Social Media’s Value Problem

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In this AdAge article, Coca-Cola’s CMO, Marcos de Quinto, was quoted saying “Social media is the strategy for those who don’t have a true digital strategy.” This is in the context that Coca-Cola has seen their TV investment returning $2.13 for every dollar spent on TV, while their digital investment is only returning $1.26 for every dollar spent. As such, Coke recently brought on a new Chief Digital Marketing Officer from Bank of America, whose focus will be “the digital transformation of global marketing and align our system around a single digital marketing agenda.”

de Quinto’s statement about social media resonated with me. I entered marketing through social media, working across General Motors brands (Chevy, Cadillac, Buick and GMC). In those early days before Facebook and Twitter went public and social media was still an earned media channel, I really believed that social media could help brands create stronger relationships with audiences that ultimately led to more commerce for brands. This was coming off of at least a decade of digital marketing where display ads lacked creativity and storytelling and were becoming increasingly disruptive. Social media forced brands to become storytellers again – to create great content that audiences love and engage with.

But, as I took on more roles across marketing, I too began to see what de Quinto is seeing: TV still drives high ROI for brands that can afford to spend there. Social media has become purely a paid media play, and the ROI on different channels is very different. For example, targeting on Facebook is pretty remarkable. And, despite recent struggles with their analytics, I’ve still been seeing high quality traffic compared to other social and digital advertising channels. Twitter on the other hand is purely an impressions play. You might get tons of impressions and even video views, but those do not convert at any meaningful rate to website traffic where you can continue to develop a relationship with your customer.

And, this is the rub with social. Whereas, social media used to be the place for brands to create fresh, memorable experiences for audiences, it’s become a place of fleeting moments and a lead generation tool to drive audiences to a different experience: a website, an app, a webinar, etc. To drive audiences to an experience that brands can own and use to develop a richer relationship with their audience. As marketers continue to face increasing pressure on the ROI they deliver across their activities, social will face more scrutiny. And, marketers will need to be more purposeful about their digital marketing efforts – selecting tools and channels that support the specific marketing problems they’re trying to solve.

CMO Mondays: The Visionary’s Dilemma

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The Wall Street Journal published an article yesterday entitled, “PepsiCo Wants to Sell Healthy Food, Consumers Want Chips.” In it, reporter Mike Esterl describes the dilemma that PepsiCo‘s CEO Indra Nooyi has been wading through for the last decade since she took the chief executive role: growing a business of nutritious foods while not cannibalizing its empire of sugar and salt rich foods.

When Nooyi came into her new role as CEO in 2006, she focused on capitalizing on the growing market and consumer desire for healthy snacks. But, after having to cut her profit outlook twice in 2011, PepsiCo refocused on its core business of “indulgent products”. The markets have supported this decision, as you can see from the below chart showing PepsiCo’s share price growth.pepsico-stock

In 2010, PepsiCo set a goal of tripling revenue from nutritious products to $30 billion this decade, but given its need to refocus on indulgent snacks, PepsiCo has had to adjust this goal. The new goal is to have sales growth of its nutritious products outpace the rest of its portfolio by 2025.

It shouldn’t be a surprise that visions to change the world and consumer behavior take time. A long time. Decades even. And, for a company like PepsiCo that generates over $60 billion in revenue globally, driving positive change (helping consumers eat healthier) while not cannibalizing its core business of indulgent snacks is a tough balancing act.

Perhaps the example that I think of most is Elon Musk and his companies, Tesla, SolarCity and SpaceX. All of them have big audacious goals – somewhat related and intertwined. In their own way, they’re each pushing towards better energy efficiency and to reduce our dependencies on fossil fuels. And, what Musk’s companies have faced is not unlike what PepsiCo has faced. Consumers say they want to be green, but the mass market of consumers is not actually willing to sacrifice their indulgences in order to be green. Consumers may say they want healthier foods and snacks, but the mass market of consumers are not actually willing to sacrifice their indulgences in salty, sweet goods in order to be healthier.

Musk recognized this in the energy sector and developed a long-term plan to evolve consumer behavior. With Tesla, he started out with a limited edition $100,000+ sports car and targeted wealthy, influential consumers as his customer. This created a luxury brand that consumers aspired to. Since then, he’s been moving down market to provide the same remarkable experience (beautiful car design, driving experience and ever-improving software) at a more affordable price. The main selling point isn’t that Tesla is an electric vehicle. It’s that Tesla provides a remarkable driving experience – and the cars happen to be better for the environment.

Similarly with SolarCity, recently Musk revealed three new styles of solar panels that are designed to replace your roof tiles (see video below). Not only are they beautifully designed, but they’re stronger and more durable than the roof tiles you have on your house today.

Musk recognizes that while consumers say they want to be green, the mass market won’t be willing to sacrifice the aesthetic of their house to be so. So, he’s bringing a solution to market that meets both the aesthetic needs of the consumer and the social desire to be green.

Over time, Musk and his companies will help meet a long-term vision of a self-sustaining house that is off the grid. Your solar panel roof will provide you all the energy that you need, including charging that Tesla you have in your garage. So, you’re fossil fuel consumption goes to near zero.

So, as I think about PepsiCo and Nooyi’s challenge of meeting consumers’ desire for indulgent snacks today, while pursuing a vision of helping consumers be healthier in the future, I think about those incremental steps that Musk has taken over the last decade across his companies to bring his vision to life – a vision that won’t become fully realized for at least another decade. Nooyi started out on her journey around the same time as Musk. She’s a decade in. What can she do to realize that vision in the next decade or more?

