Why will Facebook always be free? Here’s why...

On its homepage, Facebook prominently advertises that its service is "free and always will be."  Yet it hasn't stopped false rumors of a pay scheme from going viral on numerous occasions.

Why will Facebook always be free?
Here’s why:  It doesn’t need the money.

In 2011 Facebook pulled in approximately $4.27 billion in revenue -- double what the company made in 2010.  Projections for 2012 near $5 billion and last month we saw the social media giant go public -- bringing in significantly more capital.  Impressive numbers, but the bottom line is not necessarily the bottom line.

The company’s business model revolves around having as many users as possible. Remaining free is paramount to doing that.

Facebook makes money through three sources while allowing users on its site for free:

1) Advertising
2) Virtual Goods
3) Applications

Restricting users’ ability to use the site would actually be detrimental to that model.

Advertising
By the end of Q1, 2012, 82% of Facebook’s revenue came exclusively from advertising.    Highly targeted, affordable advertising based on the plethora of data that its members share on the site is extremely valuable to brand’s looking to engage with their target audience.  Facebook didn’t even introduce its ad platform until 2007 — because the company wanted to focus on adding users as quickly as possible – their most valuable money-making commodity.

When you see “Sponsored” on the right-hand side of Facebook, someone has paid for those links. Advertisers have the option of paying per 1,000 impressions (every time it shows up on somebody’s screen it’s an impression) or per click. Therefore, depending on how the advertisers set up their ads, Facebook gets paid every time someone clicks on or views an ad. A huge part of the Internet works this way, with ads generating many thousands of sites’ revenue.

  

By the end of Q1 2012, the network has generated 82% of their revenue through advertising.

However, the difference between it's division of revenue among advertising and other sources continues to increase. 

The way Facebook earns even more money with ads goes beyond offering advertisers good targeting data.  Facebook thrives monetarily from being useful to visitors. When Facebook makes a change, you can bet it’s either to:

• Generate attention to their services so that people will use Facebook more and click/view more ads (note that even the “I HATE THE NEW FACEBOOK!” comments keep the attention on Facebook itself)
• Generate more revenue from the ads (It’s rumored that Facebook will soon stop delivering business updates into your feed unless you interact with them a lot, meaning that they will have to buy advertising on Facebook)
• Respond to features of another service (Facebook is changing a LOT in response to Google+),
  or
• Improve their performance (meaning their servers don’t have to do as much work)

All of these things are driven by money.

If you Book Them, Will They Come?
In a recent poll by Reuters/Ipsos, four out of five Facebook users said neither advertisements nor comments on the social network have ever led them to buy a product or service.  The vast majority of Facebook users say they ignore ads on the social network.  Google appears to be more effective at attracting clicks, as The Wall Street Journal cites a click-rate that is seven times that of Facebook.

Facebook has also proven ineffective in a B2B environment. Like all other Internet ads, Facebook ads also have a very low conversion ratio. However, if you follow my blog regularly, you know the importance I place on integrated strategy, so for my recommendation would always be for B2B’s using Facebook to use it as a supplemental marketing strategy rather than a sole marketing strategy.  (As with any marketing, the key to success is to understand the benefits and limitations of different advertising tools and to identify what fits the company and the product.)

In the face of scrutiny regarding the effectiveness of their ads, Facebook is now rebuffing claims that their advertisements are ineffective.  They’ve come out with their own research results, which show that most ad campaigns get companies $3 for every $1 they spend.  The Los Angeles Times reports that the data released by Facebook, together with comScore, shows that 70% of ad campaigns will get advertisers a return three times what they put in and, in nearly half of all campaigns, Facebook ads get companies $5 for every $1.

“This provides some strong evidence that Facebook can be an effective marketing channel,” said Andrew Lipsman, vice president of industry analysis at ComScore, to Bloomberg. “These are strong results.”

Virtual Goods
Zynga is an innovative company that brought casual gaming to the masses, there most popular game being FarmVille that users can play via Facebook -- and of course share socially their journey through the game.  As far as their business model, Zynga gives their games away for free, but charges gamers for “virtual goods” that can be purchased inside of a game.  These “virtual goods” allow gamers to experience new capabilities and access new features that were previously locked down.   While this may sound like somewhat of a gimmick, the “virtual goods” business model has been extremely lucrative for the company.

Facebook takes a cut when users buy virtual goods on games played through the network.  In the FarmVille example – simply put, each time a user buys a cow, they put in their credit card information and Facebook takes a 30% cut of Zynga's revenue on that cow.  And a roughly similar cut from other companies.

