The Muddled Math of Social Media Marketing

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Facebook’s IPO Conundrum

I have spent 50 years in direct marketing. It is a precision business model with three elements that can be described in 85 words:

  • Testing. If something works in a small quantity, you run confirming tests in a larger arena. If the results hold up, you roll out and cream the market.
  • Discipline. Be it direct mail, off-the-page advertising or broadcast, the overriding constraints are size and accessibility of the specific universe and cost-per-thousand.
  • Measurable Arithmetic. Rules include: allowable cost per order, ROI and lifetime value of the customer. Direct marketing arithmetic is precise right down to tenths and hundredths of a percentage—otherwise known as a gnat’s eyebrow.

Three key words to successful direct marketing: arithmetic, arithmetic, arithmetic.

How the Internet Knocked This Business Model Into a Cocked Hat
Reaching people via the Internet is basically free, thus blowing the cost-per-thousand and arithmetic constraints to smithereens. The result: 235 billion spam emails per day.

Hearing Social Media Marketers First Hand
I had the opportunity to attend a conference where many of the sessions were devoted to social media.

Disclaimer: I do not have a Facebook page, nor do I trade testimonials on LinkedIn. I do tweet occasionally and currently have 600+ Twitter followers, although I follow no one on Twitter.

My single agenda at that conference was to try and figure out the arithmetic of social media marketing. Much of the lingo of social media presenters went over my head. Fast and furious snippets of techie argot and acronyms flew around the room. Plus the following:

“We want to engage with them-not necessarily sell them anything.”

“This is not a direct revenue driver.”

“Measure the statistics, metrics.”

“Get user generated feedback for your product developers.”

“90 percent of business decisions are based on user generated data.”

Denny Hatch is the author of six books on marketing and four novels, and is a direct marketing writer, designer and consultant. His latest book is “Write Everything Right!” Visit him at

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  • Jonathan Blaine

    The snake oil salespeople, inbound-only preachers, those who think people who enter their store to get into the mall are "customers" or think gaining eyeballs equals marketing success, and others who blow social media smoke and/or have no idea what return on investment or cost effectiveness truly mean will hate this article. Which is why I love it. 100% spot on, Mr. Hatch.

  • GeorgeM

    Thanks Denny. I am still appalled at the pseudoscience of social marketing and the new-age marketers making a fortune on these schemes. What does this old direct marketer tell his clients? I tell them that if they improved their boring old direct marketing programs by just 20%, it would equal the same revenue if they improved their social marketing by 5000%. However, it is very hard to go for the low hanging fruit if your desire is to reach for the stars.

  • Kevin Nielsen

    That’s the problem with you Denny, you make sense.

  • Sweeps

    Hey Denny – I was going to comment earlier today but got busy doing whatever else. Now that I’m back, I see all the intelligent and thoughtful comments you’ve received in the meantime, and so I won’t blather on about how exactly correct your article is. What a bunch of hogwash. Thanks for saying what I believe. David

  • Brent Gardner

    "As a business model, Facebook is a joke." – Best quote of the day! Thank you, Denny.

  • wash980952

    Denny, I note that "eyeball traffic" espoused by the social media devotees reminds me of the old cost-per-thousand impressions cited by traditional ad agencies in media buys. Neither offers any valid arithmetic to work with, or ever could. But we all nodded sagely when considering generalized media placement

    Like most Americans, I’m seeing mostly "junk" mail (and bills) in the postbox these days. Not much different from online–why else would my email source have a Spam filter?

    An internet marketing devotee I know, dedicated to "analytics" and "metrics," decries my complaint that blogging’s generally vapid, intended either for venting the writer’s steam or tossing out a marketing scheme hoping for a hook, as you mentioned. Many of the supposed free offers I see are rather preposterous.

    Moreover, my analytics guy sees protection of intellectual property as a bad thing in that it does not sufficiently inspire innovation (allowing owners of said copyrights/patents to sit unfairly on their laurels, clipping coupons and contributing little). He says the "freemium" is the wave of the future–stuff (especially written material) offered free up front, then later charged-for in the next product or interation via a "crowd-sourcing" finance scheme. All of which labyrinthine parnering would support, in his view, what capitalism is really about at its heart.

    To me, as an individual person looking at the present social media phenom, the notion of being continually in touch with a retinue of "friends/followers" seems juvenile, unless you’re a movie star or such, dependent on personal popularity for your next job. Interestingly, my social media maven cites popularity as the new currency in the social media marketing thing–the reason people are supposed to be repeat customers because they like what you offered the first time for free. But he’s loath to explain how the numbers work in that utopian scheme.

