In the old days advertising was very simple. You developed a product and went along to Madison Avenue. You consulted Don Draper – he put his Lucky Strike and his secretary to one side for a few minutes and came up with a catchy slogan. The artwork was done and your ad targeted with laser precision. It went up on a billboard at the side of the interstate: everyone who drove past saw it. In theory…
Fast forward 57 years: last week Facebook announced soaring third quarter profits, bringing in more than $10bn in advertising revenue. Profits for the three months rose to £4.7bn (£3.5bn), which is up 80% on a year ago. Much of that revenue comes from small and medium sized businesses – exactly like ours – which make up the bulk of Facebook’s 6m active advertisers.
Meanwhile Amazon boss Jeff Bezos once again leapfrogged Bill Gates to become the richest man in the world, as Amazon shares surged thanks to Q3 sales being 34% up on the same period last year. Sales were $43.7bn (£33.5bn) compared to $32.7bn in 2016. And if you are wondering how much $43.7bn is – it is equivalent to the economy of Slovenia.
Facebook now generates more advertising revenue than most major TV networks. So why do SMEs advertise in such huge numbers with the company? Why are the projections that ever more businesses will join them? And most importantly, what does the future look like?
In the early days you had a business page on Facebook. ‘No, no, we don’t need to advertise. We’ve a Facebook page.’ Sadly, Facebook business pages have pretty much gone the way of the penny-farthing. ‘Organic reach’ is dying out, with estimates suggesting that less than 1% of a business’s ‘fans’ actually see the updates the business posts.
But businesses still need to advertise – and the first thing that attracts them to Facebook is the sheer scale of the numbers. Facebook has 2.07bn active users – strip out 10% of that figure for duplicate accounts and you still have around a quarter of the world’s population.
More than 1.5bn people log into Facebook every month, with more than a billion now logging in every day. With people spending ever increasing amounts of time on social media – studies suggest that the average American now spends up to 2 hours a day on social networks – there is plenty of time for advertising to connect.
Secondly, advertising on Facebook is cheap – and scalable. You do not have to commit to a billboard or a TV slot. Businesses can set their own budget and ‘dip a toe in the water’ with a spend of £40-50 getting an advertising message in front of 5,000 to 10,000 people. After that, it is scalable: the ad doesn’t work? Scrap it. It does work? Spend more money and increase its reach.
But the real reason advertising on a platform like Facebook is so attractive is the very specific targeting. Businesses can target users with Facebook ads by location, demographics, age, gender, interests, behaviour and connections. Everyone in North Yorkshire between the ages of 25 and 35 interested in being an entrepreneur? No problem: how much would you like to spend?
It’s the same story with Amazon. Once a book store, Amazon is now arguably the world’s most trusted and effective search engine. Marketing technology company Kenshoo reported that 72% of people visit Amazon if they’re planning to buy something online. And why wouldn’t they? The Amazon search engine is fast, it’s accurate – and the product listings page has everything a shopper could want to know: price, descriptions, pictures and reviews.
But even if you don’t buy the product from Amazon, you’ve researched it – and Big Brother has quietly stored the information away, ready to make recommendations next time you drop by.
We all know the feeling of being ‘stalked online.’ You look at something – and seconds later ads for it are following you round the internet. The first time it happened to me (it was for work shirts, honestly) I found it quite unnerving: now it is an accepted part of being online – but it still leaves me feeling that Big Brother is watching me. That feeling is only going to increase – and if Amazon and Facebook ever merge then believing in privacy will be like believing that the Earth is flat.
So what does the future look like? As I wrote last week, ‘algorithms will do the heavy lifting.’ The buzzwords are ‘deep learning’ and ‘machine learning’ and the ‘machines’ are only going to go on learning. However good you think your insight is, it won’t be as good as the Amazon/Facebook algorithm. My desire for work shirts has been noted – and will never be forgotten.
Over the next ten years, advertising will move from communicating to predicting. Content and advertising will be so intertwined that we will not be able to tell which is which. As brands learn more and more about you, your emotional commitment to them will strengthen: a recent study by neuroscientist Paul Zak claimed that three out of eight people already love their favourite brand more than they love their spouse. (Checks to see if wife is reading over his shoulder…)
And advertisers will know exactly how much we like their brands because our pulses (via our smart watches) will tell them. And with that chilling thought I’ll leave you to enjoy the weekend. Just remember to take your watch off before you log on to Facebook…