How big a business is this?  According to PC Magazine, Zynga contributed about $445 million to Facebook's profits last year.  The worldwide revenue from sales of virtual goods is expected to hit $15 billion in 2014, and Facebook plans to continue to get a growing percentage of that market.

And “virtual,” is not necessarily a literal interpretation of a cow you neither have to house nor feed.  Retailers are offering more on the Facebook platform and for Facebook that means a cut. It won't be able to take the same 30% it gets from Zynga, but if say, J. Crew, starts offering shopping without leaving Facebook, if the social network takes even 5%, that could be meaningful to its bottom line.

Applications
There is a way that Facebook could make money with integrated applications and services. 
Let’s take Spotify for example.  Spotify did backflips given the opportunity to partner with Facebook and leverage the network’s massive audience, an audience who spends 15% of their total Online time on the social network.  Facebook and Spotify have a streaming pact that allows the cloud-based music service on the profile pages of millions -- note that you must have a Facebook account to access Spotify, this is key. And Spotify was happy to enter into this agreement for free, especially given their recent gargantuan competition in the forms of Amazon Cloud Player and Google Music.

Right now, no money is changing hands.  It’s actually been a dream of Zuckerberg for quite some time to have a music platform on the network with many previous plans going the way of the “Facebook Poke.”  The partnership with Spotify signifies how Facebook is flexing its muscles in the media space, offering services that keep people within the social network, rather than scouring other parts of the web for content.

So, how can this partnership become lucrative for Facebook?  My hunch?  Spotify is trying to get bought by Facebook. And why not? Instagram, with 10 million active users, recently sold to Facebook for a billion dollars. Imagine what Spotify could sell for with 8 million more users than Instagram, plus an already established advertising platform?

If Facebook bought Spotify, almost all of Spotify’s 18 million users are already plugged in using their Facebook accounts. Users’ Spotify activity is already seamlessly integrated into Facebook. Spotify already has an ad platform, the main way that Facebook makes money. And finally, Spotify already has apps, which are a major part of Facebook’s brand platform.  All this will become the property of Facebook. 

With music being integrated into the social network, movies and TV shows (think Hulu) are bound to find their way in too, especially as people become more inclined to consume their content in a social way.  Why listen to a great new song by yourself when you can hear it with your friends too? 

Conclusion
Facebook may charge for some things eventually, but access to your account and normal activities will definitely not be one of them.

The one thing that all of Facebook’s revenue generating models have in common is that they rely on a critical mass of users to be successful. Facebook has that, and would never risk losing it by charging people for basic access to the tools that make its multi-billion dollar business work.

By Jennifer Pricci

The Long Road From Lead Generation to Sales Conversion

Marketers face lengthy time spans as they progress from lead generation to conversion, making it difficult to nurture prospects while moving them through the pipeline. This chart highlights the percentages of leads in each stage of the pipeline that are likely to advance to the next stage.


One of the most challenging obstacles to marketing is the time span from lead generation to sales conversion.

These long sales cycles put pressure on marketers to streamline the lead nurturing process.  When prospects first enter the pipeline, they may be months away from defining specifications, a budget or purchase timeline.

It is marketing’s responsibility to identify and fulfill the information needs of prospects at each stage and to advance prospects through the pipeline to a sales-ready stage as rapidly as possible.

What percentages of leads in each stage of the pipeline are likely to advance to the next stage? As this chart shows, on average, nearly four in 10 leads move from initial inquiry to being sales-ready, and approximately the same ratio advance from sales-ready to qualified prospect. As might be expected, the trend deteriorates moving to the next stage where only three in 10 qualified prospects convert to a sale.

The internal sales force has an edge – albeit slim – over top channel partners in percent of distributed leads closed. An organization’s own sales force is also three times as likely to close leads distributed to them as are their average channel partners.

The Deal. The Close. The Win.
Ultimately, making the sale is up to your sales team, but by implementing a sound nurturing and scoring process, you have helped them by establishing a relationship and positioning your company as a leader with the prospect. The Tools Just as a nice haircut and a manicure prepare you for that first date, every marketer should prepare for that introduction. You’ll need easy to use tools to help you nurture leads, including email, landing pages, forms, and lead scoring: essentially, a lead management solution.

Send triggered emails
Send a series of emails as part of a drip marketing campaign, or triggered based on specific prospect activities. Each email offers a document (or webinar, or trial software, etc.) that helps move your target along in their decision-making process.