  • Ricardo Vidallon

    Any business posting an AD on Facebook is posting a digital bill board in a user’s playground or park. It just doesn’t make sense to advertise where user’s are socializing, relaxing, having fun or just passing time.

    And we all know about GM recently pulling their ads … but what about all the companies who are hoping young people will click their ADS and at least see their products? (Shoes, clothes, acne cream, fruit drinks, hair products and so on…) So just for grins I asked my teenage kids if they (or their friends) ever click an AD that catches their eye or interest. They replied; "Nobody clicks those ads pop! They are just trying to sell you a bunch of crap."

    Facebook will probably go the same way of the first social network failure circa 1995. RIP.

  • Catherine Wolf

    Denny, you’re my kinda guy! Count me in as the newest member of our fan club!

  • Barbara

    I confess that, while I have a Facebook page and I visit it daily, I never see the advertisements on it.

    I use the AdBlocker plug-in for Firefox.

    It’s a cleaner look and I don’t care what targeting they’re trying on me — I’m not even getting a subconscious message. They can throw all the like at the window of my wallet, I’ve got the blackout curtains up and I don’t see a bit of it.

  • John

    I remain on Facebook partly because I’ll get so much grief if I close my "account". I’ve already lost one good relationship because I dared cross that person in some manner by not "allowing" something on Facebook. One of these days I will close it….

    Facebook seems to be junior high behavior formalized.

    "Blogging" seems to be "venting" formalized in some fashion.

    I did very much enjoy reading your thoughts and viewpoint. And agree with them very much.

  • Matt Holliday

    Well said.

    Facebook relies on advertising for revenue.

    The biggest pitfall of Facebook is the assumed fact that people will NOT pay to use the service. If Facebook suggested a subscription fee, even $1 per year, people would FLOCK to Google+ or another service that provides connection with others for free.

    I predict Facebook will fade away over the next 5 years, if not sooner. New options will emerge that will attract followers and the complicated service known as Facebook will lose the audience/users that it is selling to advertisers.

    Facebook is an opened-up switchboard, nothing more, in a marketplace with many other switchboards waiting to be used if Facebook is less desirable for any reason. Facebook is more like a tool (in its makeup and use) than a company that makes anything or a service that provides something that a person would have a difficult time providing for himself.


  • john

    Hooray! Somebody has finally dared to bare the naked, ugly truth about social media and all its fallacies. At least with Google search, people are actively looking for something and therefore predisposed to click on links that promise a product related to what they want.

    On Facebook, nobody is looking for anything other than their "friends’" stupid cat photos.

    As my dear old mother used to say: If it’s free, it can’t be worth very much.

  • Warren

    This is one of the sanest and "direct to the point" commentaries I’ve seen on the value (or lack thereof) of social media marketing. Like the author, I have attended numerous seminars and symposiums touting the need for people in my field (writing & publishing) to jump into social media head first. And like the author, I’ve always wanted to raise my hand and ask specifics about ROI (regarding both money *and* time). The few times I had the nerve to do so, I was just given more techno-speak and feel-good-isms about connecting with my audience (whatever that means). At my age, I no longer have the desire to be the most popular, the most liked, etc. I need to help my kids with college, pay for weddings, build my retirement, and I need to invest my time and resources with the strategies that will help me accomplish these goals.Thanks, Denny.

  • JBA

    Denny, try having clients who are enamored (I’m being kind) with the social sites, viral marketing approaches, etc. and who no longer see the value of the "arithmetic". Years ago you were smart when you sold the math…now you’re boring. – J Ayers

  • LeePound

    Denny, as author of "Profitable Social Media" I have to agree with you 100%. Those who tout social media as the next great way to sell your prodicts are missing the boat. It is part of the marketing process, not all of it. We as marketers still have to have a product worth selling, a clear on-target message, an audience that wants to buy, and a means of reaching that audience. Social media is only part of the way we create an online presence and reach that audience. Most people have no time for playing on social media all day. However, a few targeted, well thought out posts to a few targeted people on blogs can help you reach your objectives. The kind of marketing most social media people advocate is close to worthless.

  • Barry Dennis

    Many ideas have potential; few are realized without the commensurate amount of hard work, planning and yes, luck.
    Facebook would not be in my top ten holdings, or even top 25, absent some real evidence of a business model that produced growing revenues through building a brand and utilizing the "time spent" metric to build a portfolio of products and service that offer true value to it’s Users.
    Having said that, Facebook does have a tremendous opportunity to monetize it’s User base, but ONLY if the User experience creates real "psychic value" -loyalty among other things-as part of the relationship.