Some thoughts on the future of the Conversation Economy

It has been three and half years since David Armano brought the conversational economy into the mainstream marketing vernacular with his Business Week piece entitled It’s the Conversation Economy, Stupid.

As consumer markets fragment, marketers and designers must understand how platforms evolve and influence human behavior – David Armano

In the article David spent a lot of time talking about the social platforms that facilitate conversations (i.e. Facebook, Twitter and YouTube). The assumption being if marketeers can get in on the conversation then this would lead to relationships. Therefore the future of branding was going to be about conversation architecture.

So the question has to be asked was David right? Are the world’s leading ad agencies evolving into a new breed of conversation architects? and if so are they succeeding?

At that time I identified two fundamental flaws in David’s theoretical framework for the conversation economy.

The first was the conversational economy had been in  existence for a long time and it wasn’t based on social media, it was based on the humble telephone.

This was evidenced by the simple fact the total number of telephones and mobile phones in use around the world at that time was significantly larger than the social media traffic numbers being quoted by comScore. Three and half years on this still  remains the case today with the world’s mobile phone subscribers outnumbering Facebook’s traffic by a factor of 8:1.

It was also evidenced by the CTP rates for Telemarketing being at least 55 times more effective than the banner advertising appearing on web sites (See Is advertising online really your best option?) and the fact Direct Marketing Revenues (Including Telemarketing) grew twice as fast as web advertising over the period 1997-2007. (See If you think the internet is responsible for the decline in newspapers you are wrong).

There was the undisputed metric that the Mobile ARPU for the telcos was 600 times higher than the ARPU achieved by the social networks (See Who profits from the 6 degrees of separation?).

Finally there was the simple fact that telcos had always had access to social media’s core asset – the social graph of people and their connections – but had never been able to find new ways of monetizing it. (See FaceBook or PhoneBook?)

The simple fact was the direct marketing industry and the telcos had been profiting from the conversation economy for decades and it was hard to see how social media was going to significantly disrupt these two services and become the dominant conversational platform – at least in terms of revenue generation.

The other problem I had with David’s theoretical framework was the idea that advertisers had to be in on the conversation or better still actively managing the conversation.

At that time this idea represented a fundamental shift in what advertising was all about. After all the first lesson you learn in the Advertising Game is you need to be the topic of conversation. You need to get people talking about you . If your TV commercial or Magazine Ad doesn’t have people talking about you then you know you’ve wasted your money.

Measuring success in the social media genre is no different. Is is all about what people are saying about you. Not what you are saying about yourself. That’s why the most successful bloggers don’t waste their time talking about themselves they “spread the love” by talking about everybody else. By being encouraged to manage the conversation Brands were essentially being told it was now OK to interrupt the conversation so they could “talk about themselves”… Boring! Especially at a time when most of the conversation online was about how the big brands don’t listen.

This I concluded at the time would be the social media advertising paradox facing the world’s global brands. If they entered the conversation just talk about themselves then nobody would bother listening and if they decided to “spread the love” by talking about everybody else where would the ROI be found in spending money on building somebody else’s brand?

For me Apple was one of the few Brands to get it right. Don’t blog. Don’t Facebook, Don’t Twitter. Let your customers do the talking… and they did. That’s why Apple has achieved the same level of ROI on its advertising investment as it has on its R&D investment. It has outsourced the problem to its customers. Simultaneously increasing its global reach while reducing its customer acquisition costs.

If people aren’t talking about you then the message just isn’t cutting through. Just ask any of Apple’s competitors and they’ll tell you what the real problem is. They have no oxygen in a market dominated by the iConversation.

The launch of the iPhone and now the iPad have been perfect examples of how execute a successful social media marketing strategy. The question is did Apple embark on a strategy to get in on the conversation and manage it or did they simply just get everybody excited enough to want to spend their days talking about them? You decide.

This though is the fundamental flaw in the logic behind the conversational marketing movement. Brands are something you aspire to own and show off. Brands as friends? How Faux is that?

When I first encountered the idea of the conversational economy I felt sure this emerging generation of brand managers would quickly discover that they weren’t in the business of managing the conversation at all. Indeed they would soon discover they were not even be in the business of being in on the conversation. They would however eventually discover they were in the business of reputation management. Spending their days trying to appease the online herd by trying to please all of the people all of the time.

Every man, and by extension every brand, is three. The Brand you think you are, the Brand the world thinks you are and the Brand you really are. You can’t afford to manage all three the cost is far to prohibitive so you need to choose which one you are going to invest in. Logic suggests that unless you have an endless bucket of money to call upon it is a lot easier and cheaper to put up the flag and shout “Here I am take a look at me… I have some thing special to offer you” than to try to please all of the people all of the time.

I could however see the long term economic value in pursuing the conversational strategy in an industry struggling to come to terms with a brave new world dominated by performance metrics.  Clearly, managing the conversational economy would mean the future of advertising was more like management consulting and accounting than traditional advertising. After all, it is a lot easier and less risky to get paid for monitoring and measuring a brand’s performance than what is to get paid for building a brand. With the advent of conversational marketing creativity and advertising in general would become risk averse as the new brand managers inevitably focus on meeting the requirements of the lowest common denominator. Thanks to the conversation economy the future of advertising would be less about “take a look at me: I’m special” and more about “please don’t say nasty things about me”. Sadly if this happened then advertising will become a career for wimps. You would get more excitement in your life by becoming a banker or an accountant…

If I apply my theory that Today’s media? It’s all about Find Me, Find You and Let’s Exchange then the growth in social media would not be about the growth in conversational media but simply the next evolution in the “Find me” platform as social media sites like Facebook supplant the DIY Web Site as the place to “Find Me” and the Fan Page or Blog Page becomes the new home page on the web. In the next stage the rest of the world would catch up with Japan and social media would inevitably go mobile.

Here the growth in advertising spend on social media would be a reflection of the platform’s ability to attract eyeballs and remain sticky rather than any fundamental revolution in the way in which brands communicate with potential customers.

Alternatively, if David is right and we pursue this idea of the conversational economy to its logical conclusion, then the future of media would be in nanocasting – simply because in the future it would be easier for the audience to create media than consume it – and advertisers would then be investing  in the most expensive medium in advertising history.

It is now three and half years on and the latest stats indicate that Facebook consumes an estimated 700 Billion Minutes of global activity per month – today Americans spend 22.7% of their time online interacting with social media – 86% of brands now have a Facebook page and social media advertising constituted about 0.75% of the  total advertising spend in the US in 2009. In simple dollar terms an estimated $2.53 Billion was spent on Social Media advertising globally in 2009.

The world’s leading Brands are on Facebook for the same reason they are on TV. Because that’s where people are looking at the moment. Brands have always chased eyeballs and ears. It really is that simple.

The fact that a lot of people are watching TV while being connected online reflects the inevitable fragmentation in media consumption that has been a feature of the impact of the new media technologies past 20 years. It also represents the real “conversational” opportunity available to advertisers wanting to join the conversation online. The message today is forget managing the conversation online and expend your creative energies on the cross pollination of ideas and messages across multiple media channels. Fragmentation is both the message and the opportunity embedded here the emergence of the conversation economy.

Further Reading:

• AdBook, AdSpace and AdLinked
• Understanding How and Why Facebook Users Interact with Brands [A study of 1,500 Facebook users]- Mashable

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