The Facebook enterprise pt 2

FACEBOOK: Facing the future.(Interview).

New Media Age (Dec 10, 2009): p18.

COPYRIGHT 2009 Centaur Communications LimitedFacebook is seeing huge continued growth, reaching 350m users and planning to triple that. Commercial director for EMEA Blake Chandlee and UK commercial director Stephen Haines discuss how the platform is responding to market trends and how it sees itself fitting into the UK online ad market

nma: Last week Facebook CEO Mark Zuckerberg announced it had 350m users. You’re managing gravity-defying growth. How have you done this?

Blake Chandlee: The world of social media is a misnomer for us. There are so many players you can bundle into it, from YouTube to us, MySpace, Bebo and now Twitter. In most cases, with the exception of Twitter, these are content-driven companies with some social elements. Facebook is really an online utility that allows people to share and connect in much more efficient and effective ways than ever. We’re just touching on something that people do when they go to the pub, go on a family holiday or talk to their friends. We’re just layering technology on top of it in a way that’s never been done before.

nma: So is there a natural limit to your growth?

Chandlee: Every person in the world has a need to connect with others. If you compare our demographics to those of the internet as a whole, they match perfectly. We have as many users aged over 50 as under 18 because every demographic, every culture has a need to connect, and we’re seeing this in every country. It’s a phenomenon we’ve never seen before in the history of the web.

Mark Zuckerberg is 25 years old now and he makes calls on projects and the way we’ll approach markets that I find are unbelievably well thought out for someone who’s that age. His objective is to get a billion users very quickly. We’re definitely on track for that. In the UK we have 21m active users: people who have an account, have logged into it and taken an action in the last 30 days. We’re three times the size of Yahoo on a daily basis.

nma: What effect has Twitter had on your market?

Chandlee: Twitter has built some great stuff. It’s a very different user experience from Facebook. Twitter for the most part is anonymous and is really a broadcast model. It’s almost the next generation of blogging. Twitter I use to follow newmedia age or the FT. That’s kind of the role Twitter’s finding itself in. When it began and all of a sudden that whole concept of live streams became really strong, we saw the concept of real-time data, real-time streaming as an uber-trend. So last year, to much controversy, we launched our live stream in the newsfeed. The latest iteration was giving users a choice. So now you can look at highlights, which is the old Facebook, or the live stream. It’s about giving people choice.

nma: What changes are you planning for advertising on Facebook next year?

Stephen Haines: In the UK there’ll be no IAB standard inventory on our site. The traditional way that online has been sold in the UK is salespeople talking about the same IAB standard formats. Suddenly Facebook comes along with a new engagement ad. We’re a platform and more than 10m people a day use us for over 25 minutes. That’s a very different proposition from a traditional website.

We’ve had a relationship with Microsoft selling IAB banners. That comes to an end on 1 January. All you’ll see is the engagement ads that we sell on the home page. We’re finding huge traction with advertisers if that’s the sole ad point on the page. We’ve had huge success from big brands like O2, P&G, Sky and even the Royal Opera House; 50% of all their subscriptions have come from Facebook.

Chandlee: In this market, 7-8% of our inventory is sold by Microsoft. That’ll go. IAB banners slowed down growth. It just wasn’t a positive user experience. Broadcast media in this environment doesn’t work. The concept of shouting at users in Facebook when we’re all hanging out with our mates is not the future of this business. The future is creating tools and platforms, becoming part of the dialogue users are having. So the concept of a blinking, flashing banner doesn’t work.

nma: How do you expect the UKOM planning currency to affect the way advertisers see online?

Chandlee: We have a global strategic relationship with Nielsen on research, so we’re part of UKOM. But CPM inventory in the UK is actually destroying the industry. Media owners are jumping over themselves for every last penny. The agencies are negotiating prices and driving the value of inventory to nothing. The industry will self- destruct, and not just the digital industry, but TV too. We all know it. The agencies know it, the clients know it. I spend a lot of time talking to CEOs of agencies and clients, all of whom are saying the agency industry is self-destructing. Talk to any agency CEO and they’ll tell you that the margins they’re making of 2-3% aren’t sustainable. They’re taking businesses below their cost and that’s not a sustainable outcome.

nma: But at the moment you’re selling on a CPM basis and publishers say look what Facebook’s doing to the price of CPMs. You have so much inventory.

Chandlee: I guarantee CPMs on our home page are three or four times those of Yahoo’s. On click-through, the engagement levels we’re getting are 10-15 times that. Not 10% more, 10-15 times Yahoo’s click-through rates. This is where we’re selling to P&G and those big brands.

The other side of our business is performance: those little square boxes, ASUs [Ad Space Units], that appear everywhere except the home page. 80% of our inventory is driven through a self-service auction model. We’re on 50bn of them a month in the UK. That’s scale. And big brands are saying they’re getting more volume and lower cost than Google on Facebook right now.

nma: But aren’t those 50bn ASUs pulling down CPMs?

Chandlee: Actually, the effective CPM is higher than for most banner ads. That’s the problem with some of these tools people are building.

nma: What has been the effect of Facebook Connect?

Chandlee: Facebook Connect is about sharing whatever you want wherever you want. So when I go to the FT and log in as Blake Chandlee on Facebook, the FT knows it’s me and who my friends are. 25,000 websites have now signed up for Facebook Connect. Extensions to it include things like live streaming the Obama inauguration, where you went to and could see everyone who was talking about it. We’re doing the same thing in France with football. The X Factor is doing well in the UK.

When we asked consumers what they thought about advertising on Facebook, most said there is no advertising on Facebook. We showed them what’s on Facebook Connect and they considered it content, saying, “It’s a great video – that’s not advertising.” Well, it is, it’s marketing. It’s just marketing differently.

nma: What’s the role of video on Facebook?

Chandlee: We have a lot of big broadcasters from all over the world, including the UK’s four terrestrial broadcasters. We don’t have entertainment channels, sports channels or tech channels; we’re the platform. All we’re trying to do is get people to share. So we don’t monetise it. If there’s a video playing in a Sky Sports group, Sky Sports owns that. We’re not trying to monetise video in any way, shape or form. We don’t have a video player that runs pre-roll, we don’t advertise around video, we think of video as something that’s considered shared content. We’re now the single largest driver of traffic to YouTube after Google itself. We don’t make any money when we do that because that’s content, that’s what people are sharing.

nma: How surprised were you by the furore of advertising around controversial Facebook groups such as the BNP?

Chandlee: When you have platforms, one of the things we found was there’s potential for exposure against groups especially. So we’ve created trigger points that prevent using wide lists of words and technology that can exclude groups from being served certain ads because it’s not consistent with what the advertiser would expect.

Haines: There were three advertisers that read a certain article and rang us, but contrary to what was said they didn’t cancel. They just said we’re the only platform that’s growing so fast and our technology is fantastic so they knew at some point certain problems would arise, and wanted to work with use to rectify it.

nma: So are you saying it couldn’t happen again?

Chandlee: Brands don’t have to appear in groups. We give them tools to block themselves from being in groups they want to avoid, although it reduces the amount of inventory they have access to. So we do take this very seriously; we want this to be an environment that advertisers feel comfortable in. We’re giving them the controls to do that. And most of them take advantage of it.

nma: Have brands only just scratched the surface of apps?

Haines: Brands need to think carefully about an app and not treat it like any other thing on the web. It can’t be a stunt, it needs to have some life. And they need to think about what’s of value to an 18 year old, as it’ll probably be very different to what’s of value to a 51 year old.

Chandlee: Apps are very tactical, they’re not strategic. They’re short- term bursts, typically, that are almost campaign driven. The pages platform, which is where brands spend most of their time and energy on Facebook, allows them to have long-term conversations with consumers over the course of a year.

nma: Do you think advertisers are ready for that?

Chandlee: They’re doing it now. The question is, are the agencies ready? What role does an ad agency as opposed to a media agency play? Adidas has 2m fans on its Adidas Originals page and it publishes content every day. Who manages that page, who looks for all the data on the back end of it and sees who are the active users? The UK is very trading driven, so the media agencies are structured and compensated on how they trade media. That doesn’t lend itself to engagement advertising.

nma: What will we be seeing more of from Facebook, particularly in the first half of 2010?

Chandlee: The big thing we’re bringing to the market in early Q1 is Nielsen-branded research, which will reveal what people are doing, using awareness consideration and favourability metrics that are important to branded advertising. We’ll be able to quantify this via Nielsen.

nma: Are there myths about Facebook you’d like to bust?

Chandlee: That we don’t make money. Cashflows have been positive for the last two quarters. And people are surprised when they see the scale.

Haines: I think the biggest myth is that we’re young. Our fastest growing sector is the over-40s and our core is 22-45-year-olds. Another myth is the time people spend on Facebook. There’s a traditional cohort of people spending two or three minutes, checking their messages then logging out, but most are spending 25 minutes a day.

nma: How big an issue is users’ concern about privacy?

Chandlee: All we think about is giving people more control over who sees their data and how they see it. In two and a half years, the data controls have become much more sophisticated because that’s important to users. They must trust that we’re doing the right thing for them. The fact we’re not driven entirely by commercial concerns gives us the flexibility to put consumers first.

Copyright: Centaur Communications Ltd. and licensors

Source Citation

“FACEBOOK: Facing the future.” New Media Age (2009): 18. Computer Database. Web. 7 Mar. 2011.


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