Facebook's sole function is engagement. It connects people with one another. Its $3 billion in revenue and $1 billion profit come from advertisers who believe that there must be ways for brands to profit from that engagement. They don't know how to do it yet. The two hypotheses they're testing are putting ads around it, and trying to actually host some of it via branded pages interspersed with people pages. There's no evidence that either yields much beyond nice-to-have benefit, and some experimenters (most recently GM) have given up trying, for now. Again, since Facebook makes money either way, I'd take a small piece of such failure and consider my life's work a success.
But the bet on the inherent value of engagement is still a bet, and at $38 a share times however many zillions of shares got floated on the market, it's a huge one.
You wouldn't know this from the way most marketers talk about it. The idea that engagement has inherent value, via Facebook or any other platform, passed long ago from the realm of branding possibility to founding assumption for marketing strategies. Brands from cars to cereal spend oodles of money to get people to spend time with the content they create -- video, web pages, mobile apps, anything -- and many of them are no longer requiring complicated math to substantiate what is accepted as an absolute good. There are times when it leads to a purchase, which is celebrated as content marketing, though conceptually it's no different than the way marketing worked when we called it selling. The rest of it is called engagement, and it's seen as the the future not only of Facebook but all of branding.
The stock market had a chance to vote on that vision last week, and it was underwhelmed, even though the odds are good that Facebook will put to profitable use all those likes and keywords culled from conversations and associations of friend lists and appearances in photos, perhaps even selling it for use by marketers outside of its platform. The company could well chance upon its own "adwords moment" as Google did when it realized it could sell search results to the highest bidder. Facebook might find something it hasn't even thought to test yet. But, whatever value it wrings out of engagement will result from the uses to which the data are put. The engagement itself -- the connections between people -- will prove to have no inherent value, other than to the people themselves.
What does this suggest for the value of social engagement for brands? Does spending time getting exposed to stuff from marketers have intrinsic value, or is pleasantly wasting time with an entertaining web video or fun mobile app actually nothing more than a pleasant waste of time? Do consumers really want to have ongoing conversations with brands, and does posting a comment on Facebook or receiving a promo code on Twitter constitute a conversation anyway? Is the challenge for brands to forego the endless efforts to engage, and instead refocus on how and why each effort contributes to selling something?
I think the message from the stock market last week was simple: show us the money. Facebook may well crack the code on engagement, and it'll keep minting money while brand marketers experiment. But for now investors are saying that engagement isn't inherently worth much of anything. They love a fad and the promise of business model-busting future riches, but they're not stupid.
Maybe your customers aren't stupid, either.