GM to Facebook: Your ads don’t work (but our content marketing does)

Posted on Tuesday, May 15, 2012 by Rex Hammock

The Wall Street Journal is reporting, in a three-person bylined story, that GM plans to stop advertising on Facebook after its senior marketing executives decided “that paid ads on the site have little impact on consumers’ car purchases.” However, while the company won’t pay for advertising on the site, they plan on continuing their content marketing activities on Facebook.

Here are the bullet points:

  • GM paid $10 million to Facebook for advertising during the past year.
  • GM paid agencies and others (companies other than Facebook) $30 million for the creation of content and the management of marketing activities on GM’s pages on Facebook
  • Facebook provides those pages to GM for free, the same price you or I pay.
  • Just to make sure you’re following this, let me repeat this another way:  GM paid 3x their Facebook advertising budget for creating the content (articles, videos, promotions, status updates, etc.) that appears on Facebook pages that are “free” to any marketer.
  • GM thinks the $10 million spent on Facebook advertising is wasted, so they are pulling it.
  • GM thinks it’s still worth $30 million to create and manage content on Facebook.

As you might expect, those of us at Hammock who spend time trying to explain the value of using “content” in addition to (or, in some cases, rather than) traditional types of advertising (including traditional internet advertising) to build deeper, longterm relationships with customers, find this kind of news a validation of things we’ve been saying since Mark Zuckerberg was in elementary school.

But that’s not why this is news.

It’s news because Facebook’s IPO is expected to occur in three days and the reported pricing of the IPO (when compared to the Price/Earning ratios of companies like Apple) suggests that Facebook has the potential of soon being able to, “attract 10 percent of all advertising dollars spent on the planet ‘across all media – print, billboards, radio, television, internet,” according to a Dartmouth professor quoted in an NPR story earlier today.

So here’s the rub:

If GM, the third largest advertiser in the U.S., with an overall annual advertising budget of $1.8 billion, finds that spending .05 percent of its budget is too much, what chance does Facebook have of capturing 10 percent of GM’s total advertising budget in a few years? And what chance does it have of capturing 10 percent of all advertising?

Hint: The answer is 0 percent.

But I’ve not written this post to bury Facebook, but to praise it. What they’ve done is incredible: the creation of a platform that causes a company like GM to spend $30 million in creating content just for it is miraculous — probably right up there with how much GM spends on paying lawyers and PR professionals to issue press releases each year.

The IPO price of Facebook is probably ridiculous, and that might fail. But Facebook is a success. Just like Yahoo! was in 1999.

Later: There’s always more than one side to a story. AllThingsD’s Peter Kafka says GM was never a big believer in social media, anyway.

Posted in advertising, facebook, marketing, observation | 1 Comment

See you tomorrow at Techville

Posted on Monday, May 14, 2012 by Rex Hammock

I’m looking forward tomorrow to participating in the day-long event hosted by the Nashville Technology Council, Techville. I’ll be sharing a panel with MusicSynk’s John Pisciotta on the impact of digital media on two of Nashville’s more visible industries: music and publishing. As there are new ways that digital media and the networked marketplace change music and publishing every day, we may likely limit our remarks to those changes that occur during the next 24 hours.

The key reason to attend events like this in your hometown and region, is to meet others who are both passionate and curious about the role of technology in our businesses — those of us whose work is purely tech, and those of us whose work is, more-and-more, created, managed and distributed on tech platforms.

While some believe this is a phenomenon limited to a few zip codes in the U.S., there are some exciting things happening in cities (and small towns) around the world.

Like Nashville, for example.

There are some incredible tech-related activities taking place here (and some have to do with solving problems created here) — in giant industries that have so many challenges to solve, it’s hard to know where to begin: the management of healthcare, for example. Or, how to create new, rational approaches to the ownership and use of intellectual property. Or, how to provide the infrastructure and support that will be necessary to evolve the book industry into a digital-centric business during the next 20 years.

All three of those challenges are being addressed — in big and bold ways — in Nashville.

