The Bankwatch

Tracking the consumer evolution of financial services

Some thoughts on internet marketing and the challenge facing FaceBook and Twitter

Every once in a while I have to get back to the value that is yet to be proven for internet marketing.  When I say yet to be proven I am thinking here of the promise to get beyond sub 0.5% conversion rates usually seen in traditional marketing.  This is the promise that is held out for the Twitter and FaceBook models that somehow they have transcended the value which traditional interruptive marketing brings.  (For my thoughts on Groupon)

Mathew Ingram writes a succinct summary of the problem on GigaOm:

Both are seeing their share of the ad market grow, but there is still one big question standing between them and the multibillion-dollar valuations they have received from investors — namely, do ads inserted into social activity actually work?

Brilliant.  Everyone gets excited about volume of eyeballs, but that is old thinking.  Mathew summarises the problem perfectly here.  Will people actually buy things that somehow are selflessly promoted by their friends.

The bigger story is highlighted in this thoughtful piece from Brad Stone on Business Week.  There are several anecdotes about GM, Ford and Newt Gingrich levering twitter in ways that reflect more on the troll like activity we used to see in 1990’s newsgroups, than in valuable sharing of valuable insight.  There is nothing about product quality or why I should buy in.

Where do I see shared value?  It lies in places where control is exercised by the owner and gaming is not possible.  Amazon recommendations for example are (I believe) largely based on my own activity.  That makes me more loyal to Amazon and more likely to use them, the more I see the value in the recommendations.  There is another important point here;  no-one can game what I do and buy.

A similar trend exists on Goodreads.  I choose who I observe, and their book choices hold value for me when I associate with what I know about them and what they are reading.  Again it is very hard to game because it would stand out if a thoughtful friend or person I know and respect who specialized in war history suddenly started buying bodice ripping romantic novels.

So there is another trend there;  knowing the individual on the other end.

There are possibly three things that marketers could learn from these small observations over a period of time:

  1. My own behaviour is valuable to me
  2. The behaviours of real friends and of people I know and/ or respect are valuable.  Their recommendation’s less so.
  3. I am highly distrustful of big media trying to interpret me based on my postal code or click preferences.

I don’t know if the book model I describe is extendible at scale but FaceBook at least has some of the pieces in place to be thinking about that.  Twitter I have no hope for.  Twitter is that yappy group in the corner, and while I might pick up on gossip from them, and even get a smile or two, it will not impact my purchasing habits.

Written by Colin Henderson

March 3, 2012 at 17:30

Posted in Uncategorized

5 Responses

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  1. What an amusing analogy – Twitter as the noisy yappy group in the corner. The visual I got from that sentence is priceless 🙂

    Interesting about how you can’t game Amazon based on your own purchasing behaviour. But what about Google choosing your search results based on your previous activities?

    I know it’s supposed to be for our presumed benefit – but still find it creepy.

    Great post.

    Dee

    March 4, 2012 at 08:32

    • 🙂
      Re Google I encourage them to track me more if that helps me to enjoy better service, better searches and better new services. Most people see Google as a binary choice, ie Google search or change default to someone else. I see Google as a service provider for 2 personal and one corporate email services with very low Total Cost of Ownership. Our company doubled in size over the last couple of years and when new people arrive we set up and email account, and Google takes over from there. No training and no servicing. Then there is Google Docs for simple documents to be shared.

      So yes I want Google to know what I have with them, so they appreciate my reliance on their free and aid services and so that they maintain their uptime … an uptime which btw exceeds the uptime at my previous corporate full size bank organisation.

      Colin Henderson

      March 4, 2012 at 09:47

  2. Colin —

    I would challenge your statement that the promise of internet marketing is to get “beyond sub 0.5% conversion rates.”

    The reason that conversion rate is so important in traditional marketing is that the cost of the message is relatively high. With a high cost of message dissemination, response and conversion rates are critical.

    But in internet marketing — and by using the word “marketing” I’m going beyond just “advertising” (which is just one aspect of marketing) to include SEO, email marketing, social media marketing, etc,. the “promise” (although I’m not sure many agree w/ me) is one of efficiency, not effectiveness.

    The Internet radically reduces the cost of message dissemination, and (theoretically, and ideally) enables a wider range of personalization and customization available through traditional marketing.

    In this context — in a world where the cost of an incremental message is near zero — response and conversion rates are far less important.

    When I can only send 100 messages, conversion rate is critical. If I achieve 1% conversion, I get 1 customer. When I can send 100,000 messages for what it used to cost me to send 100, if get a 0.1% conversion, I get 100 customers.

    Having said all that, I can tell you that, at least in the world of financial services, banks and credit unions have a long way to go to become competent in digital marketing. Please take a look at this: http://snarketing2dot0.com/2011/11/28/how-good-are-banks-at-marketing-online/

    Thanks, Ron

    Ron Shevlin

    March 4, 2012 at 09:17

    • Ron, I understand your thinking and agree with it. But I do believe their is an attempt to convince us that the conversion rates will rise becuase of new ‘secret sauce’.

      I see the boys from JP Morgan and Goldman Sachs fully embedded in the thinking of FaceBook and Twitter for example. I view FaceBook and Twitter as the latest AOL ‘walled garden’ iteration of attempting to control a large group of users in a defined environment. Thats why we are seeing comments such as Costolo referring to the promoted tweet as “the atomic unit of our ad strategy”.

      Its not clear to me if a promoted tweet is a paid retweet or what, but it doesn’t matter. These companies and the investment banking crowd are all about demonstrating control over the marketing message and the purchasing power the message creates. They hold out the promise of these companies as specially controlled environments.

      They can only sell millions of high priced shares in these companies if they convince everyone that they have broken the seal on the promise of a better marketing model. Or maybe I should say the market for those shares will only be sustained based on that promise (I have no doubt the shares will be sold at IPO).

      We see Costolo and the ‘atomic unit’ and Groupon excluding the costs of marketing when defining ‘profit’ – these are all symptomatic of the underlying problem these companies are attempting to display as solved.

      I go back to your piece at “http://snarketing2dot0.com/2010/12/06/the-2010-marketing-tea-party-awards/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+MarketingTeaParty+(Marketing+Tea+Party)/

      and the two quotes I took from there were:
      – Twitter won’t ever succeed as an advertising channel.
      – Bottom line is that Groupon was crazy for declining a $6 billion offer.

      Colin Henderson

      March 4, 2012 at 10:11

  3. As a marketer, I am a little disillusioned by Twitter’s utter lack of features. It is a great for news aggregation but it can’t be done with a “click on me and buy something” approach. That’s too interruptive. What we’re seeing on the social side is that companies have to provide value of some sort, whether it’s borne from a blog or free download or the like. It’s about inbound marketing which works on the idea of attracting leads and customers. I think promoted tweets are best used in the same way engagement ads on Facebook are used and that is attracting by being useful or solving a problem thereby building trust and hopefully, an emotional attachment with the brand.

    Facebook, Twitter, Google+, Pinterest are all tremendous tools when used correctly but with so much information at a consumer’s fingertips, it’s not enough to say you’re the best because consumers just don’t like being talked to. Social is here for engagement and if you’re not engaging correctly, then you can’t expect improved conversion rates.

    Joshua Fortunatus

    March 5, 2012 at 10:42


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