(A) Social Media

I don’t know anyone who is not a member of a virtual community like Facebook, Linkedin, MySpace, Club Penguin or Twitter. Forrester Research estimates there will 2.2B online members by 2013, up from 1.5B today.  One of the most popular sites, Facebook, has an estimated 250M members today, up from 100M only a year ago. 

With numbers like this you would think Marketers would be drooling to spend their advertising money. However, this is not happening…yet.  In fact, the vast majority of marketers are devoting less than 2% of their total media spend to social networks.  For perspective, leaked internal documents from wildly popular Twitter show 2008 revenues of only $4.4M.

There are many reasons why marketing spending has not followed membership growth.  For one thing, early growth will lag due to management inertia around new ideas as well as a lack of awareness and relevant tracking metrics. Furthermore, existing platforms and member habits do not necessarily translate into a fertile advertising or promotional environment.  For example, social or business communities would rather socialize or network than be bombarded by ads like they would be on a portal. 

Finally, becoming too focused on revenue is risky.  When MySpace emphasized ad generation at the expense of the user experience, they hemorrhaged users and experienced a 15% drop in ad revenue versus 2008.    

Since there is no rush, how should marketers approach social media right now?

  1. Proper targeting and creative execution is the key to effectiveness and minimizing brand risk.  Find out which communities your customers congregate at and target them with the right, community-appropriate message and promotion.
  2. Despite the hype, treat social media as another part of the marketing mix subject to the same decision criteria as other advertising vehicles. So far, best practices and ROI models have yet to evolve.  
  3. To maximize effectiveness, marketers will need to understand the relationship between membership, social interactions and consumer behaviors.   Communities with the best online experience that can generate rich usage data will be the most attractive to media planners.
  4. In their quest for revenues and profits, it is likely many online communities will adapt their business models.  For example, sites could begin to think of themselves as shopping malls renting space to a variety of merchants as well as developers of complementary applications that members would pay for.

For further information on our services and work, please visit www.quantaconsulting.com


3 comments so far

  1. pmatthews on

    Great blog!!
    Thanks for sharing.

    Stay connected with friends at global personal

  2. Jeff Wilson on

    Good blog, however! I would throw in a couple comments for your consideration. I have always looked at social media sites as the wild west; not many rules, lots of potential, and owned by the people/connectors.

    These communities are owned by consumers so i have always questioned getting directly involved in these especially for companies that target businesses or only think of themselves. It’s dangerous and full of uncertainty. its like diving into a pool that you don’t know how deep it is. With luck you can dive in and have a great time, but what if you dive into the shallow end? Is your brand going to survive the blow to the head?

    What i have been recommending to my clients adopt the “best practices” model FaceBook and others have created and apply it to their own brands to build a community of interest. This is also a great and much more risk managed approach to “dip the toe into the pool” to test the waters and then use this experience to go into the brave new world of public social media.

    Lastly, I still fail to see any long term value to Twitter… it would be great as a part of another application, but on its own? C’mon, how many times can we hear what someone ate for dinner or whatever complaint dejour happens to come up. We have successful created a medium for some incredibly stupid and boring people to have their say. It is mediocrity en masse. We saw the same thing in the Dotcom craze of late nineties which was supporting businesses that had absolutely no purpose.

  3. mitchellosak on

    Excellent insights and perspective. Thanks for the comments.


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