But then, we also have some great guitar pickers, also.

Posted in Nashville, publishing | Leave a comment

The only thing that can save Yahoo is a ham radio that talks with the year 1999

Posted on Sunday, May 13, 2012 by Rex Hammock

[Note: This post includes spoilers related to a 12-year old movie you'll probably never see, if you haven't already.]

With each new backwards somersault in the never-ending dive of Yahoo! into the abyss, I keep remembering the first movie I can recall that included an internet startup’s business success in the story line.

It was the Dennis Quaid film that came out in the year 2000, Frequency. It was a, hmm, science fiction, time travel, alternative history, kind of movie that revolved around the easily believable premise that Quaid’s son, as an adult in the year 2000, could use a ham radio to talk with his father who was living back in the year, 1970. Apparently, if you understand how sun spots work, you’ll find this premise very plausible (if you live in Hollywood).

Quaid’s son used this time-warping communication power to warn his fireman father that, unless he watched out, he would die in a fire the following night (convenient timing for that sun spot, no?) After that worked out, Quaid’s son told him how to keep his wife’s (the son’s mother) from being murdered. If you’ve read the most recent Stephen King novel, 11/22/63, you’ll understand why you shouldn’t go around messing with history next time you have the chance to travel back in time and fix something that needs fixing. But in the movie Frequency, everything works out just fine.

Indeed, things work out so fine in Frequency, that Quaid’s son not only saves the lives of his father and mother, he tells his dad to inform Gordo, the best friend of the son, to remember the word “Yahoo” when he grows up.

So Gordo, grows up and invests early in Yahoo! and in the year, 2000, Gordo’s Yahoo! stock has made him rich. So rich, that at the end of the film, there is a feel-good scene during which an old Dennis Quaid and his wife are playing softball and a foul ball busts the headlight of Gordo’s Mercedes — and we get to marvel at how rich Gordo is, as we see his New York vainty car tag enscribed with Yahoo 1.

It’s hard to believe today, but back in Bubble 1.0, the term “Yahoo!” didn’t just mean, Internet startup, it was the internet company that had become the pervasive pop-culture metaphor for “getting rich.”

But then…

Almost at the precise moment the film Frequency came out, the pop culture meaning of Yahoo! started a journey that would reposition the company’s brand to mean pretty much anything but getting rich. Or being smart. Or being anything, but “formerly important.”

If Frequency were to be remade, Dennis Quaid’s son would be telling his son to dump Yahoo! the day after the softball game.

Posted in infographic, internet, Yahoo | Leave a comment

RexBlog Re-run – A company is too large when its CEO can’t explain how it makes money

Posted on Saturday, May 12, 2012 by Rex Hammock

In March, 2009, I wrote a blog post that collected some of my thoughts in reaction to the economic collapse we had just experienced (and are still feeling). In light of the news this week that the much-admired and rarely-wrong CEO of JPMorgan is not immune from the laws of nature and market-places, I thought back to a section of what I wrote that day:

The whole “bigger is always better” thing has now been exposed as a nice theory, but a failed reality. Why? Because all the algorithms and information technology and most brilliant programming in the world can’t overcome the bugs of greed, hubris and randomness that can best be summed up in the vernacular, “sh*t happens.” How did we get to this place where massive corporations that have enriched the investment bankers, lawyers, investors and executives who profited through merger after merger now must be rescued by taxpayers because they are “too big to fail”? If they are too big to fail, I suggest we demand back the legal and banking fees and executive bonuses, etc., that were doled out to those who made the companies “too big” in the first place.

Alas, that won’t happen. So the only thing we can do is refuse to believe the investment bankers and executives who, no doubt, will continue their mantra that bigger is better, even when it’s not.

For the rest of my life, I will believe that a company is too large when its CEO can’t explain every way it makes money, including any exotic financial instruments on which it might slap a label like “derivatives.”

