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Facebook Bubble: From Hits to Likes

Amassing fans isn’t enough. Indian brands need to really
engage with their customers on Facebook to make sure social media platforms
don’t go the dotcom bust way.

Internet stocks have always been Wall Street’s brightest
stars. Recently, social networks have dramatically upped the excitement.

Amassing fans isn’t enough. Indian brands need to really
engage with their customers on Facebook to make sure social media platforms
don’t go the dotcom bust way.

Internet stocks have always been Wall Street’s brightest
stars. Recently, social networks have dramatically upped the excitement.

Goldman Sachs valued Facebook at $50 billion by investing $500
million in it early this year. Since then, debates have raged around Facebook’s
incredible valuation and that of similar companies including Twitter. The maths
seems easy. Facebook has roughly 500 million users. A $50 billion valuation
means every user is valued at $100.

Given the rapid rise and equally steep fall of social
networks such as Orkut, Myspace and Friendster, doubts around these billion
dollar valuations are understandable. An internet bubble isn’t a new phenomenon
after all. Remember when AOL, a dotcom darling, was valued at $150 billion post
its merger with Time Warner in January 2000. Eventually, AOL turned out to be
hugely overvalued. Its users moved briskly to other service providers like Hotmail
and Yahoo.

Some things don’t
change

Crazy valuations aren’t the only similarity between the
dotcom boom of the early 2000s and today’s social media frenzy though. The
“hits” of those days are today’s “likes”.

“Hits”, a measure of the number of client requests made to
the web server, was a term which was more misused than used during the dotcom
boom. It was a weapon to attract investor money and advertisers. Similarly,
“likes” (or number of fans) you have acquired on a Facebook page is the metric
to measure a brand’s success today. While the number of fans is an important
measure for any Facebook page, it’s bound to fail when used as the sole
currency to calculate brand reach.

Today, the race to gain your first 100,000 fans is what
drives brand marketing on Facebook. Let me take these two recent examples.

An FMCG brand manager goes to an agency and asks, “My
competitor is at 300,000 fans on Facebook and I need to beat them”. The agency
owner asks, “What’s your content strategy?” The brand manager responds, “I
don’t know, we’ve got three months and my promotion depends upon it”.

An Indian social network observed a spike in number of new
profiles being created on it one day. When they tracked the source, they
discovered a Delhi-based social media marketing company had deployed over 200
of its employees to just create new Facebook profiles. Those profiles then turn
into new Facebook fans which they sell to their clients.

The treasure lies
beyond the number of fans

Brand managers consider “like” to be the primary measure
because most aren’t aware of EdgeRank, the algorithm which calculates if fans
are actually engaged with the brands they like or are just irrelevant fans on
Facebook.

You might as well have 100,000 fans on your page but maybe
not even 10 per cent get your posts on their top news feed because of various
parameters such as engagement level of your fan’s friends, the time gap between
your post and your fans’ activity patterns. These parameters make up EdgeRank,
the secret sauce for success of a Facebook page. While it’s impossible to
decrypt EdgeRank’s exact formula, real engagement by fans is the key parameter
used.

So, it’s possible that a page with just 10,000 engaged fans
might have a much higher value than another page with 100,000 irrelevant or
dormant fans. Today, there are over 10 Indian brands with more than a million
fans on Facebook. Nearly 100 other brands have over 100,000 Facebook fans.
Still, only a tiny few like Ching’s Secret, MTV India, Café Coffe Day, Pepsi
India and the Vodafone Zoozoos, have actually got it right. Most Indian brands
are yet to learn the art and science of marketing on Facebook.

Take for example, Axe Angels Club page on Facebook. With
more than 1.6 million fans, it’s among the top five Indian brand pages. It also
has a reasonably good degree of engagement in terms of the number of “likes”,
comments and feedback. However, the quality of conversations leaves much to be
desired. If you spend even a few minutes going through the comments, you’ll
quickly realise that this page isn’t unlike a porn page.

There is a very fine line between sensuality and
pornography. Unfortunately, this page seems to have breached that line. The
page owners have failed to moderate the quality of conversations. And that’s
unlikely to appeal to anybody, even a supposedly “young, hip” consumer segment.
In any case, I strongly doubt Axe has managed to attract, much less engage,
their real target audience through this page.

On the other hand, take a look at the comments on Ching’s
Secret fan page. They are one of the very few Indian brands on Facebook who
make the effort to converse with their users, and effectively go beyond simply
posting great content.

Worse, brands in India haven’t even begun to understand the
opportunity and functionality of Facebook advertisements. If done well,
Facebook advertisements can play a vital role in scaling up a community on
Facebook. Unlike Google adwords, it’s highly cost effective.

Instead, they are squandering money on acquiring fans.
Brands spend in a range of 5 per fan to 50 per fan to “buy” fans. The CTR
(Click Through Rate) determines this price. The CTR is calculated as Number of
Clicks or Impressions*100 per cent. Images used in the ads on Facebook
influence the CTR most. It’s like the crazy prices brands were paying for their
ads to be shown on various portals during the dotcom era.

Engagement with scale
will continue to win!

Both for Facebook as the network and for brand pages,
ability to continuously engage a large number of users and fans in relevant
conversations, will determine their success. Otherwise, like a large number of
social networks couldn’t survive against Facebook, many brand pages on Facebook
will lie dormant in spite of amassing a whopping number of “likes” and fans.

It isn’t unlike how dotcom survivors like Naukri.com and
MakeMyTrip made it through the downturn. They focused on delivering real value
to real customers rather than on generating empty “hits”.

Can we hope that brands in India learn to do real Facebook
marketing before it’s too late? We could otherwise be in pricking distance of
another internet bubble burst.

This article first
appeared in Inc. India, July 2011 issue. 
Download the pdf
version herePradeep Chopra is the CEO of Digital Vidya, India’s premier social media training company and one of the co-founders of dvBytes, a social media service company.

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