And the New Revenue Model Is…

By Andrew Frank | November 18, 2008 | 5 Comments

Ted McConnell, the general manager-interactive marketing and innovation at Procter & Gamble Co., affirmed a growing chorus of comments on this blog and elsewhere that social networks and UGC might not be so good for advertising after all. (At least the kind of advertising associated with brands in mainstream media.)

As reported in AdAge, the event was the Digital Non-Conference, a program by Cincinnati’s Digital Hub Initiative presented by the Ad Club of Cincinnati, and his remarks included these:

“I think when we call it ‘consumer-generated media,’ we’re being predatory,” he said. “Who said this is media? Media is something you can buy and sell. Media contains inventory. Media contains blank spaces. Consumers weren’t trying to generate media. They were trying to talk to somebody. So it just seems a bit arrogant. … We hijack their own conversations, their own thoughts and feelings, and try to monetize it.”
While it’s not a company policy, but rather a personal preference, Mr. McConnell said, “I really don’t want to buy any more banner ads on Facebook.”

He went on to cite Facebook applications as “potentially valuable” for advertisers…leaving open the question of how social networks might significantly monetize that opportunity. He also added that, while acknowledging that the targeting “is fantastic,” it makes him uncomfortable, sticking a pin in one of social media’s strongest claims on advertising value.

If McConnell’s comments reflect mainstream advertiser thinking – and mainstream advertiser budgets – then what are the options for social media? Here’s a rundown of some of the possible alternative strategies:

  1. Attract brands and advertisers like P&G by making social media look more like MSM. License and promote more professional content and monetize it with video advertising. This appears to be a big part of MySpace’s strategy.
  2. Cultivate advertising’s long tail.  After all, that’s what Google does (for the most part). Take the model of self-service PPC search and figure out how to make it work in social networks (but beware of dangerous ideas like “Beacons”).
  3. Add more embedded ecommerce to the mix and try to build up commissions and transaction fees, either through third party affiliations or internal social storefronts.
  4. Go after the research side of marketing budgets. Figure out how to leverage proprietary data services to capture some of the rising spending on social media monitors (as we’ve been discussing), but be very careful about trust and privacy in the process.
  5. Try to push premium services with the “freemium” model. Emulate LinkedIn’s premium subscription concepts.
  6. Move beyond marketing entirely and pursue enterprise IT budgets with social platforms and applications. Study Amazon and Google and “the cloud.”

These ideas are not mutually exclusive, nor is the list collectively exhaustive.  Each has merits and challenges, and no one can do them all.

The big question remains: is it enough to meet the high expectations we put on social media only a year ago? Or is more disappointment inevitable?

5 Comments
  1. 18 November 2008 at 3:10 pm
    Blake Cahill says:

    Andrew – I think your post and list is interesting – what we find is that many organizations are at differing levels of understanding, investment, and transformation related to consumer conversations. It can vary significantly as to who is the “social” thought leader or champion at large enterprises. Sometimes it’s PR/Comms, or Customer Service, Marketers or Researchers – still most rare is the organization that is taking an enterprise wide view and holistically transforming their operations, client service, and marketing outreach strategies. Each discipline has it’s own use case, needs and outputs but organizations should be developing a more comprehensive strategy/approach and learning and best practices.

    Blake

  2. 18 November 2008 at 3:34 pm
    Andrew Frank says:

    Blake,

    I think this points out how large enterprises are positioned somewhat orthogonally to many large social networks as they realize that much of what they need from social networks – marketing intelligence, consumer engagement, word-of-mouth campaigns, service widgets, PR or CSR interventions – none of it seems to require writing a check to the domain owner.

    So, yes, organizations need to develop comprehensive social media strategies – and social networks need to strategize how to be a bigger part of that.

    /acf

  3. 18 November 2008 at 5:19 pm
    Karl Long says:

    First off, glad to see you exploring this stuff Andrew, subscribed.

    Any conversation about advertising in the social media space has to face the fact that this is not mass market broadcast so almost every theory around advertising developed over the last 50 years is probably not going to fit (as you rightly point out). Social Media disrupts all communication channels, advertising included, so I don’t think we’re going to make tremendous progress until companies actually start to restructure how and where they connect, inspire and empower consumers. For me the question comes down to how do we create value for the customer and for the company through our connections in social media, as you say, there is a need for real strategy here, not tactics.

  4. 18 November 2008 at 5:33 pm
    DevlinD says:

    #6 is quite an interesting model. As long as you could tailor it to a company’s needs it could hold promise.

    The one thing I don’t see anyone talk about though is that with such great targeting how does advertising on social networks fail? I think its because the context is never right. People are rarely looking to buy stuff while they are interacting with their friends on social networks. I have always thought that Facebook would be in a great position to take that targeting and roll it into an ad network like AdSense, or what we have more recently seen LinkedIn do. Doing so could also allow them to break into the evolving influence marketing segment by providing a social context to ads on third party sites where the user is more intent on making purchases.

    I’m really not sure what is stopping them from doing this. It could honestly be an ad model that could supplant Google.

  5. 24 November 2008 at 6:33 pm
    Martin Edic (Techrigy) says:

    Kari hits the nail. In social media, which is really a communications medium not a content/news medium, advertising is dead on arrival. The agencies and the major consumer brands have a problem with that because they can’t imagine scaling an engagement model. However I’m not theorizing- broadcast won’t work in social media. People don’t participate to earn money, they do it to communicate (though you certainly can earn money by demonstrating expertise through adding value). If they are not doing it specifically to monetize then they have no incentive to build a place for ads.
    The more important and positive thing is that engagement can scale because exposure is exponential. Create a valuable contribution and your message will disseminate. Blast a self-serving pitch out and the negative response will also spread…

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