Posted in All other | Leave a comment

I’d rather have lots of next small things than one next big thing

Posted on Tuesday, May 8, 2012 by Rex Hammock

A 2006 article I wrote about Jason Fried on why bigger isn't better. See note, links at the bottom of post.

[Note: The following post is intended for people who actually read what it says, not for those who don't read it, but feel the need to react to what they think it says.]

Obviously, I love internet-enabled technology and startups and am overly (obsessively?) fascinated by how the internet is changing our lives, jobs, relationships, culture and well, I could keep going. I’ve chronicled a lot of that fascination and interest on this blog for the past 12 years.

However, there are times when I wish Al Gore hadn’t invented the internet.

If there was no internet, I wouldn’t have to read things like this New York Times  clichéd story about startup companies that are (possibly) on the cusp of making it big financially (translation: like Instagram). They’ve rounded up some startups (some of which I like and use) that are already over-hyped, or that were created or funded by over-hyped individuals.

In my opinion, there are some bound-to-flop ringers in the list. (I call them Gertrude Steiners in reference to her quote about Oakland: There is no there there.)

And some on that list can’t lose unless the founders wait too long before cashing out. Hint: Dropbox.

But in my opinion, the entire premise of the story is wrong.

The companies they are pointing to may be the next big financial windfall for their creators and early investors. It’s about being the next financial big thing — the next big hit for venture-backed startups.

If that’s the definition of a “big thing,” then I prefer lots of small things that bring value to all of us — even financial rewards.

Moreover, there are several flaws in the obsession with the “next big thing” focus (startup porn, as some would describe it). Here are just a few: 1. Venture capitalists have a good record at choosing the next big thing. 2. Past success is an indicator of future success. 3. “Big things” are created by individuals who start for-profit companies for whom “exit strategies” define success, and 4. To be the next big thing, you need to create a solution to some banal or “first world” non-problem.

Let’s take those in order, in a lightening round:

1. Venture funds make big bucks: Let me point you over to the folks at the Kauffman Foundation who issued a major paper yesterday that says institutional investors should rethink the whole idea of investing in venture funds (and accept the blame for the previous failures of such funding strategies). It was written by the individuals at Kauffman who have been investing in venture funds for the past 20 years (e.g., not merely and academic exercise). They blame themselves (institutional investors) for believing the hype of VCs and declare on the press release, “After Fees and Expenses, Most Investors Will Do Better in Public Markets.” If you disagree, take it up with them, not me.

2. Past success is an indicator of future success: That’s right up there with past failure being an indicator of future failure. Frankly, failure is probably a better indicator. Does away with the hubris success can bring, at least.

3. “Big things” are created by individuals who start for-profit companies for whom “exit strategies” define success: Most of the companies listed have built their products using software platforms that were not created by for-profit companies that had exit strategies. Even when Al Gore created the internet itself, it was before he had a VC gig.

4. To be the next big thing, you need to create a solution to some banal or “first world” non-problem: Frankly, it’s embarrassing to look at the list of potential next “big things” and realize we’ve arrived at the place where a generation of entrepreneurs are devoting themselves to creating a means to find a taxi easier than, say, finding a cure for dementia.

I love the internet and technology and the people who create the cool things on this list, but being the next big thing financially for a few people is far less important than being the next thing that matters to us all.

After seeing an article like this, in order to get the sour taste out of my mouth, I click over to Kickstarter and see ideas that might be small to the world, but are big to an individuals and a few of his or her friends or fans. I love this stuff — and I love the heart and passion that goes into things that are proudly small.

Or, to get over the obsession with big, I kick the tires on ideas that may not become products, but will be approaches to software that can make it easy for me to do those things I want to do.

I love business. I love entreprneurship and innovation. I like it when people make money. But the next big thing will be bigger than making a billion dollars for a tiny group of individuals.

[Note: I go way back on this topic. In 2006, I wrote a cover story for MyBusiness magazine titled, "The Next Small Thing," that was the first (of many) national cover-story on Jason Fried. He wrote about it on the 37 Signals blog here.]

Posted in internet, observation, small business | Leave a comment