Use custom landing pages
Don’t forget that custom landing pages can increase conversion rates by up to 48% during your lead nurturing as well as your lead generation activities. You only have eight seconds to get their attention, so use bullets, short forms, and no external navigation. And have only one call to action!

Use smart forms
You will get better response rates by using a form as the call to action on your landing pages, but why use the same form with the same fields over and over? Just like you wouldn’t ask your date for his or her name every time you see them, you shouldn’t ask for contact information again and again. Smart forms recognize known visitors and can fill in the fields you already know. Since you don’t have to ask for this, ask for other info, such as company size, time until decision, etc. Building the profile over time will help you in scoring the lead.

Use web analysis and lead scoring
Knowing which pages your prospects visit on your site can be very beneficial to determining their interest as well as their level of engagement. Being able to connect anonymous visits to actual prospects? Priceless.

Automate and measure
Salesforce.com and other customer relationship management (CRM) products are great, but they typically fall flat in their marketing capabilities. As marketers we need to automate the everyday tasks of building and managing lead generation and lead nurturing campaigns. We also need to more objectively score leads according to their company demographics as well as their activities on our websites, landing pages, emails and other campaigns. And a single lead source doesn’t cut it when lead nurturing. It’s great to know where we first encountered the prospect, but knowing what happens between that first meeting and closing the sale is imperative in these days of marketing accountability.

Evaluate
As you move through the nurturing process, you’ll probably discover that some of the assumptions you made are incorrect; for instance, that downloading a particular white paper means that they are close to buying or that sending a particular email would elicit a good response. Don't forget that lead nurturing – and marketing in general – is constantly changing. You'll want to stay flexible and be ready to change your lead nurturing process as you experiment with new tactics and learn what works.

What are you doing to lessen the cycle from lead generation to conversion?


By Jennifer Pricci

The Loyalists Shall Take You To The Promised Land

Members pay an annual fee to belong to a retailer's loyalty program and they receive discounts on the retailer's most popular products, invitations to member-only events, and reward vouchers for reaching certain spending levels.

What other creative ways can this retailer reward its loyal customers?

Your customers are swimming in messages. And they’re being pursued by countless brands. How can you keep their attention, their time, and their dollar?

Gone are the days of a one-size-fits-all loyalty program. Building a creative campaign that your customers will respond to can only begin once you have a clear understanding of their buying motivations. By using real insights you can cultivate stronger relationships customers so your brand stands out. Ultimately your message motivates action… then your bottom line.

Depending on what inspires your customers craft programs which also meet your internal objectives along with actionable metrics for program refinement. More common loyalty program objectives include:

• Stimulate sales and improve gross margins
• Encourage purchase of new and better/best products
• Establish competitive differentiation
• Motivate employee performance
• Boost retention of high-value customers
• Build stronger long-term relationships
• Drive key behaviors

To understand what your customers truly value, conduct focus groups, one-on-one interviews and quantitative research. From this, determine the core elements needed to create a lasting relationship with your customers.

The mandatory requirements for an effective loyalty program are – Creative Conceptualization, Feasible Program Development, Systematic and Time Bound Program Execution and Measurement. 

Here are some proven loyalty concepts which can be customized to your customers buying motives:

• Club Cards (pay for membership for regular discounts, points programs, reward vouchers)
• Email Only Promotions
• Premium Shipping Clubs (for ecommerce)
• Subscriptions (asking customers to go steady and purchase product to be fulfilled at regular intervals)
• Service Extensions
• Recycling Programs
• Loyalty Affiliates
• Gift Reminder Service
• Value Propositions (Not loyalty per se, but extremely successful in customer retainment; think Zappos.com and their exceptional customer service)

Marketers are racing to keep up with customer expectations for personalized services and wnhancements, and well-designed loyalty programs are a tremendous opportunity to communicate directly with enticing offers that will keep customers coming back.

"The dogs on Main Street howl
'cause they understand
If I could take one moment into my hands
Mister I ain't a boy, no I'm a man
And I believe in a promised land"

- Bruce Springsteen

The Importance of Long-Tail Keywords

Those of you who have tried in vain for years to rank high for your head keyword of choice know what I am talking about. To those of you who are newly introduced to this wondrous world of SEO, I’ll say this: roll up your sleeves and prepare to wait. Or you can do the smart thing and just target long-tail keywords. You won’t have to deal with all that fierce competition for popular head keywords, and you will be a few steps closer to getting your site rank high.

It comes with one warning: the traffic volumes will be considerably lower than that from a head keyword.  But then, the probability of your ranking high for a head keyword is less than unlikely, so the traffic from that keyword will amount to, basically, nothing.

