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 dollars, and the high-flying market crashed. Many naysayers gleefully concluded that the Internet itself had failed.
Yet as these cyberskeptics crowed, a company called Overture Services was pioneering an innovative advertising application for the new medium. When Web surfers carried out searches, it turned out, they welcomed related ads. And if they clicked on one, the advertiser paid the search engine. Google soon implemented this system on a mammoth scale and turned clicks into dollars. Advertisers could calculate their return on investment down to the penny. In this domain, the insights of a Mad Man counted for nothing. Search ran on numbers. The quants rushed in.
While the rise of search battered the humanists, it also laid a trap that the quants are falling into now. It led to the belief that with enough data, all of advertising could turn into quantifiable science. This came with a punishing downside. It banished faith from the advertising equation. For generations, Mad Men had thrived on widespread trust that their jingles and slogans altered consumers' behavior. Thankfully for them, there was little data to prove them wrong. But in an industry run remorselessly by numbers, the expectations have flipped. Advertising companies now face pressure to deliver statistical evidence of their success. When they come up short, offering anecdotes in place of numbers, the markets punish them.
This leads to exasperation, because in a server farm packed with social data, it's hard to know what to count. What's the value of a Facebook "like" or a Twitter follower? In this way, marketing resembles other hot spots of data research, including brain science and genomics. In each one, scientists are combing through petabytes of data, trying to discern whether certain genes or groups of neurons cause something or simply correlate with it. It's not clear, because these are immensely complex systems with millions of variables -- much like our social networks. Even as researchers swim in data that previous generations would have swooned over, they struggle to answer crucial questions regarding cause and effect. What action can I take to get the response I want?
Debates rage as quants accuse one another of counting the wrong things. Take I.B.M.'s Black Friday study. While the numbers indicate that few shoppers clicked directly from a social network to buy a laptop or a fridge, some may have seen ads that later led to a purchase. If so, valuable influence went unmeasured. "I.B.M. is looking at a single point in time," says Dan Neely, the chief executive of Networked Insights, a marketing analytics company. Neely's team followed Macy's Black Friday campaign on Twitter, which started weeks before the big day; it generated a viral flurry on the network, he says. Clearly, many big advertisers are still believers: last week, Facebook shares got a boost from reports that Walmart, Samsung and other boldfaced names have recently stepped up social- media advertising.
But gauging the effectiveness of these ads is still a challenge. "It's hard to measure influence," says Steve Canepa, I.B.M.'s general manager for media and entertainment. That, in fact, may be the ultimate lesson to draw from the social media marketing miracle that wasn't. The impact of new technologies is invariably misjudged because we measure the future with yardsticks from the past.
Dave Morgan, a pioneer in Internet advertising and the founder of Simulmedia, an ad network for TV, points to the early years of electricity. In the late 19th century, most people associated the new industry with one extremely valuable service: light. That was what the marketplace understood. Electricity would displace kerosene and candles and become a giant of illumination. What these people missed was that electricity, far beyond light, was a platform for a host of new industries. Over the following years, entrepreneurs would come up with appliances -- today we might call them "apps" -- for vacuuming, laundry and eventually radio and television. Huge industries grew on the electricity platform. If you think of Apple in this context, it's a $496 billion company that builds the latest generation of electricity apps.
Social networks, like them or not, are fast laying out a new grid of personal connections. Even if this matrix of humanity sputters in advertising and marketing, it's bound to spawn new industries in consulting, education, collaborative design, market research, media and loads of products and services yet to be imagined. Maybe, just maybe, it will even be able to sell soap.
is a technology journalist who blogs at thenumerati.net, and the author of "Final Jeopardy: Man vs. Machine and the Quest to Know Everything."
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