Tuesday, May 29, 2012

Should Facebook worry about GM pulling out?

There are so many mediums today that bring news and updates to us on so many different devices. Sometimes, these updates are about our personal contacts; some times it is news in general. But when one of the mediums itself starts to make news, it is, more often than not, not so good news. So, when Facebook was in the news for its IPO, it wasn't all that hunky dory. Also, a quick announcement from GM that they are pulling out FB advertisements ensured FB's own status wasn't all that cheerful.

Well, good and bad are personal perspectives. The fact that the IPO did not do as good as "expected" is actually not such a bad thing as people are realizing it  may be the eye opener we all needed.

Similarly, I see GM pulling out of FB as probably an indication of the maturity of advertising on FB - which should help companies understand the true benefits they can expect from Facebook while at the same time helping Facebook to revamp some of its advertising strategy for the better.

I have divided this post into two parts. Part-1 (this one) will talk about whether GM pulling out of FB is really bad. Part-2 will continue to talk about some suggestions that FB could take from this episode.

Is Facebook the right marketing strategy for GM?

Let us start by thinking about the online marketing strategy for a company like GM. It would normally pay Google for displaying its ads when someone searches something related to buying a car on Google. The ad at that point makes sense because if I am putting in that search, I am, in all probability, interested in seeing ads from car companies so that I can see the various options available in the market. But how does it work on FB? If I "like" a friend's new car pic, does it mean that I should be shown an ad for a GM car? I don't think that is a very logical advertising strategy because all FB knows here is that I liked my friend's car pic or maybe I just liked the fact that he finally got a car, even though I don't really like that car. So, I would say, for a company like GM, it may not make sense to advertise on FB anyway. I remember recently I was comparing some new cars on and I think I selected, Maruti Swift Dzire, Hyundai Verna and Volkswagen Vento; CarWale brought out Skoda Rapid as a "sponsored" result and displayed all details of that car also in addition to the other cars that I was comparing. THAT is the kind of place I would like to see a GM car ad, not when I am just leisurely browsing on the internet, going through friend updates on FB or some random videos shared by friends.

A car is a product where instances of repeat purchases are spread apart by a lot. I don't buy a car every few weeks or months (I want to, but just can't!). Even when I want to search for a car, I go to Google. If I want friends' recommendations on cars, that is when I would probably go to FB, but by that time, I would have probably done some research and cut down my list to two or three options. If I take my example of cars above, I might now ask people whether I should go for a Verna or a Vento. I am now looking for only some recommendations based on experience of my friends to make that final call. An ad on FB by another company at this stage may not make a lot of difference to me as I have already done a lot of research and have more or less made my mind. Therefore, I would say, a car company like GM may not need to advertise on FB. Instead, there are other options which are more suitable for influencing the decision of today's savvy buyer who does a lot of online research before buying a car.

So, is GM alone? Is it just the car companies who should pull out of FB?

Just like cars, there should be other categories that may not benefit from placing ads on FB, apart from generating some brand recall, maybe. Maybe products that require more extensive research based on attributes are not best advertised on FB in the traditional ad space that we are talking about. Such products are more likely to have their dedicated comparison websites and hence, advertising on those platforms may make more sense. I can think of categories like smart phones, laptops, tablets, TVs etc.  This list is obviously not exhaustive but I believe this ought to have items which can be compared objectively. Items that have more of a subjective comparison would do well to advertise on FB. If I read a number of articles on music, FB would do well to suggest books based on music or guitar lessons or even music players. If I tend to subscribe to lot of running groups or health conscious groups, I would probably not mind advertisements about healthy snacks like digestive cookies etc. With this limited analysis here, one could probably say that if a company's product has a high price, low frequency of repeat purchase and high objectivity in factors affecting buying decision, then it may not be a very good decision to advertise on Facebook. This is not a comprehensive analysis on either the attributes involved or the categories but hopefully gives some food for thought. I will try to come back with a more detailed analysis of the factors and categories.

But does it mean that a company like GM does not need to be on FB at all?

In today's times, as mentioned by GM as well, it does need to be on FB at least as a brand page. Such a page provides opportunities for interested folks to explore its offerings on the FB page (with obviously links to its main website for further details). Also, it allows companies to keep in touch with their existing customers and build the brand connect. This brand page and the connect it builds with existing customers will definitely be a big factor in positive recommendations when a person like me asks friends on FB about which car to go for.

In summary, Facebook should take GM's pull out as an indication of the increasing maturity that its advertising partners are gaining. Facebook should also understand that given that it is a leisure website where people come to connect with friends and chill out, all business are not equally suitable for advertising here. When you are hanging out with friends in the evening after a hard day at work, you don't want calls from people trying to sell you insurance plans. A deal on a pizza combo or a new pub might be more like what you want. Hence, Facebook should concentrate on the categories that are more suitable for the experience it  provides.

So, if Facebook lets companies like GM to pull out, what should it do to get advertisements, especially given the focus on its revenues now more than ever. Part-2 of this post provides some suggestions on that.

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