2012-07-30, Nerijus Celkonas

Social networks – business trap or a desperate search for easy profits?

Social networks – business trap or a desperate search for easy profits?

I’ll be open with you right away – I’m a skeptic of social networks’ advantages for businesses (and it’s not the same as anti-social). Though, I’ll try to look at the phenomena of social networks and its benefits for businesses without bias - as much as I can.

The forefathers of social networks were web forums where we divided into groups according to different activity categories or likes. Of course, social networks evolved strongly by their technical and user possibilities and don’t even resemble web forums as they were. But the principle stayed the same – what we searched for in forums, we still look for in social networks. Naturally, first and main users of social networks were children and students. Web technologies became more progressive than SMS’ing in 2000 - here you could also share photos and video besides instant messaging.

Why weren‘t forums able to withstand the competition of social networking?

There’re two clear reasons for this. Firstly, investment into one network only instead of many forums did its job. Of course, the variety of services attracts users more. Secondly, social networks unite audiences, that is, target groups, by their needs. Young people and children have only one basic instinct – to be recognized. To show oneself and see others – that’s the only desire of young people during free time.

We also have to understand that marketing is still alive and most of consumers are told what they should be consuming thought it. If “Facebook” spends 400 million US$ per year on marketing – you have to be very strong to be able to resist. And of course, we should all understand that those millions spent on marketing are intended not only for consumer need satisfaction, but also for the satisfaction of venture capitalists before the first release of IPO.

Of course, even now there are many specialized forums that attract different auditory.

Who are the real social network users?

So why do we go to social networks, when do we do it and who are those “we”?

When a person has spare time, that is, he/she isn’t busy with necessary or useful activities, he/she trades actual live communication with others into technological communication. This means that only the channel has changed, but not the principle. The channel, of course, changed the attributes as well. Physical things were replaced by bits and bytes. Postcards, flowers, emotions and even kisses became digital (I’m guessing you’re thinking “what’s next?”). So, when there’s nothing to do – we go socialize. Technologies allow us to communicate with the people surrounding us in real time, in groups and regardless of distance.

When do we visit social networks? The answer is simple – when we have free time. Most of the people have spare time in the morning or at night, that is, at times free from work. Young people – at a time when there’s no school. Of course, because mobile technologies keep conquering users, time spent in social networks is adjusted, as well as time spent at work and not appointed to it changes attendance.

Who are those “we” that use social networks? It’s logical to say that it’s those having more spare time and super-social individuals. Never before have have we seen any brave statistics, but the most logical conclusion seems to be that if one has nothing to do, one’s a sponger. This could be seen if statistics on how many hours we spend in social networks would be revealed (collectively we all spend 15.5 hours per month in “Faceook”, that is, 3.2% of our total time from 16 hours). First place would be awarded to spongers, second – to young people and kids, third – to the middle class, fourth – choose “LinkedIn”. 

After checking 100 social profiles of my environment (businesses and managers) only 8 of them had a “Facebook” profile when 78 had a “LinkedIn” profile. At the same time after checking 100 of my friends and surrounding people (middle class representatives) – 54 had a “Facebook” profile and only 2 – a “LinkedIn” profile.

Of course, social networks create huge psychological advantages for those that can’t communicate and socialize live. How many “friends” do we averagely have that we’ve never even seen? We use it to promote ourselves. It's just lack of recognition.

We all remember the movie “Social network” and the desperate pressing of F5 at the end. I call them “F5-ers” (even though, most of us do it to emails as well).

What are the threats to social networks and their owners?

The first threat is income. “Facebook” shares keep falling and business can’t find a ROI endorsement. “LinkedIn’s” advertising income per user is well ahead of “Facebook’s” income per user. There’s no wonder, because their target audience differs as day to night. Even without any research marketing specialists understand that higher income, but busier people choose “LinkedIn” versus “Facebook”.

The second threat is loyalty. People aren’t loyal to social networks. If competition arises every one can have the faith of “MySpace”. Also, people have desires of individuality and trend. After all, it only takes a click of a mouse to change your social network.

