How Facebook Has Impacted the World of Advertising - Coursework Example

How Facebook Has Impacted the World of Advertising Research Background In todays’ rapid paced world, advertisers must be able to involve the s and maintain their interest for long run in order to gain success in the market. The advertisement segment is changing at a lightning pace since new platforms and media are constantly developing. One such development is social networking. Popular social networking site Facebook is attempting to change the traditional way in which organizations advertise their products and services to the potential customers. Several large organizations have already dedicated their involvement to use Facebook as one of the legitimate advertising platforms. Concerning this aspect, the report is based on preparing a proposal in the area of social networking, i.e. Facebook. The objective of the report is to understand through various literature surveys regarding the way in which Facebook has impacted the world of advertising. Furthermore, the report also provides methodological framework for evaluating the topic. Literature Review According to Kaushik (2012), primarily social media might have started for social involvement of people, but the commercial worth of this media has soon become clear and therefore it has emerged as one of the key choices for advertisers. As the use of social media has become popular and the number of social media users has increased, advertisers are required to seriously change their marketing plans in order to accept this shift in the media landscape. The advertising industry is rephrasing its conventional strategies and altering the basic advertisement campaigning structure. The Advertisement Industry Over multiple decades, globalization, deregulation and most importantly the technological improvement have redesigned the advertisement segment. Similar to other industrial segments, the advertisement segment of the US has also been impacted by recent recession. Advertisement spending by major organizations had reduced in between 2007 to 2008. However, gradual improvements had been observed in the year 2010. The research of New Politics Institute (2005) states that widespread audience movement across and within media is driving considerable shift in advertisement spending. Profitmaking advertisers are quickly changing a portion of spending from traditional to internet advertising medium and aggressively experimenting new media such as social media advertisement. Apart from various traditional medium of advertising such as broadcasting, television and radio, new advertising platforms such as internet video and video-on-demand advertisement are gaining considerable attention. Audiences especially the teenagers have continued to shift their preference from traditional print media to more online media. Major shift is occurring from offline advertisement to online advertisement. Increased internet penetration rate is driving organizations to establish more robust online advertisement. However, the advertisement market remains fragmented as a considerable portion of advertisement is still consumed by television broadcasting media (New Politics Institute, 2005). The research of MEF (2005) stated that on an average in the United States, young individuals spend about 3 to 4 hours on television and an average American child views about 40000 television advertisements in a year. Four hours of television comprise about 100 advertisements and 30% of local television programs are allocated to advertisement. It was projected that in 2004, the total expenditure of advertisement in the US would be about US$248 billion, out of which 9.9% would be spent on internet advertising, signifying that internet advertising is still not utilized at its full extent (MEF, 2005). In accordance with the study of Lightcap and Peek (2012), the advent of World Wide Web in the period of 1990s brought significant technological variations and influenced the communication realm along with the world of advertisement. The explosion of digital technology, comprising recent proliferation in social networking has possibly interrupted the advertisement segment in comparison with any other platform during the last century. The report of IAB (2012) states that irrespective of crippling recent economic recession, internet advertising has been the quickest growing advertising platform, with approximately US$26 billion spent in the year 2010. Furthermore, internet advertising has also surpassed the popular print advertising in terms of revenue. Remarkably, the internet has grown nearly twice as fast as broadcasting television when evaluated on the basis of advertisement. Overview of Facebook Basically, Facebook provides users with a platform to establish personal profile and develop relationship. Facebook was initiated in the year 2004, and since its foundation, the website is ranked as the top social networking media in the present day context. According to Roberts (2010), in the year 2009, there were above 300 million active users in Facebook. For many individuals, using Facebook has become a central portion of their regular life. According to Chu (2011), in the year 2011, Facebook had above 750 million active users, spending more than 700 billion minutes