Demand Generation vs. Demand Fulfillment

Source: Technology Review,  May/Jun 2011

Facebook aims to be not just a place to advertise but an entirely new way to advertise—one that uses the power of social networks to create and amplify brand messages. In essence, the company is pushing a highly charged version of word of mouth, long seen as the most valuable of all marketing because people view friends’ recommendations as more credible than marketers’.

Facebook, where each of an estimated 600 million active users is connected to an average of 130 friends, changes all that by lending personal recommendations enormous reach. After all, anything a user does on the site can be broadcast automatically to all that person’s friends. “This is in many ways the Holy Grail of marketing: making your customers your marketers,” says Sandberg, who joined Facebook in early 2008 after building up Google’s ad sales operation from four people to 4,000. “For the first time, you can do word-of-mouth marketing at massive scale.”

What sets Facebook apart from online rivals, especially Google, is that its advertising is aimed not at influencing immediate purchases but at branding, something online ads have never done very well. “We’re not really demand fulfillment, when you’ve already figured out what you’re going to buy—that’s search,” explains Sandberg, bounding up to a whiteboard to circle the bottom of a classic “marketing funnel,” representing the stage at which a purchase is completed. Circling the top half of the funnel, where consumers become aware of brands and consider buying their products, she adds: “We’re demand generation, before you know you want something.”

Another challenge is that very few people click on Facebook ads. The analytics firm Webtrends recently estimated that these ads on average draw clicks only once every 2,000 times they’re viewed—about half the industry average for display advertising. Though ads with a friend’s name attract more clicks, the performance is still nowhere near that of Google ads, which on average get a click for every 50 times they’re viewed. That’s mostly due to the nature of search ads, which are served up to people who have often signaled their readiness to purchase with the very words they type into the search box. But the inescapable result is that Google still grossed more in a month in 2010 than Facebook did all year, even though people spent more time on Facebook.

To underline what Facebook could do for traditional brand marketers, in September Sandberg addressed an audience of marketers and agencies at a New York conference hosted by an online-ad trade group called the Interactive Advertising Bureau. “The social graph,” she said in an expansion of Zuckerberg’s definition, “is not just connections between people but between people and the things they love.” Give people a chance to help shape your brands’ products and image, she said, and they’ll view ads as useful, engaging content, not commercial interruptions.

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