Tuesday, November 6, 2012

US Election Costs $50 Per Vote –Money Well Spent?

The presidential election of 2012 may not be remembered for who won or lost, or the issues, or the storm that wrecked the east coast: There’s a good chance it will be remembered by how much it cost.

By some estimates, over $6 billion (with a ‘B’) has been spent collectively on the various election races nationwide, with something close to a billion being spent on the presidential election alone. With at least 120 million Americans expected to go to the ballot, that’s a staggering $50 per vote. This compares with under $20 per vote in 2000.

This is unquestionably great news if you’re a TV station owner, especially if you’re Ohioan, but of dubious merit for just about everyone else and for democracy at large. But let’s ignore the Big Question about the wisdom of mixing all that money in a democratic election process. I have a more fundamental question: Is this money well spent? Said another way, can you buy an election?

There’s no question that advertising is persuasive to some degree, but can it influence voting? Not so much. Stephen Dunbar at Freaknomics  finds that campaigns managers and insiders from all political parties don’t see a nice linear relationship between spending and outcome, but they recognize it contributes. While researchers acknowledge that the biggest spender is also most often the winner, when all other factors are taken into account, the spending isn’t the root cause of success. To cite recent examples, Meg Whitman in California or McMahon in Connecticut each spent a considerable part of their private fortunes on loosing campaigns. So, the good news is you apparently can’t buy an election.

But wait. There has to be a reason all this money is sloshing around in politics – why are we all subjected to so many crappy TV ads unless they do something?

Advertising does a couple of things very well. First, and most obviously, advertising raises awareness. In this regard, political candidates are no different to dog food or Viagra, at least from an advertising perspective (there may be other similarities which I won’t pursue). This is why so many ‘third party’ candidates rail against the political system – they aren’t able to compete for awareness is a noisy, cluttered political environment. (Indeed, many Americans are surprised and confused to find that there’s actually four candidates on the ballot for president this year. Most voters have never heard of two of them).

The second effect of advertising is to set the agenda. The famous adage about the news business –  news organizations can’t tell us what to think, but they can tell us what to think about – is also true of advertising. This election cycle, the Democrats did a masterful job of framing the political debate, so that the focus became less about the economy and more about social, environmental and health issues. This didn't directly persuade voters to vote for any specific candidate, but it did provide evaluation criteria that favors one over the other.

Advertising can have others effects, especially for so-called ‘low involvement’ buying decisions (think breakfast cereal or washing detergent), but for most situations it’s influence is weak, indirect and fleeting.

As goes political advertising, so goes advertising everywhere.  Those we wish to influence in business may not be heavily swayed by our own advertising and self-promotion. We can make them aware of our company, we can raise issues we think are significant and warrant attention – but we will need to rely on other tools to really influence decision making.

Friday, September 28, 2012

The Value of Social Media

Ever since the Facebook IPO debacle last May there’s been a lot of fretting about the real value of social media platforms. Facebook’s stock opened at $38 a share, and today trades at about $21, a loss of 45% or about $25 billion dollars, or the equivalent of the GDP of a small country – say Cyprus or Panama.

Of course not all social platforms have disappointed so magnificently. LinkedIn, the social professional networking platform, IPO’d in May 2011, and first day investors have made a healthy 50% return. There are other success stories.

The valuation of social platforms isn’t just about investor returns. We need to consider the value proposition to users and to those that will provide income to these platforms – potential sponsors. Most social platforms have at their core an advertising model for making money, and advertisers have also begun to express their value judgments. Responses have been mixed. Back in May this year, shortly after Facebook’s roller-coaster IPO, GM announced that it was withdrawing advertising support, citing poor performance. Many other companies have taken a measured approach to all online advertising, although according to Forrester, advertising revenues for social platforms are expected to rise by 34% through 2014. To some extent, advertising on social is a victim of its own success: clutter and saturation make any advertising or sponsorship difficult. And many potential sponsors see an opportunity to disintermediate all media, and reach out directly to potential customers with their own tailored content. Then there’s the Transparent ROI Problem – online is so amenable to measurement, smart companies are able to precisely gage the hard returns on investments (or lack thereof), and increasingly are discounting softer brand benefits.

One thing is certain – the value proposition to users of social is beyond compelling. For most teens, Facebook is as necessary to life as oxygen. For most everybody else, social is an ingrained and everyday part of life, like the morning cup of coffee or, dare I say it, like the daily newspaper used to be. It is this collective addiction to social media that is fuelling a social media investment bubble, but until we find a clearer conjunction of shared value between users, sponsors and the platforms, the real potential won’t be realized.

