Are businesses right to be turning away from social media?

Summary

No – and here’s why

This post is in response to an article by the Daily Telegraph’s Digital Media Editor Emma Barnett, titled Businesses are right to be turning away from social media. The first thing that caught me was the subtle difference between title and subtitle:

In the same week Twitter has been forced to apologise for prioritising commercial gain over its users, a new study has found businesses are reducing their investment in social media marketing. It’s totally understandable says Emma Barnett.

An understandable action is not necessarily a right action. But that’s a minor issue. The two strands I want to take issue with are the use of social media by profit-making firms, and the functioning of companies that run social media platforms – the Facebooks and Twitters of this world.

Social media is not a marketing platform

Yet all-too-often firms want to use it as exactly (& only) that, in exactly the same way political communicators often see social media as another channel for ‘getting the message out’ to the general public. After a decade and a half of learning all about email spam, the wider public is far more wiser to the concept of advertising that is thrown at them in such a manner. One firm’s direct marketing is another person’s spam. And they don’t particularly like it either.

Unlike junk mail you get through the post or stuff you get through your email, social media makes it much easier to lampoon any advertising campaign that might have the slightest hole in it – which is nearly all of them. Not only that, such campaigns can be lampooned in a manner for all of the world to see…and that’s just on the adverts.

You then have the issue of transparency – or the desire of firms to cover up their blemishes and bad practices less they be paraded infront of the world’s electronic media for all to see, and thus killing the brand. This is something that impacts companies big or small – whether the bar or cafe that gets targeted for banning breastfeeding mums or uniform-wearing soldiers from being served, to large multinationals being brought to heel by a student boycott organised online. In each of these cases, it wasn’t the advertising or the branding that was the problem, it was the decisions taken by the firm concerned in relation to a customer or identifiable groups of customers.

“Why are we being criticised?”

This is the question firms don’t seem to be asking. Yet from a firm’s perspective, social media can (if used well) provide a wealth of information through feedback from (potential or actual) customers that can feed into decision-making processes. The problem may not be with the advertising campaign – more often than not (anecdotally from my viewpoint) it’s something more deep-seated. For very small firms, it can be relatively straight forward to turn things around. In the case of the ‘lactivists’, the cafe owner apologised and gave out free tea and cake to the lactivist flashmob that converged on his cafe. (If the tea and cake was any good, chances are some of them may return). In the case of the multinational corporation, the layers of management and the diseconomies of scale associated with large organisations make such sharp turnarounds that much harder to deliver.

Rather than investing lots in social media advertising, my view is that firms should be investing in social media as a listening, feedback and customer service platform. Some of them already do this proactively – going after negative comments about their companies but treating it as a ‘customer service’ issue (“What did we do wrong for you to feel this way?”) rather than a brand protection issue (“Take down your libellous post or you’ll hear from our lawyers”).

Return on investment

The ‘listening’ nature of social media means it’s very difficult to put a financial value of the positive benefits of investing in a sound social media function. It’s not a case of ‘for every pound you put in, you’ll get a pound and a half of profit back over five years.’ Directors of firms with a very sharp short-term ‘bottom-line’ focus on investments (especially in these tough economic times) are likely to be very sceptical about social media. Why should they invest valuable time and money where they cannot see a firm likelihood of a quantifiable return on that investment over a specified length of time? Far better to invest that money in a direct advertising campaign with the aim of generating extra calls and sales? But then what is the quantifiable value of a sound customer service function? It must be reasonably high otherwise firms would not have them. It would be interesting to see data over time across a range of firms looking at the impact of their investment in social media customer service functions.

What about the social media platforms?

Caught between a rock and a hard place. I agree with Emma in that Twitter is caught between a rock and a hard place, trying to please its corporate customers that pay for valuable advertising (that then pay dividends for investors) while trying to keep its users happy. Twitter has to keep its users or it loses the advertisers. But without the advertisers, it struggles to meet its costs.

The problem that both Facebook and Twitter have is the threat to kill the goose that is laying golden eggs. The more they go after the advertising buck, the more the advertisers will want more prominence for their adverts. The bigger those adverts become, the more annoying it becomes for other users – increasing the likelihood of people switching platforms or abandoning those parts of social media altogether. With the significant Saudi investment into Twitter and the recent controversial stock market floatation of Twitter, the pressures to make short term returns for those investors must be huge – swinging things in favour of the advertisers at the expense of users.

Why should users get a free lunch?

It’s a fair question. Shouldn’t you pay for the service that you receive? Well…this is where social-media-world is turning economic thinking on its head. For decades, the drive has been to bundle up stuff, put a cash value on it and sell it. We see this with intellectual property. The first time I picked up on this was as a child – with computer games. Reading the smallprint of Sonic the Hedgehog 2 back in 1993 I noticed that the booklet said I had bought a ‘non-exclusive license’ as opposed to buying ‘the game’.

As the internet started taking a hold, so firms started giving away things that they had previously charged for, for free. The best example of this is with newspapers – The Guardian being the pioneer. Information that we would normally pay to get (in a paper-based format) we can now access for free. This caused problems that the newspaper industry is still struggling with. With online access, advertisers can insist on ‘pay per click’ advertising rather than by how much space is taken in the paper. The former gives far more accurate metrics into how successful such an advert is than its paper-based counterpart.

What I’m trying to say is that social media platforms are facing a world where society’s expectation is that access to such services is free. It’s similar to where we were with access to top flight football pre-Sky. TV-licence-fee aside, it was taken for granted that top flight sport was free-to-air. Digital technology (in particular encryption) allowed Sky to bid for the rights and ‘scramble’ the broadcasting signal allowing access only to those who paid for a set-top-box and card to unscramble the signal. Would such a move by Facebook or Twitter kill their platforms? Would a move by Twitter or Facebook to offer differentiated products (i.e. one with adverts that was free, and one without adverts which was paid subscription) work?

What about a not-for-profit/loss-making model subsidised by a profit-making sister/subsidiary companies? One could argue that this is what Google does – providing a whole host of basic free tools which are used by many, subsidised by other profitable arms of the corporation.

I don’t think Twitter and Facebook can carry on as normal. Both routes for me – whether ‘selling out’ to advertisers or trying to keep them at bay – are unsustainable given the investments investors have made in the companies. It’ll be interesting to see how both firms evolve over the next few years.

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