The world’s largest relationships platform

The funny thing about all the talk about the revolution in marketing is that it generally hasn’t taken into account that every major marketing communications channel that has ever existed has basically been a broadcast channel. Even on the Internet.

The implications of this are pretty straightforward. It’s hard to shift from a broadcast mentality to something else if the opportunities to do so are limited.

Facebook, on the other hand, represents (for all it’s recent travails) the world’s first mass relationships medium. The problem is that from a marketing communications perspective I’m not entirely sure they’ve figured out what to do with this yet.

Advertising on Facebook today is a surprisingly weak proposition. I’m not really surprised that GM decided to pull theirs.

You have essentially two choices:

  1. You pay for display ads that live off to the side and that few, if anyone ever click on. Supposedly highly targeted to people’s preferences, I’ve yet to see one of these that made any sense whatsoever to me.
  2. You piggyback on an individual’s “like” of your brand, message or product and this becomes a sponsored “story” which in effect becomes the ad creative. This is very innovative, and Facebook claim a much higher recall rate for this kind of messaging because it comes from a “friend”. My belief, however, is that this recall will rapidly decline as people begin to realize that their ‘likes’ are being used for this purpose.

The problem with both of these approaches, however, is that they do little or nothing to reinforce the relationships strength of the platform. Ironically, both methods are locked into a broadcast mindset. And worse, neither of them add any real value to the consumer. (And arguably the newer ‘sponsored stories’ approach does the opposite)

As a direct comparator, the reason Google Ad-Words is so effective, so popular and such a huge revenue driver for Google is that it absolutely leverages the underlying strengths of the platform. When I am doing a search, I am specifically interested in a topic. To have targeted advertising based on what I’m looking for makes perfect sense. To have these ads appear as innocuously and helpfully as they do is possible the smartest UI decision Google ever got right.

Facebook today is nowhere near having their equivalent of Google Ad-Words.

On Facebook, the most impressive marketing R&D is actually being done by the brands themselves and not by Facebook as such. To take just a single example, I’m particularly impressed by what Ticketmaster launched in January.

Essentially they are connecting the relationship dots. They recommend upcoming shows based upon your Spotify listening habits, they allow you to share shows you want to go and see, as well as shows where you’ve already bought tickets. If you’ve bought tickets, your friends can see where your seats are and buy their own tickets for seats nearby. And vice versa. All from within the Facebook platform.

Not surprisingly, Ticketmaster state that this has become an incredibly powerful platform for them, with significant ROI.

This is just a single example, but a very good one, of a brand leveraging the underlying relationships strength of the Facebook platform in a much more effective and consumer friendly way than Facebook itself has.

Worryingly for Facebook, the tools Ticketmaster use to do this are currently given away for free. Their income only coming from a percentage of the on-platform sales.

The joy of this approach is that for the first time we are creating advertising that gets close to Peter Drucker’s ideal of marketing that gets a customer ready to buy, rather than marketing designed to sell.

And this is the crux. Rather than the broadcast mentality, what brands increasingly need is the ability to leverage the relationships potential of Facebook in ways that add value to their customers and that makes relevant purchasing behavior more convenient. Do this well and everyone wins.

This would suggest that the future of advertising on Facebook should lie less in solutions rooted in a broadcast philosophy, and more in solutions rooted in a relationships driven one.

The great thing for them, of course, is how many brands are already building on their platform and essentially engaging in R&D behavior on their behalf.

Of course, the need to do this is not just because the existing advertising approach has limited potential, but because the existing advertising approach doesn’t work at all on mobile. And mobile is increasingly where people are choosing to access the Facebook platform.

Put simply, the mobile environment demands a shift in mindset. And while the details are a topic for a different day, I’d argue that the mobile environment should accelerate the shift from a broadcast to a relationships mentality, rather than slow it down.

But we’ll see where it all ends up. I’m pretty bullish on Facebook to succeed. They’ve overcome every previous obstacle, so I hope their current troubles don’t lead them down a more short-sighted path.

Why Marketing Should Be Your Friend

I have a soft-spot for Box. I think Aaron Levie and his team are building a really interesting and valuable business. One with a simple proposition that is succeeding against multiple 800lb gorillas in an increasingly competitive cloud storage and sharing environment. Impressive stuff.

One of the major reasons they’re succeeding is that they’re really smart marketers.

Now, I know this statement is going to be about as popular as passing gas in an elevator for some people, but please bear with me for a second.

Lets start by heading back around 50 years to quote the late, great, Peter Drucker:

“The aim of marketing is to make selling superfluous. [It] … is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy.”

The final sentence here is key. What Box have been so good at is creating customers who are ready to buy.

They do this by getting individuals to sign up for a free Box account, thereby familiarizing themselves with a product type they’d never considered they needed before. Once there is a large enough set of individuals from any one organization using (and demanding) the product, the Box sell to the enterprise buyer for that organization becomes as easy as saying “why not buy a license so that you control the use of the product your people are already using anyway? Secure and managed for you, no change in behavior for them.”

While the Box product is great, the above approach has nothing to do with product and everything to do with marketing. In Drucker’s words, they’re creating a customer who is ready to buy. And if you consider how conservative enterprise IT buyers have traditionally been, this approach is pure genious. In fact, in hindsight, it may have been the only way for them to succeed in the enterprise space.

Of course, I recently saw an article with the following headline: “How Box built a multi-million dollar business without spending a dime on marketing”.

The truth is that of course Box spent money on marketing. What they didn’t spend money on is advertising. Instead of going out there and spending on media placement, they gave the product away for free. Giving the product away for free is in fact a marketing cost. The revenue you forgo up by giving the product away for free is a pure cost of customer acquisition.

The difference, and why this really matters for startups, is that money foregone is very different from money spent. If you have $10m to spend building a product (and a business) you’d obviuously be foolish to spend that $10m on advertising. You probably can, however, afford to give away $10m worth of free product (particularly since the marginal cost per unit in the digital environment is generally very low). In effect doubling the available budget for your business. $10m on the product, $10m on customer acquisition. Navigating this course is exactly what Box have done so well.

Looking forwards, we can look again at Drucker to find another nugget of marketing wisdom:

“Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

This quote is again important when we look at the direction Box are innovating in. A recent article stated that they are working with their clients to create cross-platform solutions. The unmet need is simple. The modern day enterprise environment is multi-platform (particularly when we take mobile into account). However, the major cloud competitors all have their own platforms they want you to use exclusively, meaning little or no interest in building cross-platform solutions. (As cross-platform solutions mean lost revenue for them)

By working with their clients to innovate cross-platform, marketing is in fact driving product innovation for Box. Not marketing as advertising. But marketing as value creation. Marketing designed to create a customer by creating a product that will, in effect, sell itself.

Unfortunately, a fundamental misunderstanding of what marketing is has become pervasive today, particularly in this startup space. Instead of value creation (creating a customer) many people see marketing as a pure cost (selling me crap products I don’t want). And while this may be true for some, particularly some of the biggest advertisers, the advantages of marketing as value creation are so strong that we should be careful not to fall into this mental trap.

My advice for anyone who wants to replicate some of the success of Box is simple. Get past the idea that marketing is your enemy. Instead focus on how you will create a customer, how deeply you can understand this customer and how you can create a product that meets their needs so well that it makes selling unnecessary.

Get this right and you too will be a great marketer.

Oh, and everyone should try to read Peter Drucker if they can. He said it better than I ever could a very long time ago.