October 26, 2015

Valuing the intangible

Back in 2001, I remember being fascinated by the news of how the Australian government made over $1 billion out of thin air (literally) – by auctioning the rights to the 3G mobile frequency spectrum to local telcos.

Here was an astronomical amount of money being handed over for something you can’t see, touch or feel, nor something that the government had earned or created. Here was an intangible resource that was always present under our noses – just waiting for the right time to be made tangible and ascribed value.

In 2007, when I started deep diving into Adwords, I realised the same thing had happened again. This time Google figured out a way to auction the rights to something that we take for granted every day – our words.

Then in 2012 history repeated when Facebook started taking quantum leaps in its ad platform, unsurprisingly around the time it went public. Facebook had figured out how to auction the rights… to our relationships.

The auction model underlying the Facebook ad platform now places a realtime dollar value on the strength of relationship between a brand and its audience. The stronger the relationship (ie. likers, website visitors, email list subscribers etc) the cheaper it is to engage, the weaker the relationship (eg. unaware but in target demographic) the more expensive it is.

Relationships is Money. Click To Tweet

Because of the realtime dollar value now placed on relationship, brands who will thrive over the long haul will be those who are able to continuously grow in relationship with their tribe.

It will simply be too cost prohibitive for anyone else to compete against such brands for any significant length of time otherwise.

The safest place to aim for in such a climate is to deliver the Best for the Least for the Most.

ps. In our Connection Economy, Facebook’s move will not be isolated to Facebook – Facebook itself owns Instagram and so the same auction model applies to both these platform giants. Even Google, in unfamiliar second place, recently announced Customer Match – a blatant but not unexpected copycat of Facebook’s Custom Audience targeting. Email platforms will likely also copycat these smarts to penalise spammers and reward brands with strong relationships.

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About Adam Sugihto

Founder of Intentional - a specialist Pay Per Click Advertising Agency based in Melbourne, Australia. Member of Perry Marshall's Marketing Mastermind since 2011. Google Adwords Qualified Individual since 2010.

Category

Connection Economics