Social Media, Marketing and the ROI Dilemma

Can social media sites develop business models that can generate even a fraction of the billions that Google is racking in? To this point the answer is a resounding no. Sites such as Facbook and Twitter are growing at an astounding rate, but are they primarily relationship sites, or will they turn into marketing and business building powerhouses?

There are those who insist that MySpace is yesterday's news and that Facebook and Twitter are basically fads that will soon be seen, as far as marketing is concerned, as interesting but failed experiments. According to this reasoning, these sites will remain as vehicles for social interactions, but when it comes to helping build businesses or generating ROI, they will be seen as monumental failures.

Google has more than proven its ROI capabilities. AdWords alone is reported to generate up to 95% of its revenue stream, which is more like an ocean. But unlike Google, which serves as a basic (if the term basic can ever be applicable when describing Google) search engine, FaceBook, Twitter and other social media sites have markedly different formats and face very different marketing challenges. Originally developed for friends and acquaintances to interact, the posting and images on social media sites can often be confrontational, controversial and at times obscene. Therein lies the marketing problem; do companies want to take the risk of having their messages, ads and brand equity positioned next to such possible loose canons? Does a chain that sells children's clothing want to risk having its ad position next to a sexually explicit post?

Add to that the question of user's perceptions. How do those that utilize social media sites feel about ads? According to studies many find them annoying and intrusive at best. According to eMarketer, a marketing research firm, social networking revenues rose an extremely modest 4% last year. Click through rates on Facebook and others sites are minuscule compared to those on Google. Because of that, many companies choose to have a presence on social media sites, but only a small fraction choose to buy ads. But in order for social media sites to thrive and come from age as business sites and marketing avenues that can compete with traditional media outlets such as TV and print publications, they need to attract advertising revenue. To be sure many large corporations are giving social media ads a shot. But it's a slow build. The very quality that makes social media sites so attractive, the free flow of content, is quite what makes advertisers so very cautious.

Copyright © Anthony Mora 2010

 
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