As several hundred magazine executives gathered at MPA’s 2011 American Magazine Conference in New York to hear speakers dissect social media, tablets and e-commerce, Scott Galloway, New York University Professor of marketing and founder of L2 Digital Think Tank—authors of the Digital IQ Index—struck a nerve with his frank dressing down of publishers’ social media strategies.
“About 19 percent of our budgets are now going to digital,” he said to the audience. “But 40 percent of media consumption for those under 40 is digital based.”
Galloway took a stark tone with the crowd and at times took on a scolding demeanor when asserting that the magazine industry is doing itself a disservice by not aggressively tapping into the benefits of the digital space and in particular Facebook.
“The reason you’re having trouble making money is because you’re not relevant—profits are an indicator of relevance,” he said, adding, “Not a brand in here is managing capital allocation correctly in relation to Facebook.”
The professor said that Facebook is the number one medium in every market and that magazine professionals need to view the social media platform as a market place, citing statistics that reveal that 50 percent of people on Facebook make at least $50,000 a year and that 38 percent of all online referral traffic now originates from Facebook.
“The new young affluent—we’re no longer the target market—the new kids on the block want innovation from brands,” he said. “Right now, social media is the least expensive way to do that.”
Galloway turned to fashion company Burberry to make his point. The British based clothing company has over 8.6 million “likes” on Facebook, while the internationally recognized women’s magazine Cosmopolitan has only 1.1 million.
“How did a trench coat company get so far out ahead of you there?” he asked. “It’s somewhat ironic that brands are ahead of media companies. Burberry has spent millions of dollars on Facebook before it was cool and by our estimates 13 to 15 million people over the next few years will raise their hands and say I want a direct relationship with your brand. Once they get there, somewhere between one third and two thirds of people that subscribe to Vogue will already have a relationship with Burberry. Will they spend more,less or the same to advertise? The response around Facebook is fairly uninspired in this industry.”
Galloway added that the number one source of upstream traffic to Burberry is its Facebook page, meaning they can reduce their spending on Google Ad Words because they have a lower source of cost of traffic from Facebook.
“That’s where the money is in Internet media,” he said. “This is a seminal moment, go all in on new technology, it’s going to pay off.”