Marketers Start to Use Social Networks for CRM Instead of Ads

Real Promise of MySpace, Facebook Lies in Potential to Help Nurture Consumer Relationships -- but How?

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NEW YORK ( -- For all the talk about how much money Facebook and MySpace are making off ads -- and whether or not those ads work -- there's a growing sense of concern that the promise of social networking as a marketing vehicle is getting lost. Some marketing execs are suggesting the space should be used less like a paid media vehicle and more like a customer-relationship-management tool.
Champion: Connects with customers via a sponsored Facebook group.
Champion: Connects with customers via a sponsored Facebook group.

The topic was broached last month at Widgetcon, a conference on the nascent widget economy (one agency executive in attendance suggested it was a breakout session turned into a daylong event). At the event, former JWT CEO Chris Jones said MySpace was at a crossroads.

"[They say], 'It's not fair others can use the audience that we created for marketing purposes without us having a share of that.' At the same time, it's MySpace, not Rupert's Space," he said. Mr. Jones is an adviser to FreeWebs, which creates widgets run on social networks.

Debra Aho Williamson, analyst at eMarketer, calls the display advertising "low-hanging fruit" and suggests that the real potential of social networks has yet to be tapped.

Untapped potential
"What's been a challenge is figuring out a model that expands the beauty of social networking," she said. That's partly because it's easier to buy display ads and sponsorships than to create completely new programs; it's also not exactly clear how to monetize a role as a long-term, relationship-building tool.
Some marketers have adopted this approach within their proprietary social networks: Carnival Cruises' lets people talk about and review cruises, allows novice users connect with experienced cruisers and creates a network where booked passengers can connect prior to sailing. Some advertisers hope this kind of rich customer relationship experience can exist within existing communities. Ian Schafer, CEO of Deep Focus, hopes the roles of Facebook and MySpace evolve into more conversation-monitoring and relationship-nurturing.

"I understand the entertainment dollars are easy, but to be able to come to these brands with a real solution -- not just inventory -- for helping them manage their brands or conversation around their brands is an opportunity," he said.
Ian Schafer
Ian Schafer

Facebook claims the goal of its groups is for marketers to have these kinds of continuing relationships. Marketers can use a sponsored group to communicate with consumers via discussion threads and "wall" posts. Marketers pay to promote their group through sponsored stories on news feeds, which let others know about the group. For example, Champion formed a group earlier this year and is still participating in a message board. Ms. Williamson said she believes the Facebook groups are the closest a big network has come to helping brands create long-term interaction with consumers.

Organic growth
But hard as it might be for marketers to stomach, the most vibrant groups tend to sprout organically. Examples are the several devoted to Nikon cameras, where owners post photos they've taken, answer each other's questions about techniques and offer tips for getting the most out of the product.

That kind of affinity and attention is not something marketers can buy, warns Chad Stoller, executive director of emerging platforms at Organic. "Groups will form if there's interest; they will not form from an ad buy," he said. So how should a marketer react when groups form around their brands? "Often the first reaction is to spend against it," Mr. Stoller said. "The first reaction should be to listen to it and figure out how to make that group better."

In the meantime, paid media does seem to be paying off for social networks. The channel is expected to rake in $900 million in advertising this year, according to eMarketer. MySpace and Facebook make up 72% of the market. Two weeks ago, News Corp.'s Fox Interactive Media reported profits of $10 million on top of $500 million in revenue, mostly on the back of MySpace.
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