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Facebook: Are the Good Times Really Over for Good?

Last week, we perhaps had a watershed moment in the ongoing maturation of Facebook as a business.  Mark Cuban, owner of the Dallas Mavericks, posited that Facebook was “blowing it” by offering the Mavs an “opportunity” to make posts visible to its fans for $3,000.

As one of the most successful business people of our generation, I’m sure Mark originally looked at this dispassionately.  The Mavs make investments in social marketing software and FTEs to make their social assets among the best in the world.  Additionally, they probably allocate some costs of content production and other shared responsibilities to social media to get an idea of what it all takes (direct costs, resources, % budget, etc.) to maintain.  Social investments are not free — Mr. Cuban is spending real dollars just to keep social sites up to snuff.  And now, here comes Facebook wanting to charge money for access to Fans — something that was free as little as say six months ago.  All you had to do in the past is master Edgerank, Facebook’s cryptic yet somewhat easy to understand formula about optimizing everyone’s News Feed experience.


So in addition to the current costs of maintaining Facebook, now Mr. Cuban is being asked to spend even more just to get people to see his team’s content.  And he’s questioning aloud whether or not it is worth the additional expense.  After all, the Mavs brand is strong.  And Myspace and Tumblr are free.
But I’m sure Mr. Cuban went one step further, and tried to get a sense of what this recent change would mean for the Mavericks — a team that is pretty active on Facebook.  Multiply $3,000/post by the 1,516 times the Mavericks posted content to Facebook over the past year, and you come up with a stunning $4.5 million investment that would be required in just content advertising for Mark Cuban to get all his fans to see Mavericks posts on Facebook!!
And thus, Facebook goes from being a really nice, relatively inexpensive addition to the marketing mix to an ongoing annuity payment — and a big one at that.  Anytime the Page needs guaranteed visibility in the future, it will need to pay real dollars for the privilege.  So a commitment to Facebook goes from being something that fits nicely into the marketing mix to an ongoing liability.  Compare that to Tumblr or Myspace, which would involve switching and migration costs, but would (at least for the moment) allow the Mavs to maintain a vibrant social presence that doesn’t involve a massive advertising investment.
And then I’m sure Mark Cuban’s dispassionate approach to this swung violently to evangelical outrage at Facebook.
Mark Cuban is not the only person to complain about declining reach numbers.  In June, George Takei lamented that Facebook was rolling back features that were designed to make it easy for people to read his entertaining posts and commentary.  Last Saturday, he resorted to coaching his Fans on how to make his content more visible.
The negative feedback is not limited to celebrities — people who manage smaller pages are starting to express concerns as Reach numbers show decline. My favorite quote:
It’s no conspiracy, Facebook acknowledged it as recently as last week: messages now reach, on the average, just 15 percent of an account’s fans. In a wonderful coincidence, Facebook has rolled out a solution for this problem: Pay them for better access.
As their advertising head, Gokul Rajaram, explained, if you want to speak to the other 80 to 85 percent of people who signed up to hear from you, “sponsoring posts is important.”
As anecdotes and concerns roll in from Facebook community managers and executives around the world, I have to ask,

Is Facebook rolling downhill like a snowball headed for hell?

And is Facebook “jumping the shark” for marketers?
I’d argue that there are really three market forces taking place at the same time that are changing reality as we know it very rapidly:
1) Investor expectations – Remember when Mark Zuckerberg told us that he was trying to build the best product he could… and that investor expectations were not his primary concern?  Well, that is easier said as a privately held company than a publicly traded one.  There are real pressures associated with being a publicly traded company, much less one that has endured a big drop in its market capitalization since its IPO (from approx $80 billion to $47+ billion today).  The company is looking for ways to aggressively monetize its over 1 billion users — and that is and was always an inevitable reality for the company.
2) Convergence of paid, owned, and earned media — For a long time, we’ve been enjoying free earned media from our owned media assets.  Write a great blog post or share some interesting content on Facebook or Twitter, and get response from customers in return.  But now, more than five years into social marketing, Facebook and other social media platforms know quite a bit about how those things result in likes, comments, shares, and retweets.  As social platforms get smarter about end user behavior, it stands to reason that Paid Media would become more influential in determining what shows up in our Feeds and when.  Altimeter refers to this as the Convergence of Paid, Owned, and Earned Media.  I like to think of it as the investment thesis for Facebook, the cashtag ($FB).
3) Smart people attacking tough problems — Facebook still attracts some of the smartest, most talented people on the planet.  All the things you know and love about Facebook are there because they were invented or improved upon by these sharp people.  But as any platform matures, its feature set also becomes much more stable.  The invention phase winds down, and is gradually replaced by a less intriguing optimization phase.  And optimization moves from technical discoveries to business & business model discoveries.  So in a nutshell, some of tech’s smartest people are trying to figure out how to make the most money possible from this fascinating, but now maturing social network.
Additionally, lore is developing inside the hallowed walls of Facebook — stories about how the business advanced by sticking steadfast to its core business principles.  What are some of those principles?  Mark Zuckerberg has told us himself:
  1. Be bold
  2. Keep shipping
  3. We can always correct a mistake
  4. People can’t get away from Facebook
Simply put, the experimentation phase of Facebook has moved squarely from product innovation to News Feed Optimization.  Mark Zuckerberg knows from experiences with Beacon, cookie tracking, the Open Graph, and personal data that the company can take things in a controversial direction, manage any resulting PR problem, and resume innovation at a slower, but more customer-friendly pace.  In that sense, it is low risk, high potential return for investors.
But for marketers, the good times as we knew it may be ending.  It’s going to cost us more to do the things that we’ve gotten for low cost so far — whether that cost comes in the form of additional expertise, direct advertising spend, or other future expenses we don’t even know about yet.  Social as a channel will get more and more complex for marketers, but we won’t go anywhere.  The allure is too great.  Facebook will come to a tough realization, however, that value is a two way street.  We’ll want to know more about what it is that we actually get for our time and money.  And in the end, that’s not a bad thing.
Chris Treadaway (3 Posts)

This bi-monthly Facebook column is contributed by Chris Treadaway. Chris is co-author of Facebook Marketing An Hour a Day with Mari Smith and Founder & CEO of Polygraph Media, a Facebook data mining & analytics company.

TOPIC: Facebook

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