Tuesday, May 22, 2012

Near and close (Facebook IPO)

I read some interesting posts on HN that argue the advertising merits of social media. With the Facebook IPO just past us, there has been a bevy of posts and articles on how social media advertising did not work for some particular organization. It isn't only Facebook this time. At least one poster reports disappointing results from Twitter's paid tweets. IIRC, Twitter's advertising platform is still technically in "beta" at this point. In any case, despite the frenzy over social media as the magic lamp for advertising, there are at least some who realize that it isn't a turnkey solution. Companies hire social media experts to get out the tweets, retweets, and likes. Newcomers come with a budget and a lot of faith in the seemingly magically benefits of viral channels. Alas, the viral coefficient has to be maintained. Moreover, as demonstrated in some of those posts, viral promotion does not guarantee sales.

As many have observed, paid search remains the relatively effective online channel. A fraction of the queries are from potential customers who are actively looking to purchase, so it shouldn't be surprising that a well-placed sponsored result can convert. The tricky part is zeroing in on the right keywords, demographics, and time. Demographics is where social media can help. My claim is that timeliness or proximity is just as important. This is also where the role of local lies. Effective targeting must be proximate in both time and space. The importance of timeliness varies considerably. Consider how long a typical consumer will shop around for a car or for real estate after the original purchase inclination. Consider how long will such a consumer shop around for the latest consumer gadget to hit the streets. In the former case, purchases take a considerable incubation period during which a consumer forms his or her inclinations and a decision. In the latter, the consumer is making much more of an impulse buy. With the growth of local and flash sales, businesses moving towards more of the impulse buy market. All this isn't new. Marketers have been targeting, targeting, and targeting for as long as there were marketers and perhaps even a little before. The difference is that today marketers can start measuring, experimenting, and more precisely time these campaigns. But the question is, will there be a race to zero here (as in the high-frequency finance space)? Will marketers compete to see who can push out a promotion within hours, minutes, seconds, and milliseconds of the formation of a target audience? Unlike in HFT, the really tiny timescales probably do not matter as much because they are imperceptible. However, one will never knows what research in cognitive neuroscience and psychology will turn up next.

The fact is that there is a lot of outdated and irrelevant information on the web. Some of this information can be used to construct a history, but there needs to be considerable effort to reconstruct such a history from the data on the web.

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