socialmediocrity

As covered in BusinessInsider earlier today, the rise and rise of Facebook user numbers appears to have hit the rails.

In fact, evidence has begun to emerge that many of the key, and early, markets are falling in user numbers. According to Inside Facebook’s data service, the US has lost 6 million users, Canada 1.5 million – approximately 4% and 8% respectively.

Daily user numbers from Google also support that evidence, showing thatdaily user have been falling for several weeks now, cerainly in the US, and the UK, shown.

Daily Facebook users in US falling

UK Facebook users also falling

Better news still exists in other territories, and there is of course a lot more growth to come from the less mature markets. Turkey, for example, has always stood out as an over-adopting nation almost, and yet growth continues there

Growing base in Turkey

Does any of this impact Facebook’s strategic direction? The pressure to monetise existing audiences may grow, especially as FB move inevitably towards an IPO, and it won’t help valuations if falling mature markets become the norm.

Or will falling “western” users increase the pressure to expand in the more nascent markets? And presumably seek to retain and monetise aggressively. The Facebook user experience, which has been exceptional to date bar the occassional privacy indiscretions, could suffer with the combined pressures of growth and revenue.

I was recently sent the tipp-ex digital campaign by a non-digital friend of mine – a clear sign that either I am no longer at the bleeding edge (anyone who knows me, this is your cue to comment in a light-hearted manner here), or this type of thing has gone, how do you say, mainstream?

http://www.youtube.com/tippexperience

A nice enough campaign, but a distinctly similar experience in the main to the subservient chicken, which remains one of my all time favourites. So a decent enough idea, but in no way new or original.

And to execution,  I tried a few things to find that the range of actions / videos available and was disappointed with the 404 error video (and that there’s only one of them), and the frequency with which it appears. The limit on the actions that have been shot is too tight, and the way the word connection occurs is light-weight too. “Plays Twister With” gives me a shot of RoShamBo being played, “shears” gives me nothing, “races” gives me nothing – in fact about half of my suggestions failed to deliver a result.

And what occurred to me most of all by the end of it is that as a campaign, by the end of it, all I actually remembered was the bear and hunter. The product or brand it was meant to be promoting is lost almost immediately as at no point after the intro video does the product itself feature. Burger King’s (TM)  Subservient Chicken was, in my opinion, much better executed and being presented in the guise of a web cam, represented a far better creative treatment.

What is a real shame is that I can’t forward links to the phrases or words that I have used to my friends, so that they can see how clever I am, or that I have “discovered” a funnier, naughtier, clever clip included in the campaign – instead anything I share is back to the top end of the campaign – which really counts against it as far as “social” is concerned.

Of course, the reason for spoofing the YouTube setting is no doubt to somehow claim this is another great success for “social” marketing. I’m old enough to remember when YouTube was the platform of choice for viral marketeers, but something tells me  history will record this as a great triumph for social marketing.

I’m a big fan of social advertising. I like the idea that advertisers can use that information to give me increasingly relevant ads.

However, as mush as I tolerate, nay, embrace this new model, I can’t abide lazy creative.

Take this example. It talks to me as a fan of Liverpool FC. Bingo. Targeting achieved. I am one. Every bit of one.

But where it fails is the message. Apart from ending the question in their title with a full-stop instead of a question mark, their copy doesn’t seem right somehow.

Call yourself a copy-writer?

Yes, I’ve got the official shirt (two of them, actually).

Yes, I’ve got the hat (even the missus has one, reluctantly)

And yes, the scarf too (again at least 2 of those)

And yet somehow, somewhere, in the mind of a senseless out-of-touch advertiser or copy-writer, the hat-trick has not yet been completed.

Now last time I checked, a hat-trick in football constituted three goals. I remember Robbie Fowler scoring the premierships quickest ever (just over 4 1/2minutes against Arsenal in ’94). Liverpool won 3-0 so he definitely didn’t score more than three.

I remember Peter “good-touch-for-a-big-man” Crouch’s perfect hat-trick, also against Arsenal, in ’07. Liverpool won 4-1, but Peter Crouch only scored 3 of them.

But our learned advertiser, which I trust is the banking partner concerned and not the club themselves, is determined to sell me the mythical fourth constituent of every fan’s memorabilia “hat-trick” – a club-branded credit card.

With new figures showing Facebook overtaking MySpace in the US we’ve begun thinking again about Facebook’s ad revenue model. Of course a recession is always going to cause trouble and concern for ad revenue business models, but with a public platform available, we can begin to get a feel for their actual income.