in a month. The study of eMarketer on the students of American college stated that about 60% of female and 44% of male students obtain product information from social networking sites. Since its establishment, Facebook has continued to add features and is developing itself on a continuous basis. Since there is no expense to create a profile in Facebook, it is required to generate revenue from different sources and one such source is advertisement. Facebook features can be used by different organizations in order to reach the target customers. Facebook enables young population to learn regarding a product or brand and it represents a revolutionary trend for advertisers to persuade or influence information to others. Gangadharbatla (2008) states that Facebook is changing the way advertisers can reach customers and these changes are altering the world of advertising altogether. There are several methods through which advertisers can use Facebook where diverse features permit creativity and experimentation while positing advertisement contents. Advertisers also have the option to develop free fan pages where organizations and individuals can invite users in order to become a fan of a specific product, brand or group. Statistics have depicted that in 2009, there was about 10 million users who became fans on a regular basis. According to Bajpai, Pandey & Shriwas (2012), Facebook permits individuals to communicate and to establish personal relationships. When organizations join Facebook, people can easily interact with organizational products. Such interactions are deemed to be subjective to the users. Facebook features provide the opportunity to make comments on any advertisement post. Furthermore, by reposting the advertisement, more and more users are able to observe the advertisement message. For advertisers, Facebook performs as ‘word-of-mouth’ as information regarding the product is being put in the Facebook wall and repeatedly being posted by different users. As a result, it helps to attract more traffic towards the product and the organization. Facebook allows organizations to provide videos, pictures and in-depth descriptions of products. It provides real-time promotion of products and brings increased number of customers. Social media such as Facebook permits target customers to send messages by transmitting advertisements to friends, linking them with marketers openly, commenting on advertisement and having those comments shared through viral channels. A report of Neff (2010) indicated that advertisement recall, brand awareness and purchase intention increase when more users become fan of a particular brand. In the similar context, positive advertisement reactions indicate the strength of Facebook as a platform of advertisement. When a group of users forward an advertisement message to different friends, they become supporters of the brand’s advertisement and thus, enhance the likelihood of the friends to pass and share the messages. Impact of Social Networking on Advertising Environment Social networking is a key force in the internet and represents greatest opportunities and challenges to advertisers. In the commercial system, social networking has provided organizations with advertising inventory and target audience segment which are required to capture more market share. In comparison with the other forms of advertising, Facebook provides different experiences to advertisers. Traditionally, advertisers had been capable of purchasing time and space in a static media in an organized environment. Advertisers knew where their advertisements would appear, and most importantly in what environment it would be observed. In other words, in traditional advertisement, advertisers can guarantee that the advertisement message was not being delivered in an argumentative or unsuitable environment. However, in present day’s social media environment, such assurance cannot be given and that there is a lack of control on advertisement. On one hand, such aspect of social media represents considerable anxiety for advertisers, but on the other hand, it also signifies an unrivalled opportunities for advertisers. Advertising in social media necessitates advertisers to change their approach. Instead of broadcasting one way message to the audience, social media allows advertisers to involve in conversation (IAB, 2008). Advertisement in social media provides an exclusive and complex degree of customer involvement. Instead of inviting customers into an environment of their own creation, advertisers advertising on social media website enter into conversation instigated environment by consumers themselves. This necessitates advertisers to behave differently than they used to in other forms of advertisement. Advertising in social media environment necessitates radically different mind-set than traditional advertisement. Since social network environment cannot be controlled by advertisers, they must become a part of it. Social media environment is instable in nature and it acts as an unrestricted exchange of feelings and viewpoints where advertisers are expected to become another participating voice. Advertisers in social media are required to surrender certain level of control over their brands to the users. The research of Assaad & Gómez (2011) revealed