Tag Archives: Facebook

Could word-of-mouth web traffic referrals eclipse search referrals?

A few weeks ago, a report from Citigroup analyst Mark Mahaney claimed that Facebook usage has eclipsed Google for the first time ever. A summary of that reportphoto illustrate networking - tin cans with a string on Techvibes indicated that “people spend over 41 billion minutes on Facebook every month in the U.S. alone—Google clocks in at just under 40 billion.”

While this report doesn’t mean that Facebook is going to outperform Google in terms of advertising sales revenue any time soon (read my article from last week on the future of online display advertising), it does raise a very important question:

Could word-of-mouth traffic referrals one day eclipse search referrals as the #1 traffic generating source for all websites?

If enough people are referring links to web pages on a daily basis, could their combined recommendations on sites like Twitter, Facebook, LinkedIn, and Quora, etc. collectively amount to more referrals than search results on Google alone?

Twitter recently reported that the company now has over 100 million active users. As usage of that platform, plus Facebook and other social media sites continue to climb, the idea definitely seems plausible in the not too distant future. Why else would Google be so focused on making Google+ a success?

I am not implying that search referrals will ever go away – it is too ingrained in our online behaviour not to seek information via search engines. However, as people become comfortable sharing and trusting information online, a new source of traffic generation will become increasingly important. Why? Because consumers will always trust referrals from their close friends and family over ads or computer-generated results online.

Facebook is already the leading traffic source for news websites – who spend less and less money on Search Engine Marketing (SEM) due to the high Cost-Per-Click (CPC). However, retailers and other performance-focused (CPC) advertisers invest more in search because many people research products online prior to purchase. Still, a recommendation from a friend about a product will almost always trump an online ad.

This is definitely going to be an interesting trend to watch in the next few years. Please share your thoughts on how you think it will all play out?

Image source: iStockphoto.com

The end of online display ad sales as we know it?

Yesterday, AdAge.com published an article indicating that Facebook advertising sales growth is projected to decline year-over-year – from 104% growth thisImage of a road sign indicating a new direction year to 21% growth in 2013. While 21% year over year growth is still good, it’s quite a significant drop from 104% two years prior. However, this doesn’t spell the end for Facebook’s revenue growth. The company is actually seeing a rapid increase in year-over-year sales for “Facebook credits.”

What this data might indicate is that there is a limit to how fast a company can scale the growth of display advertising revenue from brand-focused advertisers online. You see, many advertisers who are focused on “performance advertising” have seen a decline in click-through rates on Facebook ads over the years. At the same time, the cost-per-click for those ads has gone up. As a result, performance-driven advertisers have become less interested in Facebook campaigns.

While Facebook claims that it is making a play for branding and social CRM dollars vs. performance ad revenue, they haven’t quite yet figured out the best way to monetize social display advertising. As a result, it may be harder to scale brand advertising the same way that performance advertising can be scaled to date.

So, where is the lion’s share of online advertising dollars going today? While search and e-mail remain the most reliable channels for generating high ROI, there’s a new game in town that could turn the “traditional” online display advertising industry on its head. That game is called Ad Exchanges – which are basically platforms on which you can buy and sell display ads in real-time via an auction (similar to stock exchanges). This new method of media buying could change the rules and roles for all parties involved – including the ad agencies and media sales reps.

Over the past few months, I’ve met a lot of technology, media and analytics companies who are looking to get into this space. It’s definitely a trend worth watching. For more information about Ad Exchanges and how they could change the industry, check out this article entitled “Don’t Look Now: Classic Disruption Is Taking Place In Advertising,” from AdAge.com.

Stay tuned for future stories about this growing trend.

Don’t Buy Your Friends – Avoiding the Groupon Pitfalls

A few months ago, I posted a blog about how everyone is competing to become the next Groupon in Canada.  After speaking to a few e-commerce veterans in Canada who are cautious about getting into this space, I still stand behind my belief that this is a potentially dangerous business model.  The challenge in offering such large discounts to consumers is that we (as the consumer) are being taught to only like a brand if they are giving us a huge discount.  Yes, the economy has been tough and we are all out to save money and find a good deal, but what ever happened to paying someone for what their product or service is really worth?

Of course, there are some companies who may be marking up the price of their products too much and taking consumers for a ride. However, if the price is not too ridiculous for a really great product that I believe in, I will most certainly pay full price for it.  If we’re going to help struggling businesses out of a recession, wouldn’t paying them what they’re worth be part of the solution?

Yesterday, I received a re-cap of the most popular marketing charts of 2010 from MarketingProfs that highlighted the fact that the number one reason why people “like” brands on Facebook is because that brand offered them a deal or discount in order to “like” them.  Again, I am the first to go to a good sale to find a bargain but I see a lot of danger in enticing fans/consumers/users to “like” your brand just to get 20% off your product at purchase.

Google insights for search shows that during the start of the recession, Canadians were going online to find deals and coupons because they were concerned about saving money.  Retailers jumped on this trend and offered serious discounts just to get people to buy in their stores – and I can totally support that cause.  However, I do fear that all of this mass discounting via Groupon, Facebook, etc. (I bet you can name 5 other group discount websites right now) is training consumers to like you for the wrong reasons.  The chart below shows that the search behaviour for coupons and deals has sustained the same level of interest in the past few years.  This is likely partially due to the fact that people are still staying conservative due to the strain on the economy.  However, it is also likely due to the Groupon craze and the fact that we are being trained to seek out discounts.

As a result of this trained behaviour, I have one question for retailers. Didn’t your mother ever tell you that no one will buy the cow if they can get the milk for free?  Why would you then ask people to like you online – just to buy a piece of you at a discounted price? MarketingProfs.com recently published an article about the fact that coupons cheapen your brand in the long run.  They argue that “discounts train customers to think your regular prices are too high, and to wait for the next coupon before they shop again. They might eventually refuse to make any purchase without a coupon.” This is definitely a word of caution about the sustainability of a business model based on heavy discounts.

Of course, there will always be good business reasons to offer sales and discounts, I would just caution brands to be aware that it’s always better to build customer relationships based on quality and substance, rather than simply buying your friends online.