Social media networks were supposed to be the greatest marketing machines on earth. It hasn't worked out that way - yet. One morning in mid-December, Pope Benedict XVI gazed down on an iPad and composed his first tweet. From a marketing perspective, it was about time. While the pontiff had been issuing his traditional encyclicals online, other world leaders were venturing further, onto Facebook and Twitter. The Dalai Lama, for example, was already spreading his wisdom in 140-character packets to more than five million followers. And as people retweeted his posts, his messages winged through social media, reaching tens of millions. How could the Vatican resist such marketing magic?
Growing legions of marketing consultants are pushing social media as the can't-miss future. They argue that pitches are more likely to hit home if they come from friends on Facebook, Twitter, Tumblr or Google+. That's the new word of mouth, long the gold standard in marketing. And the rivers of data that pour into these networks fuel the vision of precision targeting, in which ads are so timely and relevant that you welcome them. The hopes for such a revolution have fueled a market frenzy around social networks -- and have also primed them for a fall.
The drama swirls around data. In the "Mad Men" depiction of an advertising firm in the '60s, the big stars don't sweat the numbers. They're gut followers. Don Draper pours himself a finger or two of rye and flops on a couch in his corner office. He thinks. What slogan would light up the eyes of the dour airline executive, or the dog food people? Fellow humanists dominate Don Draper's rarefied world, while the numbers people, two or three of them crammed into dingier offices, pore over Nielsen reports and audience profiles.
In the last decade however, those numbers people have rocketed to the top. They build and operate the search engines. They're flexing their quantitative muscles at agencies and starting new ones. And the rise of social networks, which stream a global gabfest into their servers, catapults these quants ever higher. Their most powerful pitches aren't ideas but rather algorithms.
Yet this year has brought renewed hope for the humanists -- or at least a satisfying burst of schadenfreude. Facebook made its public offering in May at a valuation of $104 billion, only to see the share price tumble as many began to doubt the network's potential as a medium for paid ads. Corporate advertisers are devoting only a modest 14 percent of their online budgets to social networks. According to comScore, a firm that tracks online activity, e- commerce soared 16 percent from last year, to nearly $39 billion this holiday season. But advertising from social networks appeared to play only a supporting role. I.B.M. researchers found that on the pivotal opening day of the season, Black Friday, a scant 0.68 percent of online purchases came directly from Facebook. The number from Twitter was undetectable. Could it be that folks aren't in a buying mood when hanging out digitally with their friends?
A more likely answer is this: When big new phenomena arrive on the scene, it's hard to know what to count. We've seen this before. During the dot-com bubble in the late '90s, investors threw billions at Internet start-ups that promised to deliver targeted ads to millions of viewers, or "eyeballs." But eyeballs didn't produce
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