscape for people who knew how to communicate with Facebook users without sounding like a clichéd version of a marketer.

But one of the best ways of communicating with users is by using alternative methods other than sponsored stories and paid advertising. Brand-appropriate social marketing, gamification, attractive content -- all of which are supported, again, by Facebook's free tools. Perhaps advertising helps seed an audience for a Facebook page, but if the page is well run, it should (in theory) take on a life of its own.

Perhaps Facebook's new Android initiative, Facebook Home, will provide part of the answer. Perhaps users really will respond to Sponsored Stories as if they represented real messages from real friends. Zuckerberg told Eichenwald that the reaction to Sponsored Stories appearing in the News Feed was "net-positive" -- ads seemed to turn off a limited number of users.

The truth is that we don't know how the audience will respond in the long term to the retooling of a social platform as a marketing vehicle. Recent changes to the News Feed will allow users, in effect, to channel-surf away from ads. That may not be a good idea. As Zuckerberg says:

If people don't connect to the advertising content, then it's not good for anyone. It's not good for the people using Facebook, it's not good for the advertisers, and then ultimately we don't make money.

And that, of course, is one quite possible outcome.