Social Media Marketing, Truth and Lies
Social Media Marketing seems to be the latest buzz word for anyone looking to increase their online presence and sales, but is Social Media Marketing (SMM) all it is cracked up to be?
S.M.M companies are now springing up all over the place these days and they are telling anyone that will listen about how incredibly important social media like Facebook twitter and YouTube are to your business but, for the average small to medium sized business, does marketing to social networks really live up to all the hype? Is spending a small fortune on hiring a SMM company really worth it? And has anyone really done their research on this before they hired someone to set up there Facebook business page? Some SMM companies are setting up things like Facebook business pages (which are free) for $600 to $1,000 or more and telling their clients that they don't need a website because Facebook is the biggest social network in the world and everybody has a Facebook account https://vidorange.com/. Now while it may be true that Facebook is the largest social network in the world and yes, Facebook's members are potential consumers, the real question is are they actually buying? Social media marketing companies are all too happy to point out the positives of social media like how many people use Facebook or how many tweets were sent out last year and how many people watch YouTube videos etc. but are you getting the full picture? I once sat next to a SMM "expert" at a business seminar who was spruiking to anyone who came within earshot about the amazing benefits of setting up a Facebook business page for small business (with him of course) and selling on Facebook. So, intrigued by the aforementioned "experts" advice I looked him up on Facebook only to find he had only 11 Facebook friends (not a good start). So being the research nut that I am, I decided to take a good look into SMM in regard to selling to see if it actually worked, who did it work for and if it did why did Social Media Marketing work for them? And should business rely so heavily on social networks for sales?
As a web developer I was constantly (and now increasingly) confronted with several social networking challenges when potential clients would say that having a website sounds good but they had a Facebook business page and had been told by various sources (the ever present yet anonymous "they") that social networks were the thing to do, but after discussing their needs it became quite clear that those potential clients didn't actually know why they needed social networks or SMM to generate online sales, They just wanted it. For small and medium sized business I always recommended building a quality website over any type of social network, why? Well it's simple really because social media is Social Media, and social Networks are Social Networks they are not business media and business networks (that would be more like LinkedIn). I know that sounds simple but it's true and the statistics back it up. The fact is that social media marketing fails to tell you that Facebook is a social network not a search engine and despite the number of Facebook users and Google users being around the same, people don't use Facebook in the same way that they use a search engine like Google (which has around half the search engine market), Yahoo and Bing to search for business or products. They use it to keep in touch with family and friends or for news and entertainment. In a recent study done by the IBM Institute for Business Value around 55% of all social media users stated that they do not engage with brands over social media at all and only around 23% actually purposefully use social media to interact with brands. Now out of all the people who do use social media and who do interact with brands whether purposefully or not, the majority (66%) say they need to feel a company is communicating honestly before they will interact.
So how do you use social media marketing? And is it even worth doing?
Well first of all I would say that having a well optimized website is still going to bring you far more business that social media in most cases especially if you are a small to medium sized local business because far more people are going to type in "hairdresser Port Macquarie" into a search engine like Google, Yahoo and Bing than they ever will on any Social Media Site and if you don't have a website you're missing out on all of that potential business. However despite all the (not so good) statistics I still think it is still a good idea for business to use social media just not in the same way that a lot of SMM professionals are today, Why? Because it's clearly not working in the way they claim it does. Basically SMM Companies and Business as a whole looked at social networks like Facebook as a fresh market ripe for the picking and when Facebook started getting users measured by the millions PayPal co-founder Peter Thiel invested US$500,000 for 7% of the company (in June 2004) and since them a few venture capital firms have made investments into Facebook and in October 2007, Microsoft announced that it had purchased a 1.6% share of Facebook for $240 million. However since Facebook's humble beginnings up until now (2012) both SMM Companies and Business have failed to truly capitalise on the huge number of Facebook users online. The truth is numbers does not equal buyers. Is it in a Social Media Marketing company's best interest to talk social networks up? Absolutely. Is it in a Social Network like Facebook's best interests for people to believe that companies can sell en masse by advertising and marketing with them? Of course it is. In early 2012, Facebook disclosed that its profits had jumped 65% to $1 billion in the previous year as its revenue which is mainly from advertising had jumped almost 90% to $3.71 billion so clearly the concept of SMM is working out for them but it is working out for you? Well... statistically no, but that does not necessarily mean that it never will.
I believe the major difference between social networks and search engines is intent. People who use Google are deliberately searching for something so if they do a search for hairdressers that's what they are looking for at that particular time. With something like Facebook the primary intent is usually to connect with friends and family. In October 2008, Mark Zuckerberg himself said "I don't think social networks can be monetized in the same way that search (Search Engines) did... In three years from now we have to figure out what the optimum model is. But that is not our primary focus today". One of the biggest problems business face with social networks and SMM is perception. According to the IBM Institute for Business Value study there were "significant gaps between what businesses think consumers care about and what consumers say they want from their social media interactions with companies." For example in today's society people are not just going to hand you over there recommendations, Facebook likes, comments or details without getting something back for it, so the old adage "what's in it for me?" comes into play. So the primary reason most people give for interacting with brands or business on social media is to receive discounts, yet the brands and business themselves think the main reason people interact with them on social media is to learn about new products. For brands and business receiving discounts only ranks 12th on their list of reasons why people interact with them. Most businesses believe social media will increase advocacy, but only 38 % of consumers agree.
Companies need to find more innovative ways to connect with social media if they want to see some sort of result from it. There were some good initiatives shown in the IBM study of companies that had gotten some sort of a handle on how to use social media to their advantage, keeping in mind that when asked what they do when they interact with businesses or brands via social media, consumers list "getting discounts or coupons" and "purchasing products and services" as the top two activities, respectively a U.S ice cream company called Cold Stone Creamery offered discounts on their products on their Facebook page. Alternatively there is a great program launched by Best Buys in the U.S called Twelpforce where employees can respond to customer's questions via Twitter. With both Cold Stone Creamery and Twelpforce the benefit is clearly in the favour of the potential customer & the great trick to social media marketing is to sell without trying to sell (or looking like your selling) unfortunately most social media marketing is focused the wrong way.
Building a tangible buyer to consumer relationship via social media is not easy and probably the most benefit to business' using social media to boost their websites Google rankings. But business' need to understand that you can't just setup a Facebook business page and hope for the best. SMM requires effort and potential customers need to see value in what you have to offer via your social media efforts give them something worth their social interaction and time and then you may get better results.
Now just as a footnote Facebook shares have dropped to under $20 per share, that's half their original price... and the lawsuits are flying
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In its brief history, Social Media, as called New Media, has traditionally been viewed as a place to meet new friends, reconnect with old friends and interact in an online social environment. In short, social networks were "a cool place to hang out" but held little applicability beyond that. There has been no shortage of funding in Silicon Valley for firms launching new media platforms. With the emergence of sites like MySpace, Facebook and Twitter, there is no question that there is value in the vast amounts of information on people that these platforms have been able to collect; however, there has been no clear monetization strategy beyond bringing in advertising revenue. Arguments have been risen as to the true value of these firms; some would state that their valuations are inflated and artificial, while other claim that the value of their databases alone are enough to justify multi-billion dollar price tags.
The New Value of Social Media and The Social Media Firm
More recently social media has spawned a new value proposition, which is the business applicability of the vast user-bases these social networks have created. Regardless of which side of the valuation fence you sit on, it can be said that social media holds vast utility for businesses looking for a new way to reach out to customers and engage in two-way communications. This has never been done before from a traditional marketing, advertising or public relations perspective, and has given rise to a new business model: The Social Media Firm. This brings forth the argument of whether or not The Social Media Firm is a good investment. Is The Social Media Firm a fad that will die out in the coming years, or is this a long-term, sustainable industry that will one-day drive obsolescence to the traditional methods of advertising, public relations and marketing?
Given the state of the current economy, Venture Capital and angel funding sources have been keeping their portfolio dollars close to their chest, reserving investment only to businesses with a decent operating history, solid revenue streams and unlimited growth potential. Does the Social Media Firm fall into this category? My answer is yes. The bottom line is: social media is not going anywhere. Social media has become a staple of the lives of younger generations, and the fastest growing adopters of new media are people over the age of 30. Since the recognition of the business potential that social networks holds, large Fortune 500 firms are devoting a good portion of their marketing budgets to social networks and new media campaigns. For instance, Pepsi has devoted $20 Million of their marketing budget for a social media program called Pepsi refresh, and many large firms are beginning to follow suit. Needless to say, the earning potential for The New Media Firm is substantial.
Is it sustainable?
As mentioned earlier, new media is not going anywhere. For the most part it has become a standard part of the Internet experience similar to email. The sites that are considered the gorillas in social media may churn; however, there will always be something new to which these Internet-based communities will migrate. For example, the social media migration to-date has gone from MySpace to Facebook to Twitter, and the next major shift and/or addition to this massive online social sphere is likely just around the corner. The long-term sustainability of The Social Media Firm is largely dependent upon these companies' ability to identify and pre-empt the next big shift, and to develop effective methods of leveraging both the old and new platforms for the sake of driving revenue, profitability, sales volume and identity to their clients.
Why Outsource to The Social Media Firm?
One question that may arise is: why would large companies hire a social media agency when they have the monetary resources to do it in-house? The answer to this is the simple fact that it is cheaper to outsource a new media campaign to a firm that has a skilled team already in place that is intimately familiar with navigating the complex world of new media. In the same manner that large companies hire advertising agencies to design traditional media campaigns, this approach can and will be taken for new media. By hiring The New Media Firm companies can eliminate both the administrative burden that comes with hiring a multitude of new employees, as well as the learning curve that will inevitably be present when trying to integrate those employees into their corporate culture. It is more cost effective, in both monetary and administrative respects, to outsource these campaigns to professional teams that are fully adept at leveraging the potential of modern media, navigating the codes of conduct of these online communities and staying ahead of the curve when it comes to identifying the exploiting the latest new media trends.
In summary, I do believe that investment in The Social Media Firm holds great potential for many funds; however, it is imperative that when vetting these agencies, Venture Capitalists and Angels need to ensure that the company contains the correct personnel and management team to fully exploit this budding industry. The ditch is full of one-man shops and so-called social media experts that are no more than victims of the recession who happen to be adept at Facebook or Twitter. It is imperative that the architects of new media campaigns are familiar with the intricate details of new media, and the vast array of assets that exist online to for a business to take full advantage of the social media world. Utilization of the lesser known social media outlets such as Digg, BrightKite, hi5, Xanga and countless others could be the difference between a full-scale robust campaign that shows real results, and an ineffective and unorganized attempt at new media that wastes marketing dollars.
Due to the infancy of this industry, there are few companies out there that truly know how to unlock the value of new media for business. The one's that do will quickly rise to the top, and if sufficient due diligence is done, these companies are ripe for investment. A strategic infusion of capital is likely the boost needed to take these companies from a sustainable cash-flow business to the next industry giant with A-list clientele.