GM pulls out of Facebook: What next for FB?

This is part-2 of my post about GM pulling out of Facebook and the implications from that. As I mentioned in Part-1, it is probably an indication that all businesses are not suited for Facebook advertising. Facebook will do well to understand this fact as well and work with the categories that are suitable for Facebook advertising to enhance its revenue streams. In the short run, there might be more exits like GM but in the long run, Facebook should have a more solid advertising business with tangible returns for its partners, and in turn, itself. So, here are a few suggestions on how Facebook could display advertisements.

Brands use FB pages to reach out to their customers - currently for free

Ads in Newsfeed but how many?

I have a slightly different take than FB's current strategy on how it should use advertisements. Rather than the small spaces on the already busy (if not cluttered) page, the best place where all users definitely focus is on their wall posts. An item in my news feed is probably the best place for placing an advertisement if you want maximum attention from me. Putting an ad in my newsfeed does have challenges about the number of ads you can put in the news feed but if FB can keep it to a small percentage of my daily news feeds or base it on the amount of time I am active on FB, I may not really mind it. For instance, if I stay online for 15 minutes going through 20 news feeds, I may be fine with a couple of ads spaced out evenly. If I stay on for another half hour chatting with friends on the FB messenger, I may be ok with another ad every 15 minutes. That kind of analysis should take care of the number of ads you can send me. As for what ads to send me, FB already knows so much about me. They know when I was born, when is my wedding anniversary, which schools did I go and when, where I work, what I did last month, what I read yesterday etc etc - the list is long. So, without getting into the wrong side of privacy laws, if FB can share information at an aggregate level with advertisers, they may be able to provide targeted advertisements in the news feed. They can also use the feed for running some small surveys with a few questions which can be used for market research by companies.

Brand Pages: The free ride must come to an end!

Another big change it should do is on the brand pages. Currently brand pages are free. Anyone can create their brand page and promote their products, reach out to potential and current customers for free. Since FB works as a medium for companies to reach out to their customers, it should charge for this access, especially given the kind of recent changes it has announced to enhance the exchange between company and customers. Brand pages can probably continue to be free for really small companies or entrepreneurs, at least for a limited period. After the limited period or after a company becomes big (may be bigger than some amount of revenue etc), brand pages should be charged. Such companies who pay for brand pages should get some data from FB at an aggregate level to help them take decisions and send targeted communications to those identified. Apart from the standard brand page fees, FB can charge companies for pushing out advertisements into users' news feed. May be they can put out plans such as "send email to top 100 customers" based on some attribute or random 1000 people etc. FB knows so much about people - so it should allow brands to send emails to consumers without sharing their email ids etc. Only when you "like" or share their post or reply to them should they be able to see limited customer details. Till that point, customer should only be an aggregate data. I must mention at this point that I am not particularly conversant with privacy laws and therefore some of what I am suggesting here may not exactly be on the right side of the law. But the point of this post is to suggest the general idea which can (hopefully) be expanded on within the limitations of the privacy laws.

Collect more ad-relevant data (within the privacy laws!)

Apart from the umpteen ways in which FB gets information about us, they can also ask people to tag photographs that they upload with categories like personal, birthdays, general party, anniversary, vacation etc to allow FB to target ads towards such people based on the category that the photograph is put under. I remember Picassa does ask for such optional information when I upload photographs there. Once they have this information, for instance, a person who likes photographs of a friend under the vacation category may like it if he sees an ad for some nice vacation plan. The ads will, of course, need to be from a company in the "suitable" category as discussed in Part-1 of this post.

For all we know, GM's pullout might be the best thing that's ever happened to Facebook if it can be turned into an opportunity to better understand the capabilities of the FB platform!

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 CarWale.com 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.