Social Media Survives Budget Slashing at Many Companies… Why?
The recession may be hurting the pocketbooks of people and businesses, but a new study shows that few companies that currently spend money on social media plan to cut back next year. The 2009 Tribalization of Business Study by Deloitte, Beeline Labs and the Society for New Communications Research reveals that 94 percent of the 400 companies surveyed intend to maintain or increase investment in their communities.
In addition, community and social media strategies are maturing. For instance, many more of the businesses surveyed are capturing data on “lurkers” (internet users who merely observe interactions without actively participating in them) than in the past in order to learn more about how these individuals derive value from these online communities.
Still, the study also shows there’s a significant gap between how companies would like to use social media and how they actually use it. Businesses’ stated goals for online communities included increasing word-of-mouth, customer loyalty, awareness, idea generation, and improved customer support quality; but in practice, actual usage usually looks a lot like traditional marketing, just delivered through social media channels.
“While we are seeing signs of maturation in this year’s study, there are still plenty of companies who do not realize the power of communities, and others who have not yet figured out the proper approach for leveraging communities as part of their business,” said Francois Gossieaux, partner with Beeline Labs and a senior fellow with the Society of New Communications Research. “Businesses are truly become social again, and companies should look to leverage the collective wisdom of their employees, customers and partners in order to innovate faster, reduce costs, and bolster their bottom lines.”
Cut now, lose later
To anyone who weathered the online industry’s travails during the previous recession, the news that companies are keeping up spending rates on social media may be a surprise. Back when social media was just a twinkle in the Internet’s eye and advertising was pretty much the only means of online customer contact, hard times translated to a 12% drop in Internet advertising in 2001, followed by another 17% drop in 2002.
Given that history it’s surprising that in this current recession it’s not just social media where companies are putting their money. Through the financial uncertainty of 2008, the spending on Internet advertising hit a record high, followed by only a small drop-off in the first half of 2009. The online advertising numbers are even more impressive if you consider that combined advertising expenditures dropped 15% in the first half of 2009, after a 2.6% fall in 2008.
I think all those numbers look very good for social media as part of every company’s customer communications toolkit. In the recession of 2000, a lot of companies still hadn’t internalized the Internet. Dubious plans by self-styled experts produced little short-term return on their investments. So, when the economy went soft, online spending was an obvious target for cost savings.
Unfortunately for the companies that cut back, not all of their competitors were as quick to do the same. Companies that kept working at online communications and Internet advertising began to find better models. Those that continued their active online advertising programs were positioned to grow as the economy turned the corner, while the cost-cutting companies had to start all over again.
This time the recession is much worse, but many companies remember the lesson they learned last time: Cut online spend now, and pay the price later. Now, however, Internet advertising is far better understood. The pricing structure is far more reasonable than it was in 2000, and vastly improved metrics make it easy to find out the return on investment. With real data backing up their tactical decisions, advertisers feel more like they are shooting at clear targets and less like they are trying to smack a piñata while wearing a blindfold.
On the other hand, companies are still struggling to understand what ROI measurements can be applied to social media. At this point, company forays into social media are a less sure investment than the simplicity of online advertising. I can only speculate that companies are becoming involved in social media out of fear, or because they think it’s a way to be competitive with their peers, or that they are interested in new communication channels, or because they truly believe that openness and two-way communication provide the best, most profitable, path for customer service and loyalty.
What remains clear, however, is that no one has yet figured out a way to measure what simple communication is worth. If the return on talking with customers can ever be quantified, it will provide great benefits for companies and social media experts alike.
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7 Comments, Comment or Ping
LADunkin
Brook, another good post. I think you nailed it down when you said “…a way to measure what simple communication is worth. If the return on talking with customers can ever be quantified, it will provide great benefits for companies and social media experts alike.” If only we had an algorithm that would calculate the value of communication between two people and then apply it to an entire network of people. We know that communication is valuable, not just in terms of trying to monetize it, but in everyday life, like communication in a marriage, communication in foreign affairs, or communication in a business meeting. However to be able to to put a number on the value would greatly help the social media world.
Now if we could only get a mathematician to develop an algorithm like Dijkstra’s algorithm that solves the shortest path problem or Prim’s algorithm that solves the minimum spanning tree problem in graph theory. We need something that will take into consideration the social graph and the weighted values of the edges of the graph to formulate an overall value for the communication between two or more people. I guess though before the result of the algorithm would be something of use, a determination of what constitutes the value of the edges would need to be decided. Meaning, what does the value between Node A and Node B mean? What makes a communication path between me and Brook more or less valuable than between me and Hanson? And then all the degrees of separation. So in terms of Dijkstra or Prim instead of looking for the shortest path or the minimum spanning tree would we be looking for the longest path or the maximum span since it would be better to have a higher weight associated with the edges. I have no idea if algorithms like this can be applied to the communication valuation problem, but it seems that there has to be a way to use graph theory to solve the problem.
Oct 13th, 2009
Cheryl
In my experience as a technical communicator within a large company, several factors impact the slow adoption of social media as a norm. The pace of product development is fast and teams are cut back to the bone– carving out time to change a communication paradigm and train employees within tight, overlapping schedules is a challenge (this is huge). Secondly, there is pressure to quantify the value of technical communication efforts, which as you point out, is not a measurement technique anyone has mastered. I do see innovators pushing forward with social media outreach efforts nonetheless, and as their value becomes more measurable, they are likely to become more the norm.
Oct 15th, 2009
LADunkin
I just found this article related to the topic:
The evolving face of social networks
Laura Parker: What can evolutionary graph theory teach us about the spread of ideas on social networks such as Facebook and Twitter?
http://www.guardian.co.uk/technology/2009/oct/07/facebook-social-networks-evolutionary-graph-theory
Oct 15th, 2009
Sara Niegowski
When companies say they plan to NOT scale back on social-media spending, I wonder if that is because they have not spent much to implement these strategies initially. In my organization, we cut our operations budget by $5 million and more than 4-percent of our employees this year. There was no reduction in social media endeavors, however, because the communication employees were expected to adapt and grow their job function to keep current with the most effective tools. The organization incurred no additional cost since the social media outlets we use, such as FaceBook and Twitter, are free. My workload has increased, meaning that I’m looking to decrease efforts with less effective (and more expensive) tools, such as print newsletters. Therefore—for me—it would be interesting to know if the companies that are not planning to scale back on social-media spending are instead reducing their communication efforts in other communications methods—and, if so, what are those other methods?
Oct 21st, 2009
Amy Rolph
This is a really interesting study, and it seems to point to two things. Social media is inexpensive from an advertising perspective and therefore worth experimenting with. But maintaining these efforts also speaks to a company’s desire to meet and interact with clients on their home turf, so to speak. The way people interact with one another has changed drastically over the last decade, and consumer tastes have followed suit. I certainly see the same overtones in my own industry. The New York Times announced 100-job newsroom reduction this week, but the paper is still hiring software developers.
Oct 22nd, 2009
Sophia Agtarap
We’re talking about this very thing in higher education: how to do more with less. Departments aren’t able to attend all the recruitment fairs they once were. Staff are being laid off, all the while, universities still need to recruit top students. One solution is harnessing Web 2.0 and social media for both recruitment, student retention, then engagement as an alum. As more people adopt social media into their standard operating procedures, both students and institutions of higher education are seeing that there are ways to engage throughout the cycle, from recruitment to alumni and donor cultivation.
Dec 9th, 2009
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