Social media as a marketing tool… among others

February 4th, 2010 by Greg Boutin
social wordle

Image by smemon87 via Flickr

A connection of mine just directed me, by good ol’ email, to a new book on social media. My friend knows I am thinking about the topic these days. This yet-to-be-released book puts marketing and social media in opposition, asserting that businesses must stop marketing and start engaging. The author positions himself as the “world’s authority on the topic”.

Yawn.

Social media is here to stay, no question. I use it every day, and it does occasionally help shape my impression on brands. But let’s curb the enthusiasm and keep our feet on the ground, as its impact is blown largely out of proportion:

#1  – Remember the 2000 bubble. The laws of economics didn’t apply anymore, if you listened to gurus. And now social media is going to revolutionize business and marketing. Sure, social media has a transformational impact, but gurus overstate it because it feeds their purpose: profits – for themselves, not their clients. And by the way, the economic fundamentals haven’t changed. Social media companies need to turn a profit sooner or later to stay in business. So far, none yet does. Sure, Facebook reached cash-flow positivity … What that really means is that they cover all costs except for operational expenditures and one-time costs. Like personnel and new acquisitions, for example. You know, minor ones…

#2 – Social media affects marketing, but its effect on business is not as wide-ranging, radical and fast as gurus predict. While it is great to connect with friends, the influence of social media on purchase decisions is quite limited: according to a 2009 study (referred in http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=106445 – It also compares social media to TiVo – I recommend the read) , less than 5% of social media users regularly turn to these social networks for “guidance on purchase decisions”, and only 16% of social media users say they are more likely to buy from companies that advertise on social sites (some even say they are less likely!). How many purchases did you make last year because of ads or product recommendations on social networks?

#3 – Good luck establishing a new commercial brand through social media. I can’t think of any that did, beside a Facebook game like Farmville that is, built by social media for social media and part of the bubble. Social media helps with conversion, much less with awareness. Social media does not suppress marketing channels, it adds new ones to the mix. To build awareness, there will always be room for one-way communication channels like TV, radio (and podcasts), and billboards, as well as for face-to-face channels like events, presentations. Often, people want to learn stuff without having to “engage”. People need to really care to engage, and that’s why they want to engage with friends, not with the makers of the hundreds of products they consume. Sure, some brand with cult-like status such as Apple can communicate effectively through social media, but it’s as a one-way channel, not much better than TV and other traditional media which Apple still primarily uses to reach the masses.

#4 –Embracing social media too fast may lead businesses to neglect traditional channels, counterproductively. Fancypants marketing heads love to do social media, because it’s new, more fun and attention-grabbing. You would be surprised by how often they’ll spend loads of cash on something just because it’s “cool” and “we have to do this”, although any levelheaded employee could tell them this is not going to generate a cent for the company. Let me say it again to those Silicon Valley marketers: you live in a bubble. The time people spend watching TV, reading papers, and surfing classic web portals dwarfs that spent on social networks – if those even were comparable metrics. 350 millions of active users on Facebook is great, but there are billions of phone users and yet to make money phone companies still have to charge them for usage.

#5 – Social media is currently subsidized. Expect normalization and the end of social media subsidization. The main reason the growth in social media users is impressive is that almost all social media companies have focused entirely on growing social media users. At the expense of making money. Now, imagine that TV channels tomorrow could spend tons of money on great programs while getting ads out of the way. It wouldn’t be interactive but surely it would be way more attractive than it is today to most of us, the TiVo-less majority (note: you have to pay a subscription to get TiVo, which makes up for the lack of ad revenues). I suspect that ultimately social media apps are going to have to be commercially more aggressive, and guess what will happen then? The user experience will progressively deteriorate like it did on TV. And hype will be gone. Social media is subsidized, that’s why it seems attractive. Note #2: subsidizing to gain market share is a traditional marketing technique. Those still work.

What is a Business to Do, Then?

#1 – Don’t embrace the hype. When planning your marketing program, start with your target audience and think how they use each channel. The social media rush will open up opportunities for companies that haven’t been so fast at embracing the hype. Of the marketing programs I designed with clients in the past two years, none included a major social media component – that is, more than 5% of spend (half our programs included some sort of small and targeted social media component). The reason for it was quite simply because none of our target segments, mostly B2B decision-makers, made much use of social media or relied on it to make decisions. Some didn’t use computers much beyond email and basic websurfing, others used social media but relied much more heavily on other channels when it came to keeping abreast in their field and making purchase decisions.

#2 – Know what social media is good for, and what it isn’t. Marketing fundamentals haven’t changed, it is still to grow awareness, generate leads, convert them and build repeat business; and when it comes to doing that, lots of potential actions still beat social media hands-down. Social media is useful to build a dialog with users in certain segments. It can work well in conjunction with other channels to seed it. It also has increased the reputational risk as it created a new platform for unhappy consumers, so it is important for businesses to monitor it. All those usages are far from covering the whole marketing spectrum.

#3 – Remember the cost and the risk of social media. The medium might be free, but time isn’t. It takes a lot of time to participate in social media, and lots of that time can often be put to much better uses. Then, the chances of a viral success with social media are also slim, and the risk of backlash is higher than most channels. Run a traditional cost-benefit analysis and give it a test-run before you commit hard currency to it.

#4 – Finally, do kill the messengers (just not physically). Those self-proclaimed gurus by definition tend to be very good at riding waves, but very poor at offering any substance, let alone good advice beyond plagiarized clichés. Somehow, being smart and calling oneself a guru just seems incompatible. A recommended read on this is Social Media Experts Don’t Exist, by Toronto-based Mark Evans. Sure, if you’re in it for the fun only, as some are, then gurus can be more fun than people actually interested in your business’s success. But do your part to clear up the air and help social media reach the end of its hype cycle: refuse to drink the Kool Aid, don’t attend their events or buy their books, and never, never expect actual results from one-inch-thick gurus.

By no means am I discarding social networks. They are game-changing in many ways, and can be very valuable, if used intelligently. But common sense still applies and always will. Keep it in context of your market objectives.

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  • William Mougayar

    There is definitely a degree of hype around social media, which is augmented by a cheer-leading crowd. Although social media is beneficial especially for consumer product companies, its long term impact is totally dependent on its integration with the rest of the mix, as you suggested.

  • http://www.growthroute.com Greg Boutin

    Thanks for dropping by, William. I agree social media at this stage is most applicable to consumer product companies (although not all of them). I’ll be curious to know how Eqentia goes about generating and converting leads, and how social media fits in that mix.

  • http://www.socialfocus.com/ social media

    The viral success with social media are very slim.

  • http://www.moxdom.com Matt Kettlewell

    Good point, social media sites need to come up with a profit model soon or the end could be near.