According to Compete.com, the US user base has just exceeded MySpace’s for the first time, with 59.7 million unique visitors, versus MySpace’s 59.5 million. Google’s AdPlanner appears to show MySpace barely holding on to it’s lead, but it clearly won’t be long before they too will be proclaiming the beginning fo the end for MySpace too.

Of course there’s been constant speculation about the real value of the business ever since the Microsoft investment, which was rumoured to value it at a remarkable $15 billion. Leaked memo’s, emails, and recounted conversations since have reportedly shown that even some shareholders placed some more realistic valuations of $3-5 billion on it.

Heck, we’ve even had the valuation estimated on the Whopper Sacrifice application, placing a tongue-in-cheek $1.8 billion valuation on the community. Before Facebook banned it , of course. And not for the low valuation it appeared to place on the business either.

But whilst I might be over-simplifying things enormously, there’s enough information in the public domain to make an educated estimate.

Google AdPlanner tells us that, worldwide, and to the nearest billion, Facebook attracts 29 billion page views per month, and this is rising steadily.

We also know that, whilst it may vary from country to country and page to page, there are normally 2-3 ads on each page viewed on Facebook. Some pages have no ads on them at all.  So for the purposes of a non-scientific estimate it is probably safe to assume an average of 2.5 thoughout.

That gives us an ad inventory estimate of 72.5 billion ad impressions. every month. And rising.

Of course all the page views in the world (and let’s face it, they do seem to have most of them) are only valuable if you can secure advertising for them all, and at high enough rates. So where would we find out the rates Facebook are receiving for their inventory?

OK, no more rhetorical questions. Although the ad platform shows lower figures rates right now, they do vary, and of coruse much of the ads are not placed through the public platform, but in guaranteed delivery deals. What we can see is that at an average CPM rate of $0.50, if that is what they were achieving around the world on average, would give them ad revenues in 12 months of $435 million. Even if the user base continues to double every 12 months, the next year will generate approximately $630 million.

Of course if they’re not attracting those CPM rates, and let’s be clear that these are not the rates quoted at the time of writing for any markets on the public ad platform, then revenues will be significantly lower, and the same goes for the growth estimates. Sooner or later the rate of growth has to slow down, even for Facebook.

So with an ad revenue income estimate of $630 million, the valuation becomes clear once you determine whether you cup is half-full or half-empty. And of course which version of their costs you are prepared to believe. Alternative income streams should not be ignored entirely, siuch as sponsorship deals, and broader content deals, but with renewed prominence of the virtual gifts business that generates c. $40m per year income, Facebook could be generating $700m in 2009 if they get it right, the vast majority still coming from ad revenues.

Let’s assume costs of $250 million per year, leaving $450 earnings, then a $4.5 billion valuation would not be so obscene. $15 billion, even now, would be.

The key to moving forwards however will be in attracting advertisers, and finding ways to deliver excellent ROI for those clients in order to keep the ad dollars rolling in, at a time when advertisers are looking to reduce costs and slash marketing budgets.

Can advertising on Facebook standup to dominant low cost channels such as paid-for Search, and begin to make itself a regular feature on a marketer’s media plan? The smaller advertisers and marketers are making it work, but not until the larger worldwide agency groups find their way, and bring their clients to the party will Facebook see any great acceleration in it’s ad revenues, and until then their valuation will be debated and speculated over repeatedly.

In what looks like another hack, the socialmediocrity office was alerted to another mildly amusing copy change on the site. Accessing the Advertising platform, we notice that the “Advertising” label has been replaced with “Lying” in English (UK) language. It doesn’t appear to occur in any other languages at the moment.

Crazy People?

Of course, we can’t help being reminded of Dudley Moore in Crazy People when we see things like this. “Boxy, but good” anyone?

It’s beginning to look like these hacks are not being taken overly seriously, and whilst 99% of Facebook users will never see this particular hack, what if the “More ads” link on almost every page (beneath the other ads appearing on the page) is hacked to read “More lies”? In some respects it just goes to show that you should only give users so much control over the platform. Or perhaps open-sourcing translation isn’t such a good idea afterall. It does make me wonder what hacks are being undertaken in other languages around the world if this is able to occur so easily in the US to UK translation.

Either way we shouldn’t be overly surprised at the outcome. The vocal minorities always tend to be over-represented in any debate or democratic organisation, and so if you allow users to vote in hacks, then they will happen regularly as those with nothing better to do actively pursue the intended change.

It would be more concerning if this actually reflected broader user perception of advertising on the platform. Facebook have a series of guidlines to protect users against illegal and offensive advertising, but there is a steady stream of exceptions to this that we, amongst others, have talked about before: Guidelines but no rules.

