Tag Archives: Facebook

HBR – The Social Media Bubble: Opinion

Umair Haque, Director of Havas Media Lab, recently posted a thought piece in the Harvard Business Review .

In general, Haque hypothesizes that Social Media doesn’t really connect people but instead, creates the semblance of relationships. Haque states, Social Media is ” largely home to weak, artificial connections, what I call thin relationships.”  He goes on to say “Today, ‘social’ media is trading in low-quality connections — linkages that are unlikely to yield meaningful, lasting relationships.”  Here are my own observations relating to some of Haque’s supporting points.

Truth: If we take social media at face value, the number of friends in the world has gone up a hundredfold. But have we seen an accompanying rise in trust? I’d argue no.

Agreed. In fact the word ‘friend’ is used very loosely in the social media vernacular. To me, a friend is someone that I know and trust. Most of us have about 5 real friends in our lives whom we trust implicitly. The rest are aquaintances, people that we are tied to loosely via circumstance like work, associations, clubs or…Facebook and Twitter. What we have seen a rise in is conversation amongst relative strangers under the pretense of ‘friending’. Caveat Eggshell.

Disempowerment:  If social tools were creating real economic gains, we’d expect to see a substitution effect. They’d replace — disintermediate — yesterday’s gatekeepers. Yet, increasingly, they are empowering gatekeepers.

It’s been notable that service providers such as PR agencies, advertising agencies and media consultancies have been vying for ownership of social media within the advertiser domain re. client side of business. They advocate the social media imperative, are evangelical in their style of persuasion and purport to offer social media “ROI”. They fall short by ignoring the element of accountability – something ingrained in traditional media. There is however, substitution in the form of reallocating traditional media dollars to digital. In this regard though, the financial equation is incomplete: digital is cheaper but the material business benefits are elusive. Quantified returns, in management accounting terms, are a work in progress.

Value: The ultimate proof’s in the pudding. If the “relationships” created on today’s Internet were valuable, perhaps people (or advertisers) might pay for the opportunity to enjoy them. Yet, few, if any, do — anywhere, ever. .. I can swap bits with pseudo-strangers at any number of sites. “Friends” like that are a commodity — not a valuable, unique good.

This is a tough one. Social Media is increasingly seen as a near free channel or pipe to deliver content, customer service and promotional offers. It’s also cheap in the sense that it has the capacity to diminish the value of fact-based, expert content while simultaneously encouraging the rise of ill-founded, non fact-based crowdsourced opinion. In this context, success is all too often gauged in purely quantitative terms (# of fans or followers) rather than say, degree of loyalty/willingness to recommend. In a similar vein, it is problematic to prove that people are who they say they are in the world of social networks, as many use avatars to represent themselves. If something is a known unknown then how does one ascribe value? 

There also exists an element of social media that is redundant, maybe superfluous, in terms its effect (non-effect?) on consumers. For many brands, the franchise is well entrenched (Tide, McDonald’s, BMW, Wal-Mart and of course, Apple) and the principles of The Discipline of Market Leaders are in place. These same brands already have meaningful relationships and established trust with consumers pre-Internet. Social Media is not about to change this any time soon, though to some, it may appear that way.

– Ted Morris, 4ScreensCRM

(Cross-posted at Cloud Ave and reprinted by IBM Business Insight Blog)

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