To some extent, LinkedIn shows the way and for sponsors and users, the meeting point for shared value is bound up in the idea of community. This is where we find the common values of like-minded users of a product, or passionate followers of a brand. In LinkedIn's case, they attract professionals who want a mediated way to network with colleagues and companies, and businesses want a way to find talent. Everyone sees value. Today, too many social platforms are hoping to exploit business value by mining users’ personal information, marketing this data to companies. Trouble is, users don’t see the shared value – they see exploitation, and that’s not good news for social media companies.

Monday, April 9, 2012

The Emperor Wants Clothes

We used to have an assumption that is the digital world we remained cloaked – almost anonymous – unless we choose to reveal ourselves, and even then we were able to invent a self of our choosing. Not anymore.

As I’ve mentioned in a previous post, everyone now knows that as we rummage around in the virtual world, our digital trail is soon followed: What we do, where we go, who we are, and what we think can all be discovered and refactored with unnerving ease. Our online selves are laid bare.

Us marketing types are very happy with this situation. We like naked consumers who cavort online as if well-dressed, because this unrequited intimacy allows us to target them very effectively. Knowledge is always powerful, and in marketing circles the manifold details we can gather online make us giddy with excitement about how we can tailor loving entreaties the better to woo prospects.

The whole thing is a parody of the old children’s story of the Emperor’s Clothes, expect that in this version the Emperor is starting to demand we give him his old wardrobe back.

Punters know they’re being digitally stripped searched and they’re not thrilled.  They want some protection, some dignity, some rights. Enter Do Not Track. As early as 2007 the US Federal Trade Commission was approached about creating a “do not track” list, similar to the “do not call” lists that exists to suppress telephone solicitations. Over time, a more practical, technical solution has become favored: The implementation of a HTML header field that automatically signals a user’s willingness to allow tracking. This is a small step in the inevitable direction of giving consumers more rights to privacy, but it may not be enough to placate regulatory bodies like the FTC or EU regulators.

So, what do we marketing types do when the Emperor has robes again? More permission-based marketing is one outcome. A reliance on cultivating trust and a relationship with prospects is another. Certainly, the crutch of unfettered access to consumer information may soon be gone.

Tuesday, March 6, 2012

The Gladwell Effect

A virulent meme of the moment is 10,000 Hours – the idea, popularized by Malcolm Gladwell in his book Outliers, that brute force persistency is the route to greatness.

 In his best-selling book, Gladwell examines the factors that contribute to high levels of success and acclaim. Looking at everyone from Robert Oppenheimer to Bill Gates, he concludes that success is largely predicated on having the stamina and determination to work at a task for a total of around 10,000 hours – what he calls the 10,000-Hour Rule.


One of his examples is The Beatles, who Gladwell points out spent much of their early days in a daze, in Hamburg, playing and playing and playing. Having read about their exploits in Germany, it’s actually amazing they even survived the experience, never mind rose to acclaim. But to say that the critical ingredient that led to their fame was being on stage together for months on end is, at best, misleading. There’s just so much more to account for.

For one thing, The Beatles adroitly (or fortuitously) surrounded themselves with great talent. To take an example, their producer on most of their recordings, George Martin, was enormously influential on their musical development, making the studio an instrument in itself and pushing the band to explore more complex sounds. Then there’s Brian Epstein, who took their raw talent and turned it into a mop-haired product for worldwide consumption. Oh, and in case we forget, Lennon and McCartney wrote some pretty good tunes, a talent that transcends anything they might have picked-up at the Ratskeller.

Perseverance is undoubtedly a characteristic of greatness. So is its near-neighbor, obsession. I’d actually argue that the real driver here is passion, an ardor for what you do. But this is never enough and to argue otherwise is an oversimplification.

Gladwell can’t be entirely blamed – although some, like scientist Stephen Pinker, have claimed his whole argument is flawed. Gladwell’s idea is more nuanced, but the popular interpretation is a reduction to a direct cause-and-effect: If only we all tried harder, we’d be rock stars.

It’s a very human failing to try and account for all results by isolating a single variable. In marketing, we do this all the time – be it attempting to understand what led to a sale, why that video went viral, or what caused our competitor to beat us on a deal. It’s too easy to say it was all down to the salesman, or the clever script, or the fact we didn’t have that one specific feature in our product. Usual this reductive reasoning is all wrong.

