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Tuesday, February 21, 2012

The Limits of Facebook

All of this just seems wrong:
According to Ad Age, Colorado's New Belgium Brewing recently commissioned a survey of its Facebook followers in which it determined the average New Belgium Facebook fan spends $260 per year on the brand. That translates to $50.7 million annually — or roughly half the brewery's sales each year.

Not a bad return on what New Belgium tells Ad Age was a $235,000 investment it made on its social-media presence last year "mostly dedicated to Facebook, including both app development and advertising."
Really? Over two hundred grand on Facebook--just to get a story in the USA Today confusing correlation with causality? It gets worse: New Belgium is planning on dumping another $200k into promoting a new beer launch on Facebook. And this is just sad:
New Belgium ... has managed to best the larger craft brewers with 211,000 fans. Not bad for a brew that is available only in 28 states and Washington, D.C.... Its fan base compares with 138,000 for Boston Beer's Sam Adams, and 134,000 for Sierra Nevada, both of which have national distribution.
Here's a real statement of causality: New Belgium has apparently spent over a dollar for every "like" on their Facebook page. No wonder they're leading the pack. But will any of this translate into actual beer sales--or even a big enough sales bump to justify the expense? Let's just say I find it implausible. (Even this morning I encountered yet another in a long line of studies showing the real-world limits of social media.) While it seems to make good sense to have an active social media presence for the small minority for whom that's important, "liking" a brewery on Facebook is not the same as selling beer. Just saying.


  1. I think social media has improved how people with common interests share information. In our situation, breweries share information with people who are interested in breweries and beer. As bloggers, we share that information with our readers, many of whom are already in the same loop. So the problem with social media is that its reach is limited by commonality.

    As you say, that doesn't mean it should be ignored; it just means we should recognize that social media isn't a cure-all marketing solution ...and reckless spending on it probably isn't all that wise.

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  3. I've "liked" NB on Facebook, but living in New York state, I can't get NB stuff. So, NB has apparently lost a dollar on me.

  4. Jeremy said "There's no practical way to prove that the ads your firm put together for a client were directly responsible for any increase in sales." Really? I can tell from that statement that you never worked in (or with) the advertisement world. There are plenty of ways to tell if advertisement is working. Just because you aren't familiar with them doesn't mean they don't exist. (Of course, some companies do just 'piss into the wind' with their ad budget. But, again, that doesn't mean that there isn't a way to actually measure the effects of advertising.)

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  6. I think you're the one confusing correlation with causality. Nothing in what they've said says that they believe it's because of their FB advertising that they are generating sales. What they are recognising (and on the info provided is fact) is that 50% of their revenue is coming from people they can reach via Facebook. Show me another channel - any channel - where you are guaranteed to reach 50% of your income producing customers??

    Hence for any business with an ounce of common sense, love or loath FB, that sort of percentage outlay on FB advertising/marketing makes smart business sense.

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  8. They're spending 0.002% of their income on maintaining - at the very least - a two-way communications channel to 50% of their income producing customers. I don't see how anyone could not view that as a HIGHLY cost effective way to maintain a communications channel with your qualified target market. I'd certainly jump at that sort of spend & return!

    In case you missed that: 0.002%. Do you have a better use for that tiny amount of revenue that will guarantee increasing sales in a measurable way that would satisfy you (oh, and the actual company spending the money of course)?

    "...because the quote which begins the article implies exactly that."

    No it doesn't. It could just as easily suggest they're simply recognising the value of a two way communications channel to so many of their customers. But read into it what you will, it's your blog I guess.

  9. Dave, on the point of causality, the article clearly draws a conclusion. "Not a bad return" can only be interpreted one way.

    However, there's some pretty smart pushback on my larger point at Facebook by a couple social media bad-asses. If your quibble is with my larger point, you will find succor there.

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  11. Jeremy: once again, you're wrong. To the average Joe, $200k might seem like a lot, but if you've ever had a real company build out an entire Facebook presence, then you'd know that it's not totally out of line. There is more than just throwing a few graphics up on a web page. Front end, back end, APIs, servers, moderation, maintenance, updates, content management, etc., all add up.

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  13. Yes, backend. Depending on what they're doing with their Facebook page, if they have custom Pages on their profile, they would have a back end server, database, etc. Most companies that have a Facebook presence have some sort of backend system associated with it. How do I know this? Because I've built them.

  14. Last comments I'll make before unsubscribing from this post:

    1) Please refrain from personal abuse like "smartass", stick to debating the subject matter rather than make it personal if possible. If I've got replies from different folk mixed up so be it, I'm still responding to the common viewpoint from some, and certainly have not called anyone names.

    2) There's a lot, lot more to running a successful FB page/group than "just to post the occasional status update", which I guess indicates very little knowledge in the area, hence probably not much value in taking this discussion further. There would be a marketing/PR plan in place, and along with that work involved in a variety of campaigns throughout the year. I just had a look at their FB page (did you?), they appear to have 4 apps/campaigns up there at the moment, each of which could cost from a couple of grand to 10 grand each in design/development. How many of those do they have through the year? And that cost wouldn't be any less if done on a website, though there aren't many websites that will get as many views for a beer company.

    That 214,000 "likes" doesn't just happen, nor is it maintained by just the occasional status update. A lot like a website isn't just "build it and they will come", there's a lot more to making a success of any online destination, which you would know if you either worked in online, or ran a business that took used online channels.

    Oh, and perhaps you also forget, that for 214,000 "likes", if we say an average of just 20 friends for each of those users, each time you post a message it will reach 4,280,000 people. So that's 5c per person now. Or if you post 5 messages, it's 1c per message. 50 messages it becomes .02c per message. Please enlighten me on what other marketing/advertising channel is that cheap?

    Lot more naivety than valid opinion in this post and some comments it would seem.

  15. Gawd, you don't know there are backend systems involved in most major FB pages??? FB is basically a "window" now, that enables businesses to display their online app to their FB consumers. The backend exists on the company's server, just as with a website.

    And the $235,000 is very much the total spend, from what info is provided.

  16. And in case you missed it, money was for all of FB presence, including development costs:

    a $235,000 investment it made on its social-media presence last year "mostly dedicated to Facebook, including both app development and advertising."

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  18. "Reach" has always been a grey area since the beginning of advertising/marketing, centuries ago. Nothing has changed. So if anyone has an issue it should be with that subject matter, not facebook (at least not on this issue). Since if you compare "reach" costs via FB to "reach" costs via other channels, it seems extremely low from my estimations (and my experience), and potentially extremely targeted, far more so than most other channels.

    (and yes, I did break my own rule).