Headline from the WSJ: GM pulls advertising budget from Facebook! Days before the IPO, that’s just plain mean spirited. If I was banking on a $100bn valuation, I might be a tad concerned about this development. With a budget of over $3bn to spend on ads, GM is the third largest spender in the US (P&G is #1). Perhaps they were miffed that they only have a $33bn market cap after all these years, and quite a few motor cars sold. Either way, the implication is that targeting Facebook members as advertising opportunities is the principle value from the site is missing the point. Facebook is a treasure trove for companies.
I am of course, looking to the social voice of the customer. I’ve made the gross generalization in the past that advertising spend is simply a tax you pay because your customers are not advertising your product for you. That’s extreme for effect. But it is true that companies with higher NPS don’t need to spend as much money on ads as those who have lower, to get the same result. It’s a logical conclusion from the word of mouth economics studies we have done around NPS.
But for many companies, the first instinct when a new medium comes along is to rush to buy advertising space. And if people don’t respond to the ads, what interest do they have in that medium. Respectfully, let me suggest they start by listening, not talking. Facebook, like much of social media, is a gift for companies around viral word of mouth. Spend a fraction of that advertising budget on understanding what customers are telling you on Facebook, understanding who your promoters and detractors are in social media, figuring out your Sparkscore; companies may discover that the real financial return comes from the positive word of mouth they can create rather than the ads they serve. It’s what Net Promoter 2.0 is all about.
See you in London!