I am admittedly late to the party with regard to the social media explosion. The MySpace and Facebook revolution hit about 20 years too late for me to become immersed in profile pages and virtual friends during my high school and college years. Nevertheless, working in this industry continuously pushes us to stay current, so I took the plunge and created my own Facebook page several months ago.
Feeling emboldened by my newfound hipness, I began to explore the site to find out for myself what makes a publisher like Facebook such a desirable destination for marketers, aside from the obvious reason that their target demographic might be there. After clicking around aimlessly, adding a handful of applications to my page and ignoring countless friend invitations and pokes, I decided to talk to someone who actually had some expertise in this area: Chris Johnson, CEO of Terralever.
Terralever is an interactive agency based in Tempe, Ariz., and was one of the first companies invited to participate in Facebook's F8 launch in 2007. Over the past year, it has developed Facebook applications for clients including Nike, BMW and Red Bull.
I asked Chris about the criteria for marketers wanting to develop a Facebook application. He broke it down to three simple questions:
1. Why would someone want to install your application?
2. Why would someone want to share your application with a friend?
3. Why would someone want to use your application one week from now and one month from now?
He pointed out that while the initial focus for success focused on the number of application installs, the true key to gauging success lies in engagement metrics. Those metrics go beyond the number of installs to how many people are actively using a marketer's application over an extended period. The value proposition for marketers centers on engagement.
While this concept is clearly not startling news, it only answers half of the equation about the long-term sustainability of social network sites as viable brand marketing vehicles. The ability to create an application and place it on Facebook, gaining free access to a target audience that can be engaged in a meaningful way, provides clear benefits for a brand. It creates loyalty, awareness and, ultimately, revenue opportunities. However, the monetary value for Facebook appears questionable.
Behind the impressive database of registered members and their vaunted social graph, millions of yet-to-be-monetized page views and a ginormous valuation, sites like Facebook and mySpace still lack one key element: profitability.
While the free form, unedited nature of social content is not a deterrent for some advertisers, mainstream brands are still somewhat hesitant to jump on board. That, in turn, has created a substantial hurdle to attracting significant advertising dollars to the site.
Still, there is no shortage of companies trying to develop strategies to monetize social media platforms; a number of niche ad networks are developing new social media strategies to draw advertisers into the space. One of the most prominent, Visa, made its recent announcement of a new marketing initiative to provide small businesses a total of $2 million for advertising on Facebook.
Will such efforts ultimately be enough to turn the red ink black for Facebook and other social networks? If the answer is no, the free ride for brands looking to connect with their consumers on Facebook through fan pages and engaging applications may turn out to be a short ride.
What are your thoughts? Will advertisers overcome their fear of UGC? Can Facebook turn the corner and monetize its wildly successful platform? How long will the free rides last for brands launching third-party apps? Will Facebook still be the destination of choice for this Internet-immersed generation by the time I allow my 9-year-old daughter to access social networks sites (when she is 20)?