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Sequoia's Kvamme: Social Media Marketing Can Replace Advertising

Sequoia Capital partner Mark Kvamme, citing examples from campaigns run on Funny or Die and AdMob, told an audience of marketers at OMMA Global in San Francisco today, “If you can harness social media marketing, you don’t have to pay for advertising any more.”

Kvamme, whose experience in advertising dates back to the 1980s, when he led advertising agency CKS Group, justified his argument using Neil Borden’s “Marketing Mix” theory. He said Borden’s elements of promotion — advertising, direct marketing, PR, point of sale and word of mouth — are still valid for marketers today, just in different ways.

The biggest difference can be found in the word of mouth category, said Kvamme, who subsequently called it a tremendous — and cheap — opportunity. “If you take what’s going on on Facebook, on LinkedIn, on Twitter, on Digg, the masses are starting to make their own media, and it’s basically free,” he noted. “So if you can figure out how to work in this world, you can get your message out very quickly.”

Funny or Die’s (one of Kvamme’s Sequoia investments) recent Presidential Reunion, which brought together actors who’d portrayed U.S. presidents throughout the years on “Saturday Night Live” at a cost of $20,000 (primarily flying all the participants in), according to Kvamme, yielded some 3 million views.

[funnyordie id=f5a57185bd width=512 height=328]

Presidential Reunion was a bit of a passion project for Funny or Die co-founder Will Ferrell, but Kvamme also pointed to last summer’s relatively unsuccessful movie “The Goods” starring Jeremy Piven (and produced by Funny or Die co-founder Adam McKay), the expected box office returns for which were lifted 15 percent through a Funny or Die campaign including prizes for retweets on Twitter (which led to the movie becoming a Twitter trending topic), featuring on the front page of Funny or Die and its Facebook fan page, two appearances on the front-page of Digg for custom Funny or Die content, live-tweeting from the premiere and a live conversation with McKay on Ustream. It generated “several million dollars in sales for something [the studio] probably didn’t pay Funny or Die enough for,” said Kvamme.

But the next big opportunity is in mobile, said Kvamme, using AdMob to illustrate (again, another Sequoia company, but at least one that’s had a successful exit, with Google (s GOOG) beating out Apple (s AAPL) to buy it for $750 million). With more than twice the global penetration of the Internet, mobile — especially smartphones — represent an opportunity to harken back to that “Marketing Mix” theory, because they can encapsulate all the elements of promotion from one single screen that’s attached to its owner at all times. An AdMob campaign for the movie “Wolfman” had ads on mobile media sites ad within applications that users could click on in order to get more information, share it with their friends, buy tickets directly and set up a mobile calendar alert.

Sure, Kvamme is pitching his own investments here, but to his credit he said that one of his favorite and most-visited sites is, for keeping up with what people are talking about online. He also talked about Facebook’s opportunity to become the new mass media — with half its 400 million users logging in every day, “that’s almost like what broadcast television was 20 or 30 years ago” — and to dominate and grow the market if it ever does launch its own payment platform inside its trusted environment, just as PayPal revolutionized eBay (s EBAY).

Related content from GigaOM Pro (sub req’d):

Why 2010 Still Won’t Be the Year of Mobile Advertising

29 Responses to “Sequoia's Kvamme: Social Media Marketing Can Replace Advertising”

  1. Social media can be very powerful yes but oinly when used correctly. Look how it can go wrong when large companies get it wrong, or try too hard to be ‘down with the kids’. Also how long will social media last, Bebo is on its last legs, how long till Twitter and Facebook are no longer the power sites they are today?

  2. Social media is one way to advertise and can be a great way to target your audience but a smart business person knows that it’s only one of the many ways that we communicate and businesses that egt taken seriously will be ones people see in many places: in print, on TV, on YouTube, websites, newspapers and articles.

  3. Geoffry

    Here’s my question: Can anyone produce actual numbers as far as conversion are concerned? For instance, someone mentioned that Einstein’s Bagels netted ~250,000 fans from their free bagel promo. That’s great, but how many of those are, or will become, repeat customers? Anyone?

  4. Yuanzhou is considered to be” the famous leisure wear town of China”, however, Huada is the leading company in the town, and our chairman is the president of Yuanzhou Garment Association.

    Huada Garment Company Limited was established in the early 1990s. After hard struggle for more than a decade, Today, Huada becomes a large-scale modern garment enterprise and integrates with garment design, production and sale together. Huada occupies an area of 25,000m2 with staff and workers more than 1,000, including senior talents management, researchers, designers, sales, dressmakers and etc.

    In order to meet the needs of competition in market, Huada introduced into a number of advanced equipment, it’s reached to the international leading level, we established the ISO 9001:2000 Quality System in 2001, and successfully passed relevant international authorization. It is most important that we gained high reputation and had chance to build long-term cooperation relationships with many famous companys.

    Our company has created a number of well known brands such as “Wenki”, “poloboy” and “powweb”. One of the brands “Wenki” wasgranted the prize of “Most Favorite Guangdong Commodities of Canton”. Products from Huada are sold throughout the whole world, and becoming the biggest supplier of ladies’ leisure wear of the Walmart.