In marketing, don’t expect simple answers. And don’t anticipate that repetition and persistence alone will drive success.

Friday, February 24, 2012

Can social media predict the future?

We all know reporters love to prognosticate, their opinions respecting no temporal boundaries. But now a whole other industry has grown up that lives off their stories, trying to predict future events based on today’s news coverage. Companies like RavenPack have built a business by sifting through news stories in near real-time, looking for the sentiment of coverage related to publicly-traded companies. They claim this information can be profitably used to predict fluctuations in stock prices.

Predicting stock price moves based on current media sentiment has logic to it – readers are also traders, so if we see a string of gloomy stories about IBM’s recent product announcement, then some of us will likely dump the stock. And our likelihood to take action is proportional to our trust in the news source: If we see negative reporting in the Wall Street Journal that outweighs positive opinions on iLoveIBM.com.

Now we have social media and the prediction game has got a good deal more complicated. Researchers at the USC Annenberg School have been working hard to see how social media traffic can be used to try and predict future events. They started by looking at new movies and tried to correlate Twitter messages to first weekend receipts. They managed to get very good at estimating this, often better than industry experts, and what they found has broad implications for social media marketing.

The Annenberg team discovered that the best predictor of box office outcomes wasn’t the volume of traffic related to a movie, but the net sentiment expressed. In other words, quality beats quantity in predicting outcomes. A new movie might get a lot of buzz, but that wasn’t predictive of making a lot of money. This confirms what companies like RavenPack have long known: it’s the tonality, not the totality of coverage that really matter.

The takeaway from this? We need to be very careful how we measure social media outcomes. Measuring retweets, mentions and the raw volume of coverage for your brand just isn’t enough. Yet this is what most people do today.

Annenberg, in co-operation with the LA Times, are now trying to see if they can use their system to predict the outcome of this week’s Oscars. If you believe them, we should expect a big upset: The winner for best movie will be Midnight in Paris. Here I’ll make a prediction of my own: Much as I liked it, Midnight will lose.

Remember, I said that being able to predict stock fluctuations worked because readers are also often traders; the same logic does not apply to Oscar voting. The Oscar outcomes are based on the opinions of a mere 5,700 members of the Academy. Winning others awards such as BAFTA are a much better indicator of Oscar success.

The lesson here is that listening to everyone’s opinions is often a mistake. Instead, we need to target on influential audiences – potential customers, shareholders, employees – and understand clearly how they impact our brand and business.

Friday, February 10, 2012

The social deluge and market saturation

Here’s a fun statistic: every 10 days, over a century’s worth of video footage gets uploaded to YouTube. Here’s another: there are over 27 billion likes and comments added to Facebook every day. Or try this: last week, the number of Superbowl tweets peaked at over 12,000 per second.

If you’re a marketing type, then your first reaction to all this is probably salivation – all those eyeballs, all that attention!! – but dwell on this for a moment and you’ll quickly despair.  The astonishing growth in social media  –  the unbelievable volume and velocity of messages, news, and information – is quickly leading to saturation. As users of social, we’re all increasingly unable to deal with the cacophony and clutter.

There’s another, related effect. In his book Data Smog, David Shenk estimated that the average American consumer was exposed to about 50 commercial messages a day in the 1970s; by 1997, that number had grown to 3,000 messages a day. Today, some put the number of marketing messages as high as 5,000 per day, with most of the increase coming from online and social sources. Commensurate with this dramatic increase in message density is a dramatic decrease in advertising effectiveness. The effectiveness of commercial messages is inversely proportional to the number of messages received.

Getting attention in social media is getting harder and harder. The effectiveness of pushing any messages through social channels will only diminish with time. This isn’t solely an advertising problem.

There are several consequences to this. First, social platforms that rely wholly on advertising for revenue will slowly see growth-rates falter as smart, data-driven companies begin to see waning returns from their advertising investments. The irony here is that the runaway popularity of social platforms will be their undoing.

Second, marketing pros will be forced to rethink old ways of engaging with consumers. Heavy-handed corporate marketing in a social world won’t work. Getting heard amid the social din will require an authenticity and empathy that is alien to many old-school marketing pros. It will require careful targeting and impeccable timing.

Finally, marketing professionals need to educate their organizations on what can realistically be achieved with social media. Engaging through social marketing will require clarity of message and intention, as well as focus and agility – and resources.