changes in relationship between organizations and customers in recent years. The customers have gained increased control through communication regarding the organization and its products. The essence of any business is the customers and social media provides the prospect to establish closer and cost-effective relationship with customers. Consequently, organizations are accepting this change in advertising environment due to introduction of social media. In reality, organizations can gain advantages by using social network for advertising. Social network can facilitate to gain better understanding for the customers’ requirements and aid to establish better relationship with the customers. For the organizations that desire to accomplish outstanding commercial benefits, they are require to plan their advertising activities in social networks, because this field is effective for following the clients, understanding their requirements and measuring their activities. Trends of Facebook Advertising Social media such as Facebook is quickly changing the activities of organizations with respect to advertising. Advertisers are becoming quite comfortable with the platform provided by Facebook. For advertisers, Facebook’s meteoric increase and massive users represent an excellent opportunity to establish brand awareness and to increase the possibility of earning more revenue. In any successful advertisement, organizations should reach customers in such a medium where they spend considerable amount of time. Since an increased number of individuals spend time on Facebook thus using this medium helps to reach the target customer segment. By utilizing advanced approaches, advertisers can not only reach proper customers with right information, but can also establish a long-lasting relationship with the loyal ones. A recent report by Kelsey suggests that social advertising market in the year 2012 was about US$4.7 billion which can reach to about US$11 billion by 2017. The report also indicates that social advertising market is undeveloped and increasing and it represents only 1% to 10% of most advertisers’ budgets. The increasing mobile usage trend comprising social media use in mobile has enhanced the domain of social media advertisement. In the US, about 50% of mobile users use Facebook in their mobile and about 30% of Facebook’s advertisement revenue arrives from mobile (salesforce.com, Inc, 2013). The research of CMO (2014) depicts that Facebook continues to dominate the social realm with increased number of audience and loyal fans. In the first quarter of 2014, Facebook’s ‘Click-through Rates’ (CTR) increased by 160% on a year-over-year basis. Furthermore, Facebook’s advertisement impression has also increased by 40% on a year-over-year basis in first quarter of 2014. In Facebook, comments and shares are becoming a higher fraction of social involvement by most users which demonstrates that organizations are becoming better at involving fans through providing advertisement. The comment share post in Facebook by different organizations has increased by16% on a year-over-year basis in 2014. From the report of CMO (2014), it has also been observed that among other social networking websites such as Twitter and Blogger, Facebook generates about 75% of traffic towards retail sales (CMO, 2014). In accordance with the report of Marin Software Inc (2014), Facebook has established itself as the biggest and most highly involved viewers in the world. The report states that regular active users of Facebook had increased by 25% on a year-over-year basis to 728 million in the third quarter of 2013. Among different features, advertisers have embraced ‘newsfeed’ as a medium for native advertisement. The news-feed advertisement had increased by 140% on quarter-over-quarter basis in the third quarter of 2013. In comparison with the traditional right-hand side advertisement post, newsfeed advertisement is designed to merge users’ natural and social experiences on Facebook. The proportion of users who access Facebook through mobile devices had also increased by 19% in third quarter of 2013. Given the increase in mobile users, advertisers have also augmented their concentration on mobile advertisement market. According to the report of Venture Beat, Facebook mobile application market is expected to increase by about 257% from 2013 to 2017. Among different mobile applications of Facebook, the mobile advertising solution is one of the most popular applications among people. Mobile application advertisements have rapidly become one of the most efficient methods for advertisers to increase the brand awareness and customer base. The Marin Software Inc’s statistics states that mobile based news-feed advertisement has surpassed desktop advertisement by considerable margin. Facebook has always permitted advertisers to share the message to target users group on the basis of extensive variety of attributes (Marin Software Inc, 2014). The report of Resolution Media states that in the year 2013, advertisers have invested about 127% more in Facebook in comparison with Twitter. Facebook has gained considerable success in driving direct reaction outcome which drove growth in advertisement. New advertisement formats and increased targeting abilities also drove progress in