    We are not only sticking to the idea of “operate in good faith and develop continuously forever”, based on the spirit of “People-oriented, quality-emphasized, credit-foremost, and customer-respected” for enterprise development, but also continuously improving development and innovating our own brands. “Designing first-class styles, retaining first-class quality, and offering first-class service” is the commitment and pursuit of Huada’s people.

  5. Social media is changing the game, but the same challenges remains in finding/producing content that cuts through the clutter. And there is a lot of clutter out there.

    The Funny or Die Presidential Reunion is one of those pieces that will cut through the clutter, but at what cost? Sure $20k was quoted for production, but if each of the actors were hired by a Fortune 50 company to produce an ad for their product or service, what would the cost have truly been? Seven figures in my experience, assuming all of those names would even consider selling out to do this for a soft drink or auto, etc. And if such a commercial were made and placed on a social channel with hopes of contracting a virus, some serious pay for play (i.e. a traditional advertising tactic) would be required to give it a major kick start.

    The challenge for social media remains the same as traditional media – producing things people want to watch/see/read/share. With social media, the process seems easier than it appears since random, low cost and quality things blow up. You cannot harness or even predict the randomness; however, despite how simple the process may appear. That’s why traditional media won’t ever be replaced. And I say this as an unapologetic Web guy.

  6. Thanks for this post as it made me aware of Mark Kvanne’s provocative keynote last week. I have spent a lot of time thinking about this presentation the past week as well as your thoughtful article. I have my own thoughts on the preso . . . the issue is not about whether social media will replace traditional advertising . . . the issue is how to you integrate social media in your traditional marketing efforts. Inspired by your post as well as my own further research, I wrote my own thoughts about Kvanne’s presentation .. . .

    Thanks again . . . Mary Ann Halford

    • Thanks Mary Ann. Great piece and enjoyed reading your thoughts on the subject. If we look at the upside of all of this one can’t help but be excited about the opportunities and potential. Look forward to keeping up with your posts.

      Hank Wasiak

  7. Mark’s comments taken in the extreme may be overstatement. The issue isn’t whether Social Media will eliminate the need for other media…it won’t. However, it will radically shape the degree to which we employ them and how they interact.

    Further, Mark’s points about Neil Borden’s Marketing Mix theory also rings true to me. Late last year I made a presentation to the 140conference addressing this subject.

    The four pillar P’s of marketing have been with us for decades and are still relevant today. Product. Price. Place. Promotion. And when social media first came along it was natural to put it under Promotion. But now Social Media has created an explosion of ways that consumers can
    opt-in to interact amongst themselves, with brands, businesses, advertising, content and communities simultaneously, selectively on their terms 24/7. As a result, Social Media has morphed into the fifth Pillar “P” of the marketing mix. “People”.

    Today a marketer must have a People Strategy developed in concert with and sometimes even leading its Product,Price, Place and Promotion strategies. This type of systemic change will dramatically effect how we communicate with consumers and allocate marketing dollars.

    I believe Social Media is exactly the “disruptive gift” that Madison Avenue has needed to shake up its business model and shake off the media habits of the past. Time Magazine named “YOU” as its person of the year in 2006.The Media and Advertising businesses are now seeing the challenges and opportunities it foretold. Embrace them.

    Hank Wasiak

  8. The notion that Social Media can replace all of the Paid advertising Vehicles is farfetched thinking. In fact, Social Media, Traditional Media (TV, Radio & Print) Paid Search, Mobile & e-mail Marketing all have their role and serve various Advertising or Marketing Objectives.

    Somewhere in the development of a company’s marketing mix, they are going to have to spend money to be a top brand and dominate a Vertical Market. This simply isn’t coming down to the “free” social media displacing all of the Proven paid forms of Marketing communication.

    Mr. Kvamme, with all due respect, you need to come out of the ether of Social Media. Yes, it’s a game changer, but let’s not jump off the deep end and say it’s a game ender for Traditional Media and other forms of Online Marketing that cost a few bucks!

    Is it possible that this guy Kvamme was hanging around with Will Farrell too long and has simply become a practical joker. Mr. Kvamme, with all due respect,

  9. The hullabaloo about social media & consumer-generated content is overblown. Many have portrayed social-media and consumer-generated content as something anyone can pick up and start kicking butt in tomorrow. Not so.

    Most of the “consumers” winning contests and getting their stuff on the air for big brands are either ad professionals, ad students, or work in some other aspect of creative production.

    If you want good stuff, you gotta find smart and talented people to work on it. Some may be found working in an ad agency, others not.

  10. Uhm what is he smoking? Twitter reaches 7-12 million people per day (number using it). Facebook reaches 60 million per day. BUT the live stream for both only has about a 20% viewer rate due to the sheer volume. You can’t replace Out of Home, TV Commercials etc with Social Media. That is a recipe to destroy your brand. Its a niche to accent your overall marketing strategy.

