Corporate Social Networks Are A Waste of Money, Study Finds
How would you feel if you spent more than $1 million throwing a party and less than 100 or even 1,000 people showed up? That sinking feeling is spreading over corporate boardrooms around the nation, according to study performed by Ed Moran, a director at consulting mega-firm Deloitte.
It may be all the rage, but are company-built social networks for customers to socialize in really smart?
According to Wall St. Journal coverage of Moran's study, "Thirty-five percent of the [corporate] online communities studied have less than 100 members; less than 25% have more than 1,000 members - despite the fact that close to 60% of these businesses have spent over $1 million on their community projects." That means some of those $1 million parties probably had less than 100 attendees. Somebody got fired for that, right?
Former RWW staff member Josh Catone found the WSJ story first over at his new gig and offers some good advice for companies seeking to avoid this terrible fate.
According to the study's author, the biggest problems are the following:
- Overpriced, shiny features.
- Insufficient and inexperienced community management. (See our massive post on community management earlier this week.)
- Bad metