Saturday, July 19, 2008

When will social media be profitable?

In many boardrooms, top exec's are struggling with questions around social media and Web 2.0, at least that's what I'm being told...if, and if so, how, why and what to implement are questions of the day.

The tendency to jump in with both feet as part of being a forward thinking organization (or at least to have the appearance as such) is great and why not? After all, there is potential value everywhere. Research, ability to respond to, and engage with, customers, innovate regarding products and services, shift markets with new strategies, the opportunities for value generation are immense.

Unfortunately, quite often the wrong questions are being asked. In the context of a large organization that can be really scary and expensive. For example: When trying to justify the investment of a social media strategy, its development and implementation, a CEO might ask.

"When will this social media initiative be profitable?"

Not an entirely unreasonable question in many cases, however, CEO's and their executive teams need to understand something fundamental about this entire space, culture and community. This isn't a new marketing event. Social media success is a long-term immersing of cultures. The corporate culture with that of the Web 2.0 or social media culture. Clearly most are starting at an obvious disconnect if you consider the question stated above. This will eventually permeate throughout the organization if it's not addressed early.

Social media and Web 2.0 IS innovation. It's innovation related to how we communicate with our customers, innovation in how we engage in commerce related activities with our customers, how we build and grow business models, in this case highly focused on our customers.

For example, micro-hacking sessions are going on as we speak and will be done in an hour or two from now, and as a result, large amounts of caffeine and/or pizza will be consumed. I'm also willing to bet innovation has taken place and a new micro-app will have been launched. The Internet is the raw and real "focus group" of today, if the app is spreads, if it isn't cool the team will know quickly. No discussion about profitability or break-even points, no business plan constructed or spreadsheets compiled. Talk about innovation on the fly. Now do you have to take into consider the legal ramifications of these moves, in some cases, more than others the answer is yes.

So, how does a slow moving oil tanker of an organization react to that mentality? Should they? Ahh, YES! Large industries are being impacted one micro-app at a time and many of them have no idea at this point. For example, micro-financing. The rumor is that Twitter will soon integrate a micro-finance application called Is the banking industry aware of the potential impact here? Maybe. We'll see.

The overwhelming majority of CEOs and execs have yet to experience this and still these situations are producing new opportunities for business (it certainly has for my company). Social media is changing the way people are living, growing, engaging and yes "profiting" within the social media and general business spaces.

So where am I going with this? Simple. CEO's and their exec's need to answer their own question regarding the potential profitability of a social media strategy. They need to better understand what the experience is like at least from an observation perspective and when they've done that, their question most likely won't be...

"When will this be profitable?" Rather, "how can we continue to effectively immerse our divisions in this new customer centric philosophy and continue to have more 'meaningful' customer conversations and engagements from which to learn from?"

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