When Social Media Promotions Go Awry

One of the hardest lessons that marketers and retailers can learn in social media is when a promotion goes awry. You launch with the best of intentions–certain that a coupon or a discount will get you a whole bunch of fans–but somewhere along the line, something goes wrong. And it doesn’t take long for your new fans to become not-so-friendly.

Walgreens last week offered a free 5×7 photobook to anyone who becomes a Facebook fan by Oct. 2. As of today, Walgreens has over 200,000 fans. But when it told its new fans in an update on its Facebook wall that the free photobook actually will come with a $1.99 shipping and handling fee, the fans were not amused. They didn’t hesitate to voice their complaints on Walgreens’ Facebook page.

Sara Lee Deli, meanwhile, has been offering its new Facebook fans a $3-off coupon. But scores of them have had problems receiving the e-mail coupon, or printing it, and again, they have not been shy about expressing their frustration on Sara Lee’s Facebook page.

A similar thing happened to Starbucks a few months ago, when the company promoted its new line of pastries with a coupon offer on Facebook and other social outlets. Some stores ran out of pastries, and some consumers didn’t realize they needed to bring the coupon with them. They vented their frustrations on Facebook, Twitter and Starbucks’ own social media site.

The lesson to be learned here is that marketers and retailers must make sure a social media promotion is completely synced, both online and offline. It doesn’t take much for things to go awry. And if things do start going south, it is critical to respond positively–and quickly–and turn the negative energy back into goodwill.

Facebook: $300 million or $500 million … or somewhere in between?

I’ve been getting the question a lot lately: If Facebook says it will increase revenue 70% in 2009, and if board member Marc Andreessen publicly says revenue will be at least $500 million this year, then why is eMarketer’s estimate only $300 million?

I’ll take a moment to explain.

Our estimate covers only ad spending on Facebook, and does not include any other form of revenue. Facebook currently gets some revenue from virtual goods (as much as $75 million, according to one estimate I saw recently). In addition, I expect that Facebook will launch other revenue streams this year, such as payments/e-commerce.

Our estimate for worldwide ad spending on Facebook in 2009 is $300 million. That breaks down to $230 million in the US and $70 million outside the US.

So if you add our estimate of $300 million in worldwide ad spending, plus about $75 million in virtual gift revenue, that equals $375 million. Assuming Facebook launches a payments system, that could bring in several million more in revenue (I don’t have a specific estimate on that).

The end result would still be lower than $500 million, and the reason for the difference is that while I am optimistic about Facebook, I am not as confident as Facebook is on its ability grow revenue 70% this year. With total US online ad spending slated to rise just 4.5% this year (according to eMarketer’s most recent projections) it will be an immense challenge for Facebook to increase total revenue 70%.

I will continue to watch the numbers, so we’ll see how things shake out.

Is Mark Zuckerberg crazy, or can he boost revenue 70% in ’09?

Yesterday, Facebook announced a $200 million investment from Digital Sky Technologies, a Russian-based investment group that I am sure 99% of the Internet business had never heard of before yesterday. But DST is the company behind some of Russia’s biggest Websites, including Mail.ru and social network VKontakte (an amazing clone of Facebook, by the way).

During the conference call announcing the deal, Mark Zuckerberg reiterated a statement, first made in March, that Facebook’s revenue will increase 70% in 2009. Sheryl Sandberg, in a follow-up interview with PaidContent yesterday, also said:

“Our revenue is doing incredibly well—70 percent year over year (growth) this year means that the ad products we’ve built are working, it means that all of our sales channels, all of our markets international and domestic are very healthy, and it means that our ad models are working.”

The 70% figure first came out in a March 2009 New York Times article on the departure of finance chief Gideon Yu:

Regarding its financial state, Facebook said that in the quarter ending Tuesday, it beat its own internal projections and is on track to increase revenue by 70 percent this year.

Can Facebook actually achieve this goal? I’m doubtful. My eMarketer projections estimate 20% growth in ad spending on Facebook this year, to $300 million. Advertising forms the vast majority of Facebook’s revenue. I said as much to Businessweek in an article about the new funding:

“Where is that [70%] going to come from? I can’t see it coming solely from advertising. Either he [Zuckerberg] has some new revenue stream up his sleeve or he is crazy.”

Investment bank Cowen & Co., in a new report on online ad spending, believes the growth will indeed come from advertising and estimates that Facebook’s ad revenue will increase from $258 million in 2008 to $428 million in 2009. Cowen is one of the few companies aside from eMarketer that estimates Facebook revenue.

But Facebook’s future growth, however large or small, will not be solely from advertising. Facebook already generates some revenue from virtual gifts those little icons that people buy with credits and give to friends) and has been rumored to be considering a raft of other revenue streams, from a developer “tax” to ecommerce to virtual currency. New investor Alexander Tamas, of DST, has experience with payment systems and virtual goods at his other Internet companies.

One wild card: the rumor that Facebook is getting ready to launch an ad network based on Facebook Connect. Such a network would be very, very interesting, but also very, very tricky from a consumer privacy perspective. And, as Business Insider points out, advertisers are more focused on performance networks these days than on targeted brand advertising. The business climate for a Facebook ad network may not be right this year, but it could be the perfect temperature in 2010.

Twitter on Advertising: Let’s Try That One Again

Just a couple days ago, Twitter cofounder Biz Stone was publicly saying that advertising wasn’t part of the company’s revenue plan. Oh, how a few days change things.

In a post on Twitter’s blog, Stone writes, “to say we are philosophically opposed to any and all advertising is incorrect.” He goes on:

“The idea of taking money to run traditional banner ads on Twitter.com has always been low on our list of interesting ways to generate revenue. However, facilitating connections between businesses and individuals in meaningful and relevant ways is compelling. We’re going to leave the door open for exploration in this area.”

Stone then uses the blog to say he’s speaking at the Cannes ad festival next month. Open mouth, extricate foot, keep Cannes speaking gig.

Twitter Founder: Ads “just not quite as interesting to us”

Is Biz Stone nuts? At yesterday’s Reuters Global Technology Summit, the Twitter co-founder said the company is exploring revenue streams from services and enhancement that it hopes businesses and professional Twitter users would buy. As for ads, he said, “There are a few reasons why we’re not pursuing advertising — one is it’s just not quite as interesting to us.” He added:”There are no people at Twitter who know anything about advertising or work in advertising. So we don’t have anyone there to make or take those calls.” (Reuters)

Hmm, I know a few hundred folks who are champing at the bit to take those calls … the same ones who debate endlessly about what Twitter’s revenue model should be. Were Stone’s remarks just posing? Would he REALLY turn down ad revenue simply because no one at Twitter could take a few calls? Is he REALLY willing to fork over that ad revenue to the myriad companies that are sprouting up to create ad models for Twitter? Or is he onto something: that advertising, no matter how many calls came in, wouldn’t be enough to sustain the company?

Very strange, indeed. As for that revenue stream from services, well, that’s a tough one as well. In the Reuters article Stone mentions “lightweight analytics” and a directory that would make it easy to tell which Twitter accounts were legit. Those seem ho-hum to me, but maybe I’m missing something.

Social network ad spend to fall 3% in ’09

I just updated my US social network ad spending estimates for 2009, and thanks to a particularly dismal January-March quarter at Fox Interactive Media (ad revenues at MySpace’s parent were down 16% year over year) I now expect the social networking category as a whole to fall 3% this year, to $1.1 billion, from $1.2 billion last year.

If it ends up as I expect, it will be a significant turnaround from the past couple of years, when social network ad spending was growing at double and triple digits.

The biggest reason for the falloff is MySpace, which I expect will make $495 million in the US this year — down from $585 million in the US last year — much of it coming from a deal FIM has with Google for search. Once that deal runs out in the middle of next year, things may end up even worse for MySpace unless its new management can turn the ship around.

I’m expecting Facebook to up its US ad revenues by 9% this year. Depending on your outlook, that’s either glass half full or half empty. To increase ad revenues nearly double digits in a recession is certainly a positive, but the way Facebook is burning through money to fund its growth, I’m not sure 9% is enough. If the company launches its rumored ad network, however — and if it’s successful, which isn’t a guarantee — that could change the outlook.

The bigger story — one that I hope to spend more time measuring and quantifying in the future — is how marketers are using social networks for reasons other than advertising. This, I believe, is where the true potential lies.

Facebook’s European Takeover

Just last month I wrote in an eMarketer report that Facebook in 2009 would take over markets that had once been dominated by regional social network sites. Today, comScore reports that Facebook has become the dominant social network in 11 of the 17 European markets comScore covers.

Most recently, it overtook local favorite Tuenti in Spain. And in three of the 17 countries, Facebook ranks second. The only places it trails other social networking sites are Germany, Russia and Portugal.

So much for the idea that a homegrown site could capture the nuances of local culture.



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