Commentary

Don't Let the Facebook Numbers Get You Down -- Or, Why Advertisers Sometimes Get All Confused About 'The Internets'

We started the week with the news that after months and months of ascendance, traffic to Facebook in May was actually down in the U.S., according to Inside Facebook, which said that active users dropped by six million. Meanwhile, there has recently been hand-wringing over Groupon's planned IPO. Forrester'sSucharita Mulpuru said in an open letter to the social commerce site's potential investors last week that " thereis no rational math that could possibly get anyone to the valuation Groupon thinks it deserves."

And I write this during the very same day that shares of Pandora have soared on this day of its IPO, and during the same week that someone who supposedly knows has said that Facebook plans to go public in early 2012.

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For all those reasons, you are to be forgiven if you think that this might be 1999 instead of 2011. But if you, dear advertiser, are smart, you won't jump to the conclusion that 2012 will be like 2000, the year the bottom fell out of the Internet market (and my chance at an easy million right along with it).

It seldom gets mentioned, but 2000 was the beginning of a few years in which advertisers got it wrong, because they started to confuse the failure of Internet companies with consumer behavior. Pets.com may have been a rotten idea, but that didn't mean the Internet was a bad idea. But with the wreckage of dozens of dot-coms around then, advertisers decided, essentially, that the Internet had gone away, and they punished the online world accordingly. During 2001, when advertising across all categories declined by almost 10%, online advertising declined by 12.3%.

Meanwhile, even though most homes were without a broadband connection, the increase in online traffic continued unabated, as though all of those stock options hadn't been declared worthless. In its full-year earnings announcement for 2001, Yahoo reported fourth quarter increases in traffic of 16%, compared to a year earlier. However, net revenue at Yahoo dropped by more than a third over the course of the year. Obviously, the smart advertiser stayed in the game, while traffic was surging and advertiser demand slow.

So the biggest problem I see for the online industry when I start seeing "sky is falling" headlines is that it will fall into the same trap it did more than a decade ago. If you want to see a warning sign in the Facebook traffic numbers, be my guest, although there are other traffic numbers that dispute Inside Facebook's findings. The fact is that Facebook is here for the foreseeable future, and social media is here with us forever, or at least as long as we have electricity. If you're an advertiser, you should continue dealing with that fact.

Or heed Forrester's advice and turn your back on Groupon's IPO if you want. Just know that its success or failure has little to do with whether or not your company should take a close look at participating in social commerce. The smart company will look at social commerce through the lens of whether it makes sense in terms of sales or building awareness, not on whether Groupon is worth the money that's about to be thrown at it. Those are two separate issues that should be looked at as such.

Not that I think anyone will listen to me. Which is why, if we're headed for a social media downdraft here -- and I'm not at all convinced that we are -- in about 2014, I plan on writing a column with the following headline: "I told you so."

2 comments about "Don't Let the Facebook Numbers Get You Down -- Or, Why Advertisers Sometimes Get All Confused About 'The Internets' ".
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  1. Douglas Ferguson from College of Charleston, June 15, 2011 at 5:03 p.m.

    Not as much confused as wistful for the good old days of one-way messages with easy metrics and mass audiences watching the same thing.

  2. Betsy Kent from Be Visible Associates, June 15, 2011 at 6:08 p.m.

    Catherine: Brilliant post and I couldn't agree more. Now if I could just get my hands on some of those Groupon shares!

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