Ello and the Perils of Social Advertising

Nov 06, 2014

It seems that every few months I find myself writing a column about how much I want to quit social media. Don't worry, this is not that column, but I have been thinking about social media quite a bit recently, and for one major reason, one that, a few years back, I never thought I'd associate with Facebook or Twitter: advertising.

Allow me to tell you a little story. Yesterday morning I jumped on Facebook to see what my friends had been up to over the weekend. There were a few fun posts, some pictures of autumn foliage and apple picking, a couple inspirational quotes or article links. And then, with little warning, I scrolled through at least six or seven ads in my newsfeed, one after the other. I had been shopping online the day before, and it seemed that everything I'd searched for was now showing up on my favorite social media site. A 15% off coupon for a yoga mat, a buy one get one free promotion for shoes, etc. When did Facebook turn into a giant billboard?

Obviously, this isn't the first time I've noticed ads on Facebook or other social media sites, but it was the first time I'd gotten really annoyed about it. I started wondering if these ads really even work for companies, or if they are just becoming another example of interruption advertising that Millenials and Digital Natives have come to loathe.

I did some Googling, and found an article on Business Insider titled, "GALLUP: Advertising On Facebook And Twitter Barely Even Works." Yikes, talk about straight forward. It seems that a recent Gallup survey found that "just 5% of Americans say social media advertising has a great deal of influence on which products they buy." In fact, as the article goes on to say, "62% of the 18,000 people Gallup surveyed said social media advertising has no effect on their purchase decisions at all." Ouch.

Now this report doesn't mean that social media advertising is a complete bust by any means. As Pew Research reported at the end of last year, with some 73% of online adults using social networking site of some kind, and 42% of online adults using multiple social networking sites, I have to believe that there is decent sales conversion rates from social media advertising. It's just pure math. More people, more reach, more sales. But if companies aren't seeing solid conversion numbers from their advertising on social media, it might be time to consider the possibility that these ads are burdening users more than enticing them.

Coincidentally, as I began writing this column, a friend of mine sent me an invitation to a new social networking site called Ello. She didn't tell me much about it, only that she was getting sick of the pushed promotions from Facebook and that Ello didn't have ads. I decided to give it a try. Upon joining, I was greeted with this explanation of the site: "Ello's minimal design puts emphasis on high-quality content, and makes it easy to connect with the people you really care about. Ello does not allow paid ads, and will never sell user data to third parties." So far, this ad-free promise is working. As Business Insider reports, at the end of September, Ello had 38,000 sign ups, which is pretty good for an invitation-only beta site.

If enough people switch to this social network that promises a privacy-centered, ad-free campaign, could Facebook and other social sites that do employ ads find themselves losing business? Not likely. Facebook, Google+, and Twitter are still the biggest social media platforms. But Ello's surge in popularity should be enough for marketers to revisit their advertising tactics.

When I asked a few friends what kinds of ads get their attention on Facebook, they specifically mentioned that straightforward promotions showing up in their newsfeed do nothing to catch their attention, but seeing a post that shows a good friend has liked a brand does pique their curiosity. They instantly want to know why this friend likes this brand, and feel more inclined to check out the company or product if someone they know is promoting it. It's the same as someone recommending a good restaurant to you at a dinner party. It's the online equivalent of word of mouth.

While Ello might be gaining momentum, I don't see it overshadowing the big platforms like Twitter, Facbeook, and Google+.  It's a numbers game. Ello needs money to scale, but without the prospect of serious advertising income (or an investor who doesn't mind the limited revenue options), that won't be possible. Meanwhile, advertisers go where the audience is, and if a network wants to grow it needs revenue. Case in point: Snapchat, which is valued at approximately $10 billion, has recently started allowing ads on its network. Why? The company's founder said it was simple: Snapchat needs money.