Facebook advertisement. In present days, advertisers not only have raised the amount of investments in order to develop advertisement campaigns, but have also exploited various opportunities. Facebook advertisement opportunities have outpaced other social networking websites (Resolution Media, 2014). Research Proposition Over the next few decades, it is expected that increased migration from tradition media to online will occur in the world of advertisement and Facebook will determine considerable a portion of change in such migration. However, it is also worth mentioning that advertisers have not completely embraced this new medium in order to reach the possible customers. Although Facebook advertisement has great opportunities, it would be meaningless unless they are able to get the users’ attraction. Furthermore, there are considerable risks of advertisement through popular social networking sites (Todi, 2008). Thus, how and to which extent this new media, i.e. Facebook has impacted the world of advertising is still unclear. Based on this aspect, the key research proposition is to understand the level to which Facebook has influenced advertisement activities of different organizations and to which extent advertisers consider Facebook as worth spending for the purpose of advertising than traditional broadcasting media. Research Methodology In order to evaluate the extent to which Facebook has impacted advertisement domain, a sample of 50 organizations will be selected that use both traditional as well as Facebook media for the purpose of advertisement. Questionnaire will be sent to those samples in order to understand the advertisement pattern in both types of media. From the questionnaire, their spending patterns on advertisement in different media will be evaluated which would provide a clear picture about the extent to which Facebook has influenced the advertisement activities in the modern organizations. Information would also be collected from literature surveys regarding the influence of social media particularly Facebook on the advertisement activities. It would be a qualitative research which will intend to recognize the impact of Facebook in the advertisement domain and how advertisers are using this media in order to spread the required messages to the target audiences. References Assaad, W., & Gómez, J. M. (2011). Social network in marketing (social media marketing) opportunities and risks. International Journal of Managing Public Sector Information and Communication Technologies, 2(1), 13-22. Bajpai, V., Pandey, S., & Shriwas, S. (2012). Social media marketing: strategies & its impact. International Journal of Social Science & Interdisciplinary Research, 1(7), 214-223. CMO. (2014). Social intelligence report. Retrieved from http://www.cmo.com/content/dam/CMO_Other/ADI/SocialIntelligence_Q12014/Q1_2014_social_intelligence_report.pdf Chu, S. C. (2011). Viral advertising in social media: participation in Facebook groups and responses among college-aged users. Journal of Interactive Advertising, 12(1), 30-43. Gangadharbatla, H. (2008). Facebook me: collective self-esteem, need to belong, and internet self-efficacy as predictors of the igenerations attitudes toward social networking sites. Journal of Interactive Advertising, 8(2), 5-15. Print. IAB. (2008). User generated content, social media, and advertising — an overview. Retrieved from http://www.iab.net/media/file/2008_ugc_platform.pdf IAB. (2012). IAB internet advertising revenue report. Retrieved from http://www.iab.net/media/file/IAB_Internet_Advertising_Revenue_Report_FY_2011.pdf Kaushik, R. (2012). Impact of social media on marketing. International Journal of Computational Engineering & Management, 23(2), 91-95. Lightcap, C. R., & Peek, W. A. (2012). The effects of digital media on advertising markets. Duke University, 2-59. Marin Software Inc. (2014). The definitive Facebook advertising playbook: the 4 key trends and 12 strategies you need to know for 2014. Retrieved from http://downloads.digitalmarketingdepot.com/rs/thirddoormedia/images/MAR_1401_Def2014Fbk.pdf?mkt_tok=3RkMMJWWfF9wsRoluq3BZKXonjHpfsX77O8qXKC0lMI%2F0ER3fOvrPUfGjI4ESsRjI%2BSLDwEYGJlv6SgFTbLCMbpx37gNXxU%3D MEF. (2005). Advertising: exposure & industry statistics. Retrieved from http://www.mediaed.org/Handouts/AdvertisingExposure.pdf Neff, J. (2010). Nielsen: Facebooks ads work pretty well. Retrieved from http://adage.com/article/digital/nielsen-facebook-s-ads-work-pretty/143381/ New Politics Institute. (2005). Fundamental shifts in the U.S. media and advertising industries. Retrieved from http://www.normalcommunications.com/docs/ShiftsinMediaandAdvertising.pdf Roberts, K. K. (2010). Privacy and perceptions: how Facebook advertising affects its users. The Elon Journal of Undergraduate Research in Communications, 24-34. Resolution Media. (2014). Social trends report 1st edition. Retrieved from http://resolutionmedia.com/us/wp-content/uploads/sites/2/2014/04/Resolution_SocialTrendsReport_Q12014.pdf salesforce.com, Inc. (2013). The Facebook ads benchmark report. Retrieved from http://www.salesforcemarketingcloud.com/wp-content/uploads/2013/06/The-Facebook-Ads-Benchmark-Report.pdf?b9be0c Todi, M. (2008). Advertising on social networking websites. Wharton Research Scholars Journal, 1-28. Read More