Back in January, Procter & Gamble CEO Bob McDonald told Wall Street he was scaling back his company’s $10 billion annual ad budget (mostly in traditional media) to take advantage of free impressions offered by Facebook in the form of Likes and status updates.

That’s two out of America’s top three biggest advertisers.

The two decisions were made for different reasons (GM wasn’t convinced Facebook ads are effective; P&G is simply looking for free media efficiencies) but they’re linked.

It appears to be dawning on clients who control the U.S.’s major ad budgets that if your marketing content is interesting enough you don’t need to advertise on Facebook. Advertising on Facebook is free, if you can create something compelling enough to go viral without a major media spend behind it.

This is Facebook’s worst nightmare: If P&G and GM both question why they should pay to be on Facebook, how long before Facebook’s other big advertisers—American Express, AT&T, Disney, Verizon—suddenly ask, Hey, where’s the return on investment?

Here’s how that scenario could play out, assuming Facebook fumbles the ball (which it probably won’t):

Advertising on Facebook isn’t as effective for some advertisers as advertising on search, for the simple reason that people searching for information on purchase decisions are perfect targets for ads whereas people checking out message from friends are not.

Wall Street has frowned on the quality and performance of Facebook’s ads, most recently in a critical note from BTIG analyst Rich Greenfield.

WPP, the world’s largest ad agency holding company, is also probably one of Facebook’s biggest clients. WPP’s media buyers will spend a collective $400 million on Facebook this year. Yet WPP CEO Martin Sorrell has “fundamental doubts” about whether advertising on Facebook is a good idea, because it interrupts personal conversations with impersonal branding.

Sorrell is not alone. Execs on the client side are also asking questions about measurement and effectiveness on Facebook. “The question with Facebook and many of the social media sites is, ‘What are we getting for our dollars?’” Michael Sprague, vp/marketing at Kia Motors, told the Wall Street Journal.

And some advertisers just don’t get Facebook, and maybe never will.

In this scenario, with GM, P&G, Kia and WPP gone, it’s not hard to imagine a full-scale turn away from Facebook by advertisers, as they head toward more effective, more measurable media.

Will this happen? Almost certainly not. Facebook ad sales chief Carolyn Everson has proven herself a master of client relations, especially with the new(ish) Facebook Studio, which shows advertisers what they should be doing on the site.

And even if it did happen, Facebook could start charging brands subscription rates for their Brand Pages, a service they currently get for free.

But there’s no natural law of social media that says Facebook must always stay in business, just because it’s Facebook.

GM just proved that.

]]> http://www.bookinghound.com/facebooks-worst-nightmare-after-gm-heres-how-the-other-dominoes-could-fall/feed/ 0 http://www.bookinghound.com/boom-predicted-for-uk-internet-industry/ http://www.bookinghound.com/boom-predicted-for-uk-internet-industry/#comments Wed, 21 Mar 2012 10:07:41 +0000 bh_admin http://www.bookinghound.com/demo/?p=599 The UK’s online industry is set to grow at an annual rate of 11%, according to a new report.

A study completed by The Boston Consulting Group reveals the UK is ranked top of all G20 nations in terms of the amount the internet contributes to its GDP.

It also shows that if the internet were isolated as a sector in its own right, then it would be the 5th largest in the UK; bigger than healthcare, education and construction.

But new internet start-ups often find it hard to find funding because banks are unwilling to take a gamble on what is seen as a risky area of business. Instead such companies often have to rely on so-called “angel investors”.

James Gill, founder and chief executive of web analytics company Go Squared, said: “A lot of the fastest growing businesses right now are internet businesses.

“So many people at the banks just don’t get that. It’s why it’s really important to have money coming in from angel investors, much like there is in Silicon Valley. It seems to be happening more and more over here in London and Europe.”

The UK’s geographical position makes it a very attractive place for companies to base themselves and for people to come and work.

“We can pull in talent from across Europe,” said Tom Hulme, another internet entrepreneur.

“Indisputably there is some great talent, particularly from a development and engineering side, in Eastern Europe and we’re seeing more and more coming to London.”

The retail industry is learning just how important an internet presence is. Recent Christmas sales figures showed that those with the best websites performed better than rivals.

The UK is working, shopping, playing and sometimes just killing time online. But the UK is still some way behind much of Europe though and critics might argue that it will take a very long time to catch up the continent’s leaders.

Ed Vaizey, minister for communication, said: “The best super-fast broadband in Europe doesn’t just include the headline speeds, it also includes the cost.

“We have a very competitive telecoms market in the UK which means actually most people can access broadband at a decent price.

“That’s a very important factor. There’s no point having a super-fast pipe going past your house if you can’t actually connect on to it.”

Last week, the ten millionth .co.uk domain name was registered. When it comes to the internet, having the letters UK attached to your company name is highly desirable.