It’s a quantity vs. quality argument.  And when you do the math, you will find, the long-tailed keyword is the bird in the hand.

Consider this:

• Ease  When you try to rank for a head keyword, you essentially go into competition with millions of websites. And the odds of your ranking high for that term are very low. For example, if you try to rank for the head keyword “online learning” you’ll have to beat at least 36 million other sites to rank high. Instead, if you use a long-tail with niche terms relevant to your site, like, “online learning in South Carolina” the competition drastically drops to under three hundred thousand. And your odds of ranking high will improve too.
• Speed  Thanks to the diminished competition, you don’t have to spend nearly half your life optimizing your site and building links before you can see your site ranking high for long-tail keywords.
• Relevance  Since long-tail keywords are more often than not, specific strings of keywords with a niche term; the chances of then meeting the exact search needs of users are very high.  This aids the target marketing methods of your overall mix and ultimately drives…
• Conversion  The fact that search users will find sites targeting long-tail keywords more relevant contribute another point to chalk up in its favor. Reports attest to the fact that users with specific search queries know exactly what they are looking for and are more likely to turn into customers.
• Exposure  This is perhaps the least known advantage of targeting long-tail keywords. Using long tail keywords over a period of time will eventually help you rank higher for your head keywords as well. As your site gains authority and builds its trust quotient, the long-tail keywords will help provide enough targeted traffic and also enough ‘exposure’ to your head keywords that your attempt to target them alone won’t prove to be all that disastrous.

A great thing about targeting long-tail keywords is that you can play around with all the niche terms relevant to your site and try and rank for a series of long-tails. You don’t always have to target “online learning in South Carolina,” “online high school in South Carolina” can help send an entirely different set people swinging to your site. However, targeting keywords on your site alone won’t help you achieve all this, and I doubt if I have to reiterate the importance of building credible links with the right anchor test. Try to have your targeted keywords in as many incoming links (internal as well as external) as possible, combined with your on page optimization efforts, it will do wonders for your ranking.

What are some of your long-tail keyword success stories?

Why do people think direct mail is dead?

"Direct mail is dead" is probably just too bold a statement. In reality, a complete and integrated companion marketing approach works best - utilizing a variety of venues to market your message - including direct mail, email, internet marketing, social media, etc.

I think this topic has been stirred a bit by the interpretations of an NPR article noting that the USPS is seeing less mail due to the economy. In the article, the Postal Service’s Senior VP of Customer Relations, Stephen Kearney, states:

"Our mail volume had its greatest decline since the Great Depression… We may have losses (revenue) that are larger than the $2.8 billion we had last year."

Source: http://www.npr.org/templates/story/story.php?storyId=99027132

Those looking to make their case may be misdefining "mail volume" as only direct mail pieces. But Americans are sending fewer packages and letters via USPS for a number of reasons, i.e. - the economy, email, availability of other carriers, etc. To twist USPS’ declining revenues into proof that direct mail doesn’t work is misguided.

That being said, however, I do feel the efficiency of direct mail has declined in the face of online inbound marketing tactics.

Here are some of my DM cons which has inspired me to ramp-up Web 2.0 activites and email marketing campaigns.

• Direct mail is often considered to be junk mail. Seldom does a one-shot mailing have the desired result. You must have a long term, well thought out marketing plan.
• Your piece is competing with dozens of other pieces for attention. If you don’t know what you are doing, it is easy to waste a lot of money.
• There is a relatively high cost per contact.
• It may be difficult to obtain updated, accurate mailing lists.
• There’s no data. Direct mail does not offer real time data like internet marketing campaigns can.
• Too many cheaper, more efficient options.

If you are moving forward with a Direct Mail campaign, I can only endorse it when done correctly, and that means including drivers to that next action step.

But beyond that I'd also advise to determine who you want to reach before you develop your direct mail program. This allows you to specifically target your message to fit specific needs. It is the best advertising medium for customizing your appeal. With improved database resources and demographics, you can effectively precisely target the prospect you are aiming at.

Also, carefully plan your package content, its design, and its message. Remember to attract the reader’s interest, it must be clear, concise and easy to respond to. Can't stress it enough... INTEGRATE... coordinate your mailing with other advertising methods to significantly increase your return. Also, presenting one specific offer instead of a variety of options is usually more effective.

Finally, figure out a way to diligently test and track your campaigns. I recommend the Direct Mail Marketing blog at marigoldtech.com for some tips on calculating DM ROI.

What do you think?  Is Direct Mail Dead?