    ALSO Sequoia loses MILLIONS if social media is a dud when it comes to IPO. All he cares about is pumping then dumping after the IPO. Cash out and let the companies rot. Just like the pump and dump. He is not an objective viewpoint. It is the most important thing right now that he hypes this technology. Ask him to buy my subprime CDO ok?

  11. I agree with all the commenters here who concerned over the false impression that “social is free.” But, maybe we all are misunderstanding what Mark Kvamme is saying (or said). I can’t imagine that a VC would EVER make any sort of bombastic, outrageous, hyberbolic statement in front of a big audience…

    Removing my tongue from my cheek… Mark, we get it. The world of marketing is changing. Correction: HAS changed. However, “change” does not mean extinction, and I hardly think that all other forms of media, communication or entertainment are going to go away completely. After all, even extinction takes a long time (see Darwin’s ‘Origin of the Species’ and the theory of evolution).

    The problem with hyperbole and rhetoric like this is that it rests on an assumption that everything works the same. That’s naive and dangerous thinking. There are many brands, many products, many services and they are obviously NOT all the same. Likewise, their objectives, goals, problems, needs, etc. are NOT the same. One size does not fit all. So, social media eliminating advertising as a tool for marketers? Maybe for a few, but not for all.

    Like Mike Ogden above me, I say “truce!” Can’t we all just get along?


    Follow me @tedlsimon

  12. With social media, the biggest problem is ‘Why Would The Person Want To Talk To Me If I’m not the Apple, Sony, Google, Harry Potter of the world’. Not all of us are blessed with fantastic heritages and huge budgets which allow us to become the passion of so many people.

  13. Whilst I hear what you’re saying, I think it’s a wrong analysis. This is the way we’re looking at divvying up the digital tools for our clients.

    For Generating Awareness, we recommend Display Media (Banners, Rich Campaigns, Video, Search, DOOH, etc etc.. behavorial and contextual working in tandem)

    For Increasing Consideration, we recommend that the client work with Social Media, Email, Affiliate Marketing, CRM, Digital Brand Activations, etc.

    For Increasing Preference, we recommend PR 2.0, Mobile, Augmented Reality and sometimes if the idea is really good ‘Viral’.

    For Purchase, a host of tools allow us to get creative to generate loyalty.

    So it’s not one size fits all model that we’re using and we’re finding out that it is this kind of cross media usage that is really generating the kind of results and ROI that clients love.

  14. Pay Per Click is the root problem here, and causes many more problems throughout the entire Web. Social media marketing is still marketing, and still in advance of consumer queries, and still PPC. When consumers generate queries and businesses respond with custom text, ads, links, whatever, that’s an inverse search. That’s advertising in advance of consumer queries replaced by advertising in response to consumer queries. That’s Pay Per Response. And, yes, you can do it from anywhere.

  15. I’d have to say the idea of replacing all marketing with social media campaigns is a bit extreme. Very few companies have the right idea and run successful campaigns. I’m going to have to agree with tolleson on this one- IF is the operative word here. I can’t really think of a single Fortune 500 company that should do this. It would be brand suicide to replace all advertising with social media. Yes, it’s cheap but it’s not as easy as it sounds.

  16. Of the 88,000 plus videos uploaded each day to YouTube alone, how many achieve this kind of viral success? Anyone? Maybe a handful. And it’s not just because of the content…there’s some outstanding stuff out there that never quite catches on.

    Yeah, putting all your eggs in the Social Media basket will bring you marketing success. In the same way playing the lottery will make you a millionaire.

  17. It is more than obvious that mobile marketing is the next big thing. With constant rise in the number of smart phone users and the use of mobile apps, you’d have to be blind not to see and grasp the early bird opportunities mobile marketing is offering. And yes, only if those users are your target.

  18. I’d say it works for some products and only for a period of time; that movie campaign may have worked but how would you do the same for the latest car from Ford for instance?

  19. Poisonous treacle. This is the kind of nonsense that still has marketing clients asking for “free, viral campaigns.” Can’t you just put something on facebook? The statement, “So if you can figure out how to work in this world, you can get your message out very quickly,” jumps over so much ground it takes your breath away. Working in that world “effectively” is NOT free – especially if you’re brand.


      I agree with Super Genius LLC. Social media marketing can be effective if executed well. It enhances reach, strengthens relationships, establishes credibility/trust and can work at amazing speed. To Super Genius’ point, social media marketing is not free. It requires expertise in digital technologies, marketing, advertising and a whole new way of thinking.

  20. Pay attention to his remarks, I do believe very strongly that social media marketing is the game changer here, it makes total sense from what we are already seeing happen. How Facebook scaled out to 400 million users is a perfect example, they certainly did not advertise on TV to get where they are today.

  21. tolleson

    IF seems to be the operative term here. It’s a really self serving pile of gook this guy is serving up here. Is he saying that Sequoia is going to close down all their ad companies? Should we begin with renegotiating the Admob deal? Google surely doesn’t want to pay $750M for a company that serves ads, do they?