From Free to Freemium

November 5, 2012 by Eric and Chris

You may or may not participate in social networking, but you've almost certainly heard of Facebook. (Right?) The social media giant currently has more than 950 million active users according to Facebook has more members on their platform than the continent of Europe has inhabitants! Its users are responsible for sharing over 1 billion posts on the website on any given day.

Not only is Facebook changing our interpersonal lives, it is also beginning to affect how business interacts with the market. A recent survey conducted by InSites Consulting found that an estimated 80% of American companies promote their business via Facebook. The numbers of people and business participating in this market are unprecedented in the history of marketing and advertising.

The idea of advertising and promoting your business on Facebook is still fairly new, and up until recently, it was completely free; however, that is no longer the case. The social media giant has thrown a curveball that may forever change your digital marketing strategy.

Facebook has dedicated thousands of man hours perfecting an algorithm they call "EdgeRank". The computer program automatically measures user activity in an effort to select and display content that is most relevant to you. This complex algorithm has been re-purposed into an advertising incentive for businesses. In effort to increase profitability, Facebook announced users will now be able to promote their personal or business posts to subscribers for a fee of $7 per post. We'll try to refrain from the "buying your friends" jokes for now and focus on how this impacts the business world.

First off, this platform adjustment is going to change user experience for both businesses and individuals. This new idea of optional paid post promotion is still a fairly new strategy that is being adopted by several social networks and online websites. The concept is being called "Freemium", a combination of "free" and "premium". Facebook's platform still offers a free service, but there is now strong incentive to one-up your competition and pay for "Promoted Posts" to reach a significantly larger audience. The difference between "Freemium" and Google AdWords and pay-per-click is Google does not offer a "free" option.

In a selection of the 100 top brand pages on Facebook (based on fan bases and high levels of organic reach), those pages using paid media reached 5.4 times more people on average than those who did not use paid media. In a case study of three major brands: Samsung Mobile, a major financial services company, and a major retailer, using paid media extended their reach by five times over their organic audience within a single week (see Facebook Studio's Understanding Paid and Earned Reach on Facebook). These numbers definitely get your attention.

"Freemium" is the ultimate fork in the road for online advertisers. The social media platform is no longer a level playing field in terms of marketing. With close to 1 billion users and little to no competition in sight, Facebook has the power to make the rules. Unfortunately, the company is no longer just about community and connecting people, but more focused on controlling the flow of information and selling it to the highest bidder. However, they are giving businesses an opportunity to flourish through exposure. It's still too early to tell, but this could very well be the initial step in social networks becoming the dominating media companies of the future.

For those who choose against paying for social media exposure: you're not out of luck, but a bit of extra effort may be required. Facebook's free business services are still definitely worth the squeeze. There is one rule that remains unchanged - quality content is the most important factor in your online success. Fan and follower interaction is crucial. There is strong incentive for Facebook and other social media websites to continue to show users content of interest to them, even if they have to do it for free. Businesses need to encourage page activity and engage their audience by providing quality and useful content at a consistent but never overwhelming frequency. It's all about finding a good pace. Informing your audience about the recent changes that have taken place is certainly a good idea as well. Encourage them to subscribe or add your business to an Interest Group in order to see more of your posts. After all, the majority of social networking users are in favor of keeping websites like this under the free category.

Only time will tell how effective this new digital marketing platform actually is. Something to keep in mind is that certain businesses will inevitably see a greater ROI (return on investment) than others. This particular marketing approach isn't for everyone. Experimentation is the only way to get results if you have interest in promoting your business through Facebook. Let us know if we can help with your social media experiments.

Posted in Help Me Understand, Promotions and SEO

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