CMO Mondays: Snapchat files for IPO

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Last week, Snapchat’s parent company, Snap Inc., filed paperwork for an IPO, with an expected valuation of $25 billion or more. In 2014, Snapchat introduced advertising into the platform. In 2015, it generated $60 million in revenue from that advertising, and, in 2016, it expects to exceed its target of $350 million in revenue. Snapchat is targeting $1 billion in revenue in 2017.

Snapchat reports 150 million users daily and 235 million users monthly, including 41% of 18- to 34-year-olds in the U.S., according to Nielsen. Snapchat shows strong signs of being a healthy business. With continued user and revenue growth, Snapchat will be a hot company for several years to come – even with the new scrutiny of the public markets.

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But, long-term, Snapchat could face a similar issue as Twitter: being a company that offers only a niche audience advertisers. Unlike Google and Facebook that offer a large and broad range of audiences to advertisers, Snapchat caters mainly to younger Millennials and Generation Z audiences. Facebook touts ~1.71 billion monthly users – approximately 25% of the world’s population. By comparison, Twitter has ~313 million monthly users. Twitter has struggled in recent years to win over investors – primarily because it is compared to Facebook. Twitter has only ~18% of the monthly users that Facebook has. And, Twitter has been criticized for its slowing user and revenue growth while being unprofitable. Twitter’s stock price has dropped from $69 per share at its peak in January 2014 to $18.79 today.

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While we can expect that Snapchat will continue to grow its user base at a nice rate for the foreseeable future, as it captures more of share the 34-year-old and under audience, the real test will come when Snapchat can no longer rely on that audience for user growth. It will need to stay relevant to the new young audiences entering their teens and twenties, while expanding its relevancy to older audiences. And, it will need to do this while achieving profitability. Otherwise, in a few years, we could be seeing Snapchat face similar issues that Twitter has faced in recent years.

CMO Mondays: Marketing in the Post-Capitalist Society

I spoke to a class of advertising and PR students at University of Texas last week. Below is the Slideshare of the presentation that I gave. This is an updated version of previous presentations I’ve given on my Reciprocity Theory and The Purpose Economy. I dive into foundational human behavior, technological revolutions, socio-economic evolutions of the last fifty years, and what this means for marketers.

CMO Mondays: The New Telecom

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In 2015, Verizon agreed to purchase AOL for $4.4 billion. This was a key acquisition for Verizon, as it looks to deliver more video content (and advertising) on top of its network of more than 100 million wireless users. AOL brought with it an established and growing set of content businesses, including The Huffington Post, TechCrunch, Engadget, Moviefone and Makers – as well as the advertising technologies needed to monetize this content. Indeed, per a Fortune report, CommScore says AOL’s video advertising reaches more than 50% of the U.S. population. Verizon has also been working on an over-the-top video offering since acquiring Intel’s media assets in 2014 and video delivery network EdgeCast in 2013. This year, Verizon agreed $4.8 billion for Yahoo!, which has over 1 billion monthly active users, and also brings content and ad tech into the mix. During this same period, Verizon has sold off several regions of its lucrative FiOS business, and has not expanded into new regions since 2010. Since Verizon closed its $130 billion deal to buyout Vodafone’s 45% ownership over Verizon’s Wireless business unit, Verizon is all in on content and advertising delivered over its wireless network.

AT&T, meanwhile, completed its $48.5 billion acquisition of DirecTV last year. With DirecTV came some 20 million U.S. subscribers and the lucrative NFL Sunday Ticket offering. AT&T also has over 100 million wireless subscribers. Through its Otter Media joint venture with The Chernin Group, AT&T has been acquiring some over-the-top content providers, such as Fullscreen, but nothing has really materialized from this partnership in a meaningful way from what I can tell.

Now, AT&T has announced that it seeks to acquire Time Warner for $85.4 billion. Shares for both companies have already dropped today from the announcement. Shares of Time Warner fell 3.1% to $86.74, while shares of AT&T decreased 1.7% to $36.86. Some in the industry are up in arms about the potential antitrust issues that this deal could bring, AT&T is positioning that it wants the content from Time Warner, so that it can feed that content to AT&T’s wireless, broadband and satellite subscribers, AT&T would also be absorbing Time Warner Cable’s subscribers.

I won’t pontificate about whether or not this deal will go through. Rather, I’m more intrigued the two distinct strategies that Verizon and AT&T are taking. Verizon is acquiring its way into the future, integrating its superior wireless network with premium online content and the ad tech to drive new revenues on top of that wireless network. This is critical given that the mobile subscriber market is essentially saturated. Telecom’s can’t expect to be growing their subscriber bases meaningfully for years to come.

On the other hand, AT&T is taking a very different approach: consolidate with the legacy media businesses and platforms of satellite and broadband.

Which approach will work? If the goal is to capture younger, cord-cutting audiences such as Millennials and Gen Z, while also capturing older audiences of Gen X and Boomers, then it would seem that Verizon has the better shot. Their investing in online content and ad delivery, but AOL and Yahoo! also bring the older audiences from their early Internet days. AT&T, on the other hand, is skating to where the puck has been with little visible investment in where the puck is going – even if DirecTV has seen over 900,000 net new subscribers in the last year since the acquisition.

I’m interested to see how this all plays out over the next five years, as we’ll see the impact of these acquisitions and whether or not the different strategies worked.