The third threat is, of course, the technological reach channel. At the time when most users were sitting by their PC’s, social networks created services that lured us out of forums, but consumption and communications is quickly transformed into the mobile environment. And mobile environment doesn’t have the possibilities of a desktop. After the integration of consumer behavior and mobility, consumption ‘on-the-go” is becoming the main tendency. Might we see the increase of “Twitter” users versus “Facebook” users when the technological reach channels change? After all, “Twitter” users are the most potential “on-the-go” consumers when “Facebook” and “LinkedIn” users are PC customers. 

What are the business perspectives?

Understanding out target audiences, their incomes and purposes of visiting social networks, marketing specialists should clearly understand the benefits and plan their actions accordingly. If we’re a group of friends at a party, we don’t feel quite well when a salesperson knocks on our door and offers to buy cookies of a vacuum cleaner.

Of course, business wouldn’t be business if it wouldn’t stick its nose into what’s allowed and what’s not. At the same time, social network authors aren’t charity organizations – business is the only serious source of income for them. Thus, business packed its things and moved where potential consumers are. This could be compared to doorstep sales where the salesperson comes to the consumer and not the opposite. It’s quite expensive to shout to everyone throughout the TV screen or other mass media how “cool” we are, so why don’t we try crashing a party with our goods?

2.5 million pages are integrated into “Facebook”. Business has crashed the party and … it’s not polite to start offering our goods and services right away, how would that be looked at in real life? So marketing specialists figured out a term “Engagement”. Let’s pretend we’re friends, put on our party clothes, drink cocktails and share jokes with hidden advertising messages. It doesn’t matter that nobody actually knows us. After a couple of years of active partying we don’t get actual benefits apart from brand promotion. Direct CTR’s of “Facebook” can’t even be compared to “Google Adwords” and will never be able to. Then the marketing specialists figured out that it’s not worth pretending to be friends at a party, we’re ignored or simply thrown out the door (“unlike” button). The next try was to give away freebies. Here we’re doing a bit better, but this is costing us money and the value is exactly parallel, though, the future success of the brand is potentially greater. Another disadvantage is – this brings only specific auditory and ROI doesn’t increase.

So together with potentially good results, commitment for businesses came along. Not to mention that you have to entertain the crowd at the party, because another brand will do this for you, a duty to answer consumers’ questions has also appeared. In this way customer service partially moved to social networks. As a rule, this didn’t happen by brand initiative, consumers initiated the shift.  If you’re ignored or customer service is bad a store, first thing you do is tell your friends about it. For long time such brand names as “PayPal”, “EA”, “BestBuy” or “Bank of America” were afraid to get out of their corporate offices and visit the “party” as they knew what the consumers will tell them. But there’s no choice, really. Even without them coming to the “party” the consumers will gossip about the brand, thus, it’s logical even trying to stop the oncoming storm. Probably the best example of this is “PayPal”. Even a year ago Scott Thompson and her army of employees were at war with consumers and tried to delete all unfavorable comments in their “Facebook” profile and “PayPal” community blog at any cost. “PayPal” learned the lesson on how much damage inappropriate behavior with consumers can do to a brand the hard way.

“Chief Marketing 2011 Social Marketing Survey” research showed what consumers expect from businesses in social networks:



First three categories are: freebies, customer service and feedback. 70% of the consumers look for own benefits. And I believe it’s a very optimistic report as it’s prepared by the party concerned.

So freebies are liked by almost all. Customer services are expected only by those users who can’t get in contact with the brand or aren’t answered (have you ever tried to contact “PayPal”?).

Feedback is written simply because there’s no other place in the world where your thoughts on a brand or even a person can be expressed (if it’s a restaurant or another public establishment yp.com or yelp.com can help). So only friends references are where brand can count on.

The positive aspect of social networks is that they created new workplaces: “Google” created the SEO market and social networks probably created even more jobs (of course, they just transformed).

The situation seems not very favorable to businesses and owners of social networks. So what solution will they find to have the cake and eat it too?

Please provide your opinion in the comments below. 

Author Nerijus Celkonas, CEO Qwekee.com

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