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The commercial measures of social networks

Sunday, April 05, 2009
Grant Whiteside

The commercial measures of social networks

Social networks have been around for a while, and Facebook has been the absolute spearhead in this amazing growth over the past two years. The market, once in infancy, has quickly matured and evolved into an array of individuals, companies and corporations who spend their time Facebooking, Blogging, Twitting, Beboing, MySpacing, creating, commenting, interacting, bashing, selling, buying, annoying, faking, gratifying and generally interacting in what has truly become a world wide web.

Agencies and individuals who have seen the industry grow and develop since the days of old, before wireless and cyber-optic lines, are still in awe. We all say we saw it coming, but never really imagined it taking off when we were all still tied to the wall in a restricting umbilical cord of connectivity and thirty second download times. The pace of growth is truly inspiring. Mind- boggling. Revolutionary… it’s a lot of things.

And there is one thing that it is not. At least not yet: it is not commercial.

For all the hundreds of millions Facebook generates in revenues every year, growing costs and unclear financial issues leave it without much profitability, at least not a visible one. Other social websites are in similar situations. User backlash and mixed reviews have prohibited the growth of ad- based revenue streams on social networks.  Facebook’s latest idea- charging for vanity URL’s, is running into some serious criticism before even launching. In one of the latest industry gatherings in London no representative of any social network group was able to clearly answer the question- ‘where is the money?’

It is a fair question to ask. It is fair because at the end of the day it is the bottom line that allows for the operation of these platforms. It is fair because despite the recent arguable collapse of capitalist philosophy, individuals and corporations are still driven into growth through benefits and incentives. It is a fair question, however the answer is still not clear cut and in a marketing world dominated by gray areas this reality must sometimes be accepted rather than broken down to its most basic denominators.

The difficulty in measuring most marketing activities is a longstanding issue and ROI can truly be derived only in perfect conditions where external influences can be isolated, which in the real world is almost never.  PPC activities, for example, seemingly provide a clear cut answer to ROI questions. You know how much you invest in a campaign and at the end of a specified period of time you know exactly what you got out of it. But do you?

Even with a demonstrable model such as a PPC campaign, marketing agencies cannot always account for all influences over a campaign. Bad weather can affect shopping habits. A rainy day in London can mean 20% less revenues on Sloane St. Economic downturns can hinder wedding plans and honeymoon spending. A bombing in Bali can cancel a romantic vacation and a war in the Middle East can determine the price of petrol. How can one measure the economic effect of David Beckham wearing an Adidas shirt against Irn Bru sponsoring Gretna from the Scottish Premier League? Maybe the ROI for Gretna was actually higher because they play better football? Or maybe it was because of their loyal fans. Or maybe it was the great taste of Irn Bru? Well, some things are unknown, but some are just unlikely.

Similarly, for better or worse, the activities of social marketing and social networks can not be measured in a vacuum because they do not work in a vacuum. While the effects of opening Facebook pages and engaging potential markets in social networks are hard to measure, they are probably just as critical, if not more critical, than a billboard posted at the side of a road or a poster on a passing bus. While creating platforms for brand advocates to interact and engage around a brand is critical, it is impossible to measure the effect of opening a brand sponsored blog against those of seeing the worlds most recognised faces endorsing your brand on the cover of a magazine.

Strategically, there is really no alternative to embracing social marketing as a valuable and integral part of marketing activity for brands, companies and organisations. With the overwhelming growth of the internet as a medium for information exchange and interaction, companies must recognise that while the end result will not lend itself to complete dissection, the synergy between various online marketing activities will be greater than if implemented separately. To make the most of the social revolution the internet is providing, companies must make the change from asking ‘how can I afford to do this and what will it cost me?’ to “how can I afford not to do it and what will it cost me if I don’t?’

Grant Whiteside
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