Is Facebook Building the 21st Century Procter & Gamble?

Back in 2008, I had the chance to lead P&G’s Joint Business Planning with Facebook (as well as the other big digital media players).  The intent of the Joint Business Plan wasn’t about just increasing advertising dollars.  It was about knowledge sharing between the two companies with the goal of having a strategic relationship where we both became better businesses as a result.  This cultural exchange was about P&G accelerating our digital knowledge, while Facebook learned how brand marketers thought. Following the announcement last night of their purchase of WhatsApp, it looks like Facebook didn’t just learn how to think like P&G but maybe how to become P&G as well.

What I mean is that Facebook appears to be using the Procter & Gamble playbook for building a “house of brands.”  This playbook is about building a portfolio of businesses that often will compete against each other but ultimately giving your company a larger market share.  For instance, P&G’s global laundry market share is around 31%. This includes brands like Tide, Gain and Ariel, each of which contributes above $1 billion in annual sales.  But they also have brands like Bounce, Downy, Era and others that all compete in the same space.  The same goes for Baby Care with both Pampers and Luvs, as well as Hair Care with Pantene, Head & Shoulders, Aussie, and Herbal Essences.

Facebook has a history of being active in the acquisition space, with WhatsApp being their 45th purchase.  But historically, all of their purchases were either acqui-hires for the talent or a foundation for a future Facebook feature.  For instance, Hot Potato became the basis for Facebook Places and Karma became Facebook Gifts.

But this might be changing.  The first indication was the purchase of Instagram in April 2012.  At the time, Instagram CEO Kevin Systrom wrote bluntly in a blog post that, “Instagram is not going away.”  As we near the two year anniversary of that deal, those words have held true and Instagram is an even stronger brand today than it was back then.  With the WhatsApp purchase, the key message track for Zuckerberg and company is that “WhatsApp is on a path to connect 1 billion people.”  The talk isn’t around how WhatsApp will fix Facebook Messenger but instead its all about the potential of the WhatsApp brand and service.

If you look at P&G’s Purpose, they say that they “will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come.”    Facebook on the other hand talks about their purpose being “to give people the power to share and make the world more open and connected”   With the addition of WhatsApp and Instragram, you could argue that these purposes are becoming more and more similar.  Facebook now has three “branded products and services of superior quality and value that improve the lives of the world’s consumers” to “share and make the world more open and connected.”

People were shocked at the price of Facebook’s purchase of Instragram in 2012.  And there is even greater disbelief as the WhatsApp acquisition goes down as one of the largest M&A deals in history.  But in many ways, both of these deals are similar to the moves P&G made to buy Gillette for $57 billion and Clairol for $5 billion.   With Gillette, P&G gained one of the strongest male grooming brands in the world, while Clairol was a foundation for the scale of P&G Beauty.   For Facebook, WhatsApp has the same role in Messaging, while Instagram offers it for Photos.

In the end, Facebook is following the same strategy of building a House of Brands that has built the great CPG companies like P&G, Unilever, and Nestle.  I’d say they clearly learned something about building brands during all those Joint Business Plan meetings years ago.

The Rise of Brand Tech

When the industry talks about startups and technology in the advertising industry, it often receives the shorthand description of “AdTech”.  It is a term that I have always struggled with from the perspective of a Brand Marketer.  Most brand marketers aren’t hands on when it comes to their media buys.  Instead they rely on the expertise of their internal media staff and external media agencies to understand the differences in Automated Performance, Real-Time Bidding, DSP’s, Agency Trading Desks, and all the other odd sounding language of AdTech.  They know their budget allocation of their media dollars, but not the details of the buys themselves.

On the other hand, we have seen an increasing number of startups that are calling directly on marketers themselves.  The rise makes complete sense when you consider Gartner’s prediction that by 2017 the CMO will Spend More on IT Than the CIO.  Or that by 2015, 25% of enterprises will have a Chief Digital Officer.  Salesforce for one is capitalzing on this shift as they have spent $3.5 billion to get into the CMO Suite through the acquisitions of Exact Target, Buddy Media, Radian6 & Social.com.

While Salesforce talks of the Marketing Cloud, I lean towards calling this new area of startups “Brand Tech.”  Brand Tech is the concept of technology startups that live in the worlds of the CMO and Brand Marketers.  Its not about the traditional working dollars of media or CPM’s necessarily, but new channels for marketers to reach consumers.   Brand Tech defines companies in Content Marketing, Loyalty, Social Sharing, Gamification, and other emerging channels. These themes are at the heart of many of the companies that graduate from The Brandery in this space including Donde, Ahalogy, and CrowdHall.

Speaking of The Brandery, the rise of Brand Tech could lead to another shift in the startup space when it comes to geography.  In particular, it could lead to a shift in the cities where business is done between startups and brand marketers.   I was talking with a Brand Tech startup founder who previously spent his days in the AdTech world.   Based in New York, he told the story of how his AdTech startup led him to spend every day calling on the likes of media companies such as Mediavest, Carat, and GroupM throughout NYC.  But since moving to the world of Brand Tech, it meant being on a plan and heading to Cincinnati, Minneapolis, Detroit, and Chicago to visit the headquarters of the largest brand marketers instead.   As he thinks about building out his business development team, this means he is going to be looking at those cities for expansion, instead of just building a sales team on the East Coast.

The rise of Brand Tech is going to have a fundamental change on the both the startup world and the marketing industry.  For startups, it means finding the right investors that understand this space and the right geography to capitalize on the business.  And for marketers, it is going to mean becoming increasingly focused on external innovation and new channels instead of just the allocation of their media budget.  For both, its going to be exciting change ripe with opportunities.

 

 

The Modern Marketer [Infographic]

Through my posts on Brand Manager 2.0, I have written quite a bit about how technology is changing the job of a marketer today.  Of course, that means I was quite a fan of this infographic from Pardot which talks about a Modern Marketer being part artists and part scientist.  In their words, a modern marketer must master:

  • Written Content
  • Visual Assets
  • Social Media
  • Email Marketing
  • Performance Tracking
  • Budgeting and Operations
  • Analytics
  • Campaign Performance

Courtesy of Pardot, an Exact Target Company

Branding a Lifestyle of Engagement [video]

Chris Erb, VP of Brand Marketing at EA SPORTS, took to the stage at TEDxCincy in May 2012 to tell the story of how brands like EA SPORTS, Taco Bell and Fiat are changing their approach to marketing.  In the talk, he covers how brands need to look at Collaboration, Lifestyle, and Engagement as new planks in their marketing plan.  The talk is definitely a must watch.

TEDxCincy – Chris Erb

Big news from VCU Brandcenter

Looking forward to next year’s Board Meeting and the introduction of Brandcenter’s new director.

 

Rick Boyko leaves behind big shoes for Helayne to fill.