Social media now must make advertisers their priority, not users

by Tony Fannin, CEO/Partner, BE Branded  |

Technology and advertising are both, at odds with each other and dependent on each other. Companies such as Google, Facebook and Twitter each has shunned advertising in their beginnings calling it a form of “hucksterism”. They believed that “advertising” was a dirty word and their work was pure and holy. Now, that they’ve gotten millions of users by being free, with the exception of Google, almost all of social media has struggled to turn a profit. (In fact it took another company to develop the PPC model that Google “borrowed” and eventually had to settle out of court. So, even the mighty Google needed help to get into “advertising”.) The industry most tech companies have criticized and blamed for the downfall of mankind is now having to woo back because without the advertisers, they won’t be able to live on “free” too much longer.

One sign that the social media industry and online community is maturing is the pressure to make money, to be more than just a free service. Everyone knows in their head that the number of users are massive because the service is free. My guess is that many would lose 30-40% of their users if they had to pay with another 10-20% leaving on an annual basis forcing these companies to continually sell because of attrition. Many social media and tech companies are having a hard time justifying their valuation against real financial numbers (funny how data works that way.)

As more of these companies go public, they are now forced to play by a set of rules that most businesses have to, earn more money than you spend. Free is nice and great for the users, but horrible for business. The main problem is these companies were built without any intention of how to make money. I believe in the back of their heads they though advertising will save the day, but had no clue on how to incorporate it into their service without using a jackhammer and forcing it in. Now users feel like the ads on these sites are forced and unnatural. You know what? They are. One good thing is they put users first. The downside is they forgot all about the people who will eventually pay their bills, the advertisers.

The challenge most of these new media companies will have is how to make money and make it a priority. Many have never thought that way and their founders were not interested in making money. They often relegated non-engineer types to second class citizens while bestowing sainthood on their engineers. Just as Facebook is dealing with now, there will need to be an emphasis on advertisers. They will need to show as much caring and concern to the “dark side” as they do to their users because, without the advertisers, Facebook, and the other social media companies, will become a shell of who they are now.

It will be difficult for some to go from a socialistic society to a capitalistic enterprise, but if they are to survive in the next 5 years, they must make advertisers happy or just hope their initial investors don’t care about getting their money back.

www.bebranded.net
317-797-7226

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About Be Branded

Tony Fannin is of President of BE Branded, an integrated marketing firm who helps clients BE Somebody to their customers. If you aren't somebody, then you are commodity.

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