As advertisers follow their audiences on social media, questions abound as to how justified it is for local money to flow out of the country.
Earlier last year BMW ran an advert on WeChat, a messaging app popular in China. The ad, says The Economist, was shown to only those whose profiles suggested they were more likely to afford an expensive car. Those WeChat users who did not see the ad complained to BMW for making them feel like poor losers.
This example, one of many, shows just how complex advertising on social media can be. On the one hand, social media hails opportunities never seen before. They gather detailed demographics about their users, including consumption patterns, interests, likes and so on. Such information allows advertisers to tailor their messages and target their audiences with an accuracy mainstream media could never afford.
Detailed profiles of over two billion people who use social networks like Facebook, Twitter and LinkedIn, according to eMarketer, a research company, has attracted advertising on social media worth $20 billion this year.
However, ad spend on social media is more complex than it seems.
On the one hand it causes an outflow of money. Out of the country that is. For Malta, according to local advertising agency BPC, of the €25 million ad spend for 2015, €3.5 million was for online. A grasp of that goes to social media.
This is money that goes into social media owners’ pockets, who, more often than not, do not even pay tax in any of the countries where their product is being used. (At the time of writing this article, the UK Times reported that Netflix, the world’s biggest online movie rental service with five million subscribers in the UK and 100 million worldwide, has been lawfully avoiding paying corporate tax on their £200 million revenue in Britain alone).
According to Jonathan Cremona, marketing manager for Debono Group, 30 per cent of their marketing budget is spent online and their company has “identified the need to invest in these new forms quite some time ago and now we have placed ourselves in a very competitive position in terms of social media and we’re very active in online ads as well.”
However, advertising on social media does not necessarily mean successful return on investment or successful brand building.
Advertising on social media does not necessarily mean successful return on investment
To begin with, people still have negative attitudes towards online advertising. A growing body of research leads to such conclusions for both ‘digital natives’ and ‘digital immigrants’.
According to Tanyel et al., one reason for people’s negative attitudes is that there is not enough regulation and control of advertising online. This makes advertising messages seem less credible.
People would also often associate online adverts with promoting harmful products and see them as harmful to vulnerable groups, especially children. A study conducted by Li, Edwards and Lee further shows that online advertising is still considered more false and misleading than print. While some may argue that the same was said for TV advertising back in the 50s when the medium was dominant, the argument here differs in that online remains largely an unregulated environment and therefore less credible than TV or newspapers.
‘Social media platforms come and go’
Local advertising agency BRND WGN says: “Facebook advertising can be effective but it is all about the way that you do it, e.g. people have negative views towards advertising so having sponsored posts is better and less in your face than an ad on the right hand side of Facebook because that is where the spammy ads usually are and it is really negative placement.”
However, the tactic of creating less in your face messages online has led to the blurring between pure advertising message and content. As critics object to Mark Thompson, the New York Times’ chief executive, and his view of the “limitless” potential of online advertising, content becomes more like “stories from our advertisers” than pure content. And, unlike print content – edited, referenced and source-checked – unregulated online environment becomes the Wild Online West where it is hard to tell what is true and what is not.
The effort to make here is not to shun advertising on social media. One must consider several factors that will determine the necessity of and the likelihood of success by advertising on places like Facebook or Instagram, the image-sharing app.
On the one hand, there is the factor of global vs local: how necessary and sustaining it is for companies to add (or shift to) ad spending on social media? Yes, online offers the opportunity to become global but how many local companies can sustain to serve a global market? On the other hand, is social media the only answer to grow locally? Clear answers to such questions can determine clear advertising budget allocation.
Advertising has become less blunt and in the face by infiltrating into people’s online activities because social media affords to divulge their users’ personal data
Then, rapidly changing media environments require new skills. Often, the majority of local businesses – small to medium size – either outsource or recruit someone to deal with social media matters. Does that suffice to develop integrated marketing communications for a company? How well do locals understand what IMC entails?
BRND WGN says: “There is less of a strategic approach to marketing and advertising in Malta.” Advertising is ultimately not only about increasing sales. Many businesses fail to distinguish between one marketing objective and another. The lack of clear IMC objectives often leads to misunderstanding in what advertising can be about. Then, spending thousands on social media will not necessarily increase sales if a company’s initial aim was to introduce a new feature of an existing product. Ad agencies can offer intelligence on how to develop integrated campaigns including online strategies but many local businesses still prefer to do it alone assuming that paying for search optimisation, for example, will suffice to place them on the digital market or reach their IMC goals.
Alex Galea, chief communications officer of this newspaper, says: “The main reason why companies tend to shift their advertising to social media is cost. Also, industry players like Google and Facebook offer tracking tools that enable drill-down data, which results in more accurate ROI. Marketing budgets are progressively dwindling and therefore ‘cheaper’ campaigns can seemingly deliver greater value.”
Again, how relevant is advertising on social media to the business? While brand building remains top priority to many marketers, according to a study conducted by the Economist Intelligence Unit, brand marketing effectiveness remains the most difficult one to measure compared to other objectives. As Mr Galea points out: “Few marketers calculate the effectiveness of marketing campaigns – at least locally – by looking at quantitative measures – such as the cost-per-thousand metric – and qualitative influences – such as ad recall and whether the medium is actually an active or a passive one.”
Advertising has become less blunt and in the face by infiltrating into people’s online activities because social media affords to divulge their users’ personal data such as age, purchase history, interests, and even what their children and their children’s children like, do, and buy.
Seeing online advertising as more beneficial to customers because it is more personal is illusory. Jaron Lanier, author of Who Owns the Future, says that digital economies create “informal benefits”, such as convenience, for the majority of people using digital platforms like Facebook. Only those who own the platforms benefit in a formal way, i.e. make money. In exchange for the detailed data about their users, social media platforms benefit from selling online advertising.
One would argue that there is nothing bad about that. Yesterday the beneficiaries were newspapers, today they are Facebook and Google. Looking closely, however, such shifts become a problem when money actually flows out of the country unjustified by companies’ IMC objectives.
Lastly, social media platforms come and go. New ones mushroom all the time. The widening choice of online social platforms and increasing lack of loyalty towards products and services on consumers’ part makes it harder for advertisers to stick to a clear marketing strategy. This may mean more work for ad agencies but there certainly is a limit to how many more markets and audiences businesses can afford to target. Pete Blackshaw of Nestlé, the food manufacturer, says: “You can target too much.”
Sharon Mizzi and Chantel Louise Le Carpentier contributed to this article.