Perhaps it is time for Facebook to take a harder line against the less principled advertisers, and were a bit stricter on itself when it comes to the ads it accepts. As a married man, I still receive many many ads promoting dating services, gambling products and the occasional get-rich-quick scheme – all of which contravene the otherwise largely well-thought-out guidelines (with the exception of Sex education. But only to adults), and it is the continuation of these largely irrelevant and low quality ads, coupled with no micro-targeting and no micro-messaging that generate poor perceptions amongst users, and subsequently low response rates from consumers, and therefore low value to advertisers.

Of course we’d poll the users to find out what they really thought of the advertising if we could still.

I’m convinced that most users would be more tolerant of ads if they were relevant to them and of a sufficient quality, rather than pay even a $5 monthly subscription to use the platform. But perhaps Facebook will consider an ad-free subscription model too, in the face of such low media rates being generated.

Facebook appears to have launched an initiative to increase the engagement of its users in branded Fan pages.

Following the introduction of some Fan pages into the targeting available through the ad platform, this has the potential to improve, or at least increase, the available audiences to advertisers that want to target users based on keywords. However, a couple of examples show that the initiative is not limited to major brands.

Firstly, Axe, previosuly known as Lynx in the UK. The potential upside from the perspective of an advertiser is clear,a nd with over 40,000 “fans” it certainly offers a good opportunity to target users based on their personal hygiene interests.

Interestingly of the 40,000 fans the product has, one of them is already my friend.

As I mentioned though, it does not appear to be limited to large brands. Imagine my surprise, then, when the Fan page for Classic Studios, a business run by a friend of a friend popped up.

What’s interesting here is that, despite Classic Studios having just 9 fans in total, it seems that because one of those is a friend of mine, the chances of me seeing an ad for the Fan page is roughly equal.

Overall, the push will be interesting to see develop. Certainly at the moment there are some notable discrepancies in fan page interest, something that will doubtless be discussed in more detail another time. But for the time being this increases the value of building a Fan page on Facebook, on the grounds that what appears to be a free promotional initiative from Facebook will drive users.

Perhaps Facebook are bulding some stats to understand the metrics before they make it available as a paid-for ad placement, but for the time being at least, expect to see an apparent increase in Facebook Fan page activity. Or perhaps they are comparing the stats with the home page “engagement ” ads, to determine the relative response rates.

Through extensive use of the Facebook ad platform, and no small amount of chance, I stumbled upon (not literally) the fact that Facebook have slipped another targeting feature in to their ad platform.

The public platform is suggesting that we you now target users by their job description. Which of course could be something of a boon to B2B advertisers, and a distinct advantage to recruitment advertisers of course. The phrases have begun appearing in the keywords

I’m not sure it will be enough to reverse the CPM decline the ad proliferation has caused, and especially not in this climate, but definitely a positive move. And like dynamite, it can benefit users and advertisers and Facebook alike, as long as it is used responsibly. Facebook themselves will need to maintain their vigilance, and avoid any temptations to allow it to be exploited harmfully.

And of course it is not only B2B advertisers that stand to gain. It is probably the greatest indicator of an individuals income level too, which makes the targeted groups all the more interesting to more niche and high-end advertisers.

The platform will begin to get very interesting when Facebook begin to separate some of these targeting variables, and we can begin to genuinely micro-target users based on multiple interests, job titles, and fan page affiliation.

So I noticed this morning that a third ad placement has appeared, as if by magic, on the right hand side of Facebook pages.

This is odd for two reasons.

Firstly, I wasn’t aware they were selling out anyway, so I don’t entirely understand the push to generate more ad positions just yet. If anything this will put more over-supply into the Facebook ad inventory micro-climate, and push CPMs down even lower than they are at the moment (if you use the public platform that is). So it doesn’t necessarily offer any good news for Facebook themselves.

Secondly, it is of course bad news for advertisers – which can only mean dowward pressure on…..you guessed it…..CPMs. Why is it bad news for advertisers? Of course one argument would be that cheaper ad space should be good news but now that, for want of a better phrase, each advertisers’ “share of voice” on the page is reduced then we can expect response rates to drop. Heck, for most advertisers, and especially those that aren’t micro-targeting, they’re pretty low already.

So the barrel seems firmly aimed at the toes on this one – hopefully they’re still trying to decide whether to pull the trigger just yet. I would expect them to wait until demand is sufficiently high, but perhaps the need for revenue, or at least the need to be seen to be maximising revenue, is greater.