Have you ever wondered why Facebook spends so much time encouraging marketers to take advantage of its free Brand Pages? The effort seems counter-intuitive: It costs Facebook money to provide, maintain and serve Brand Pages, and the company gets no revenue from them.If a company can create a fun, interesting or engaging enough Page, then advertising on Facebook is basically free. Procter & Gamble CEO Bob McDonald noticed this back in January, and began cutting his global ad budget, as a proportion of sales, as a result.
Also, when Facebook was trying to rescue its General Motors business, it pushed the free Pages idea (albeit unsuccessfully).
So why is Facebook so keen on this money-losing venture?
I got to talking with Syncapse CEO Michael Scissons about this over lunch the other day. (Syncapse sells social media marketing and sales management software, and Scissons is thus familiar with the way Facebook sells-in its clients).
He pointed out that Facebook has a “secret” plan to ensure that advertisers become addicted to Facebook, and ultimately spend money to promote posts to them. “Secret” is in quotes because, really, the plan is hiding in plain sight.
Then he drew this diagram of the plan (which I’ve annotated in red type) to show how it works:
Photo: Jim Edwards / BI
Here’s what it means. In the innermost circle (A) on the left, a marketer with a free Page can reach only their most hardcore fans. Because Facebook users tend to have hundreds of friends, their news feeds are fast-moving and cluttered. Any given brand post is thus only seen by a small minority of a brand’s fans. Sometimes a post is only seen by 15-20 per cent of fans, according to Gokul Rajaram, Facebook’s director of product management for ads.
In order for a brand to grow its fanbase beyond the 15 per cent core, it must pay to run campaigns such as promoted posts, which last longer in users’ news feeds and are thus seen by more people. As the campaigns are seen and liked by more people, the brand’s fanbase grows, until eventually the brand is reaching every possible relevant member of its audience on Facebook (the outer concentric circles). A big brand like Coca-Cola might need to grow its fanbase from 1 million people to 100 million, for instance.
At the same time, the growing level of consumer activity on the brand page requires constant monitoring. Brands that have consumer relations management priorities — airlines like Southwest, or above-and-beyond retailers like Zappos — eventually discover that they cannot walk away or downshift their Facebook activity because their customers expect them to be there the whole time. So companies must switch from campaigning to “always-on” CRM engagement via Facebook.
In the diagram, area (B) describes the switch from campaign spending to “always on” spending, in the form of a slider. The “e” and the “m” represent early and mature stages of spending.
Area (C) describes the two spending curves over time, with heavy initial campaign messaging declining over time and “always on” spending increasing over time. The crossover of the two curves, at the 50 per cent mark, is the point at which Facebook has basically made a customer for life: The company can’t reach all its fans without spending money to promote posts, and it can’t ratchet down its always-on Facebook spend because it has a large fanbase who expect it to be there when there’s a problem.
It’s quite clever.
Disclosure: The authors owns Facebook stock.
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