Category Archives: StartUps

Social is Priceless | Social Networks T.B.D.

The Guardian recently ran Facebook now has 350M users – and there’s no point in advertising to them. The story serves as a nice reality check for those in the Social Media ‘business’.

There is no doubt that by the measure of registered users (fans, members), many of these services have been wildly successful within a very short period of time: Bebo, Twitter and LinkedIn have around 50M users.  MySpace has something like 80M users and Facebook now claims over 350M registrants, a large number by any stretch, namely that it exceeds the population of the United States. This is all without even counting site visitations as tallied by a firm like comScore. Astounding numbers? Absolutely.

But here’s the big jolt: these services generate very little revenue or profit, command bubble-like valuations and have yet to prove that they are a viable advertising medium. Some examples cited by The Guardian underscore this point (numbers are approximate as some firms are private and/or in constant flux):

  • Facebook is valued at about $10B on revenue of $500M est. for 2009
  • Twitter has no tangible revenue, is valued at $1B;  just raised $100M
  • LinkedIn is generating revenue, how much is unclear; profit elusive

Then perhaps there’s a bit of buyer’s remorse:

  • Time Warner’s 2008 purchase of Bebo for $850M w/multiple of 48.5 x earnings
  • News Corporation’s purchase of MySpace for $580M in 2005; growth in a stall

Social Networks, as much as they have gained mainstream popularity, are still seeking to monetize their services. While companies such as LinkedIn have developed fee-based premium options to customers, most are still in the ‘freemium’ category. In the hope of attracting paying customers, free is the common denominator when it comes to the price charged for most social networking services — the digital version of “Field of Dreams” in a way. During their next growth stage, moving up the value chain will be a major challenge for many of these companies.

Investors no doubt, will become a  bit edgy, as they are prone to be, when the cost of capital gets a little out of  the comfort zone. A major question that might be heard in the boardrooms a bit more often over the next year just might be: “How are we going to get customers to pay?”

– Ted Morris 4ScreensMedia


Marketing Research RIP:

[Note: This post was originally featured by the American Marketing Association Marketing Research Conference “Making Business Sense of What’s Next”.  This post was  in response to the question, “What will marketing research look like in the year 2029”.]

These are times of transformation for industry that is reputed to see the world through a rear-view mirror rather than drive marketing innovation.  This current recession or depression is a good time to us to rethink, retool and re-launch. So here are a few things to think about when going to your next client meeting:

Mobile and the Generation ‘Effect’: Verizon just announced that it is getting out of the land line business by 2012. Telecom industry analysts have suggested that the general public will have completely disconnected from land lines by 2020. Most consumers aged 16-29 currently do not have a landline subscription and are one of the most difficult target markets to contact for survey research. If you think your teenage son or daughter are hard to reach because of their preoccupation with mobile devices and the Internet, just imaging how mobile the world will be in 20 years. Focus groups won’t be held in a stuffy room with one-way mirrors, fancy sandwiches and a drone of a moderator.

Community Building: While some say “the consumer now controls the brand”, brands have commissioned companies like to establish brand communities – online aggregations of consumers who have a specific loyalty, interest and adherence to a brand. Communispace has built over 300 online brand communities since for clients such as HP, Kraft, Reebok, Starwood and GSK. Brands use communities for direct feedback on product experience, innovation, service ideas and value augmentation allocating dollars that would normally go to marketing research budgets.

Social Media Monitoring Platforms:  Five years ago the marketing research industry scoffed at such listening platforms. I can say that from first hand experience having held a corporate development role for a technology startup that was looking to the MR industry for capital. The biggest objection that I heard was that social media monitoring ‘wasn’t market research’. While I never suggested that it was, social media monitoring is a way to passively listen and quantify brand conversations that consumers choose to undertake and post on the Internet. This would have been like saying that digital advertising wasn’t true advertising since it did not use traditional creative, media and pricing models. Aptly, Digitas recently referred to the Internet as ‘one large focus group”. Indeed.

Some early adopters, notably TNS/Kantar, Nielsen and J.D. Power & Associates took the early lead in making acquisitions. In turn they gained competitive advantage in being able to meet emerging client requirements: provide a capability to monitor and understand the nature of online consumer content, coined as WOM – Word of Mouth. WOM was coined by WOMMA, Word Of Mouth Marketing Association. WOMMA was founded by Andy Sernovitz,  one of the nation’s most influential marketing and social media observers. Public Relations agencies, consultancies and OEM’s are also partnering with companies like and  in order to have their own capability to monitor brands and emerging consumer trends.

Big Brands/ Big Digital Branding: Pepsi, Ford, Dell, NCR, General Mills are going digital or at least migrating in that direction when it comes to online consumer engagement. Ford for example, invests heavily in social media to manage, monitor, measure and position Ford as the most “social” automotive manufacturer. Pepsi for their part is using various social media platforms to engage consumers while Dell and Marriott are generating revenues from social media platforms. All are using social media to ‘sense and respond’ to customer requirements at time bypassing traditional marketing research as the need to ‘real time/on demand’ consumer feedback grows.

Advertising Agency networks: WPP for example now has a portfolio that is roughly 50% digital. The WPP network is in the process of consolidating the back offices of it four major traditional ad agencies that are, one, unnamed WPP executive was known to have said “dying profitably”.  As more advertising dollars go Digital so are the dollars allocated away from traditional marketing research – the Social Media listening industry has been pegged at $150M according for Forrester. That’s up from $0 in 2003. Publicis, MDC, Ominicom, Havas have all stocked up on digital companies in the past 3 years.

Marketing Research:  By contrast the market research industry has been consolidating for the past 10 years to the point where the top 10 global MR firms own about a 40% share of revenues. In the past 3 years, revenues have barely kept up with inflation and have actually declined in 2008 along with the drop in ad spend. In fact, according to the 2008 Honomicl50 report, with the exception of 2004, the US MR industry has not kept up with the rate of inflation since 2001 – the dawn of social media.

Our current economic recession has also seen some client companies completely eliminated their entire global MR spend – and you know who they are. There are exceptions: Comscore has grown 400% in the past 5 years according to Inside Research. Comscore focuses on measuring in the digital world. Makes sense as digital ad spend will rise by 9% next year, according to GroupM and mobile will rise by 19%. By contrast, traditional ad spend in seeing drops of 23-35% in the US, depending on the industry sector – not good for the MR industry. Moreover, WPP’s Sir Martin Sorrell sees digital has having a 20% share of marketing budgets by 2014. Haven’t heard the same about marketing research.

Food for thought or a call to action for the industry? You decide. As Yogi Berra aptly put it, “When you get to a fork in the road, take it”. The clock is ticking…

 Ted Morris ©4SceensMedia  Oct. 3, 2009