Advertising in the Age of Choice

I have to say: I’m glad last Friday’s over.

The Facebook IPO has come and gone and with it the media hype has thankfully (and conspicuously) died down as well. Prior to F-Day, even a casual news consumer would have thought that Facebook going public was an event somewhere between the Second Coming and National All Debts Are Forgiven Plus Free Ice Cream For Everyone Day. To me, it felt like “Party Like It’s 1999 Day” all over again: dot-com stocks are back, baby!

Unfortunately for those who jumped on the bandwagon (and there were a lot of them), the reality didn’t quite live up to the hype. As of May 22, Facebook was trading at around $32 – about $10 below its opening bids on May 18 (and $6 below the actual IPO price). Turns out that irrational exuberance isn’t what it used to be.

But why the quick slide? While some cite an overly-aggressive IPO price, many others are pointing to its slowing revenue growth coupled with rapidly-increasing spending as the factors that are making investors nervous. At least somebody’s paying attention to the fact that the fundamentals still matter.

But I digress. This isn’t a financial column (thank God!). The financial ups and downs of the platforms we advertise on are important, of course, but Facebook’s freefall goes far deeper than just a bunch of investors jittery over the numbers.

If you want the real reason why Facebook may not be the gilded gravy train it was made out to be, we first need to look at its main product: advertising. And as it turns out, its main product is, in the words of Mike Shields of Adweek, “abysmal.”

According to Shields, after examining 11,000 Facebook campaigns, Webtrends found that its average click-through rate slipped from 0.063 percent in 2009 to 0.051 percent in 2010. At the same time, CPMs rose from $0.17 in 2009 to $0.25 in 2010. Another more recent analysis by TBG Digital found that CPMs increased 41 percent between Q1 2011 and Q1 2012 while click-through rates decreased 8 percent from Q4 2011 to Q1 2012. During the same time period, the average cost per fan increased a whopping 43 percent. Not exactly the kind of performance that warms the cold cockles of investors’ hearts.

Or advertisers’, either. A few days before F-Day, General Motors cast its vote on Facebook’s advertising performance by pulling its entire $10 million advertising budget from the platform. And while that’s not even 1 percent of Facebook’s projected ad revenue for 2012, GM’s departure from the service had to have made a lot of the money people nervous, even for just symbolic reasons. If the number three advertiser in the country doesn’t have faith, why should anyone else?

So is GM right and Facebook wrong? On the contrary, based on a tweet from Mary Henige, GM’s director of social media, GM’s pullout from Facebook might be the ultimate indicator about what’s wrong with the advertising industry in general.

In his Businessweek article about GM ditching Facebook, Ben Kunz recounted what happened when he tweeted about GM’s actions:

“When I riffed on Twitter, ‘Wow, GM yanks $10M from FB…’ Mary Henige, GM’s director of social media, tweeted back: ‘We have more than 8mil friends on FB; not leaving them; engagement & content isn’t same as advertising.’ Fair point, Mary.”

Fair point? Ben, my boy – Henige’s point isn’t fair…it’s one of the most boneheaded statements I’ve read about advertising in a long time, especially considering that GM spends about $30 million developing content for Facebook. That’s not “advertising”? It certainly isn’t literature designed to elevate the human spirit.

But I shouldn’t be too hard on Ms. Henige. Based on her tweet, she merely suffers from the same delusions shared by most of the advertising industry that things are somehow the same now as they’ve ever been with the exception of this pesky “digital” stuff that they now have to deal with. All that “content” and “engagement” stuff is a pain in the butt that we have to endure: real advertising is the cool stuff we get to show on TV and in glossy magazine spreads.

Ahem. According to the all-knowing Wikipedia, “advertising” is defined as “a form of communication used to encourage or persuade an audience (viewers, readers or listeners. Sometimes a specific group of people.) to continue or take some new action.” And though one could quibble with the definition (or the source) a bit, I’m sure that most of us encountering this definition would recognize it as being mostly true.

So if the idea of advertising is to get people to do something, why aren’t “engagement” and “content” seen as “advertising” by the folks like Ms. Henige of GM? After all, a Fleishman-Hillard/Harris Interactive study on the influence of digital media on consumer-buying decisions found that 79 percent of folks on social networking sites across the world used social networking to learn more about brands they were interested in. The same study found that one in five people used Facebook “to obtain information about a brand or product.” Considering that Facebook’s U.S./Canada user base now tops 180 million (more than 50 percent of the combined population of the two countries) and reaches over 720 million throughout the rest of the world, the lowly duo of “engagement” and “content” seems to have the potential for a pretty significant impact on influencing consumer behavior. Kinda like that “advertising” thing.

So why in this age of consumers dividing their attention with multiple screens, beaming Internet content into their living rooms via Internet-connected TVs, “cutting the cord” in ever-rising numbers, watching nearly 40 billion videos online, spending nearly 25 percent of their online time with social media sites, and increasingly shifting their TV viewing from broadcast to online sources and PVRs, does anyone continue to discount digital?

I can think of a few reasons, and not all of them are ones that the Mad Men (and Women) of Madison Avenue want to hear.

Digital isn’t ambiguous. It’s about performance, pure and simple. Unlike traditional media, there’s no wiggle room: either an online ad delivers or it doesn’t. And while some can throw up great clouds of figurative and metaphorical squid ink when confronted with the results of their campaigns, as Ari Jacoby of Online Media Daily puts it, “real performance [isn’t] subjective. It should be about showing brands how an online marketing effort affects and influences consumer behavior. Anything else is fuzzy logic.” “Digital” means there’s nowhere to hide.

As I pointed out earlier in this column, there’s also the issue of defining what an “ad” actually is these days. Nearly 84 years of commercial TV and hundreds of years of print advertising (not to mention millennia of out-of-home placements) have trained us to see advertising as something that comes to us. Either it interrupts the program that we’re watching on TV or listening to on the radio, gets in the way of us finishing an article, or pops into our attention sphere while we’re out of our homes. It’s not something that we seek out. Advertising isn’t something we choose. “Real” ads seek us out, grab our attention, and (if they’re effective) make damn sure that we remember what they were selling so we can go out and buy it.

“Engagement” and “content” on the other hand are a bit more subtle. We have to seek out content and participate in order to engage. Branded content and experiences can’t assault us like “traditional” advertising or hold our attention hostage. It can’t scream “I’m an ad!” But if the experience or the content is good enough, we’re happy to install it in our smartphones or pass it along to our friends. We even welcome it when we are on the hunt for something to purchase. There’s a reason Google’s ad revenues keep going up like a rocket-powered express elevator: it’s “advertising” that connects with us when we want it to.

The real issue with “advertising” today isn’t, “Why haven’t we figured out how to replicate the attention hostage-taking experience of television advertising online?” but rather, “How are we going to deal with consumers who expect to have total control over their media consumption?” Or, more simply put, “How are we going to deal with choice?”

Like it or not, we’re smack dab in the middle of the Age of Choice. Consumers now have a dizzying array of media choices from tablets to phones to video game consoles to PCs to traditional televisions. Nearly half of us watch video online and 37 percent of us are time-shifting our TV watching. Shipments of Internet-enabled consumer devices are projected to exceed PCs next year. Paradoxically, while print consumption is down, new magazine launches are up. Every day the world creates 2.5 quintillion bytes of data…so much so fast that 90 percent of the data in the world today has been created in the past two years. We’re awash in a sea of choices and can choose to view or read or listen to anything we want, whenever we want, and, increasingly, wherever we want.

Today, the consumer is in control…and she isn’t all that interested in giving up that control, especially to advertisers. In the Age of Choice, accomplishing the goal of advertising – encouraging or persuading people to act – means recognizing that as an advertiser you’re no longer in control. “Advertising” can only work when we provide content or experiences for engagement that attract – rather than interrupt – consumers’ attention.