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.

Social Media Podcast with Smallbiz America

I was interviewed recently by David Wolf of Smallbiz America about social media marketing. In the interview I answer these questions:

1. You’ve been in this space since 1993—-has anything totally surprised you in terms of the ways internet advertising and marketing has unfolded?
2. At eMarketer—-you’ve got a birds-eye view of how the world of social media is changing the landscape of marketing. What does social media do that traditional media simply cannot do?
3. The issue of brand control has certainly been a concern for many companies as they make their entrance into social media. How are you seeing companies manage their brands in a world that’s all about letting go of control, and harvesting authenticity from the consumer?
4. How do you see strategic possibilities evolving for companies that want to participate in social networks as advertisers—-how are they looking to approach the challenge?
5. Do you think it’s more effective for companies to create their own social networking platforms—-or is it a better idea to leverage the existing platforms that have huge traction?
6. How is search marketing evolving—-and what can we look forward to in terms of changes there?

Why Gen X Loves Facebook (Hint: It’s not because their kids are there)

Inside Facebook has a new set of stats (culled from Facebook’s ad system) that detail the enormous growth in Facebook’s over-25 membership. As of March 2009, 41% of US members were between the ages of 26 and 44, compared with 35% between age 18-25. The fastest growing demographic is women over 55, Inside Facebook says.

In fact, women outnumber men as Facebook members in every age group. For example, of the 9.7 million US members between the ages of 35 and 44, 56% are female. In the 45-54 group, 60% of members are female.

For a while now the going theory was that older generations were signing on to Facebook to keep track of their kids. But Facebook has a wide appeal beyond parents of teens and college students. I’ve been a member for some time now for professional reasons, but over the past few months I have seen dozens of college friends, high school friends and people in my town sign on. Very few of them have kids who are older than pre-teens.

It’s true that some of the appeal of Facebook is to reminisce about the good old days, or simply the voyeuristic tendency we all have to see what our old classmates and friends look like now. No more waiting for the class reunion to discover that your high school homecoming king gained 40 pounds and lost all his hair. His picture is right there for you to see. (And just a few clicks away are the requisite pictures from 20 years ago, showing him with all his hair, posted by some other high school friend.)

Some of that usage will fall away; connecting with friends from 20 years ago is often no more than a “hey what are you up to these days” kind of conversation. But even if I don’t interact on a regular basis with old friends, it’s still fun to browse their profiles and read their news feed items every so often. One friend bragged about her son’s success at a regional swim meet. Another posted that her employer is making her take two weeks off this spring, unpaid. Yet another had the utter embarrassment of being asked if she was pregnant (she’s not).

Before Facebook, none of this would have ever crossed my radar. You may argue “Who cares?” but the reality is, a lot of people care. And they are people from Generation X and above who are quickly realizing how fun it is to get updates on the lives of friends they haven’t thought about in years.

Good news: Social Media Spending Up. Bad News: (Read on)

Forrester Research finds in a December 2008 survey that 53% of marketers who are already using social media marketing will increase their spending on social media marketing in the next six months. Only 5% expect to decrease their budget. Good news, right?

Sort of. As report author Jeremiah Owyang points out in his blog, “this doesn’t mean that budgets are expanding immensely, since this is a ‘new’ media, these are small budgets. How small? I say minuscule. Three-quarters of marketers have $100,000 of less budgeted for social media marketing.”

Do the math: Forrester surveyed 145 marketers, 114 of whom were already using social media marketing (that’s an impressive 78% of marketers surveyed, by the way). But of those 114, 75%, or 85.5 marketers, are spending at most $100,000–or less than the price of a single prime-time 30-second spot in Q4 2008, according to data from Targetcast cited in The New York Times. Going price for that 30 seconds? $122,000.

Of course, 25% of Forrester’s respondents are spending more than $100,000 on social media marketing. But who knows how much more? $101,000? $500,000? $1 million?

Last week I spoke at the Seattle Direct Marketing Association’s annual conference. I sat in on the social media marketing session, which was so full that extra chairs had to be brought in. But one comment from a panelist stuck with me. He advised attendees to go out and prove their case for social media marketing by doing as much as they can for free. Then once they get results, he said they should go to their bosses and ask for budget to do more.

I wonder: How many bosses will look at what was accomplished for free and say “That’s good enough for me; why spend money?”

Addendum (3.18.09): ReadWriteWeb has additional details from the Forrester report. According to one chart, 49% of marketers surveyed had budgeted $30,000 or less for soft costs such as services, strategy and support, and 40% had budgeted the same range for actual social media tools. The survey group for this data consisted of 83 respondents who worked for companies with 250+ employees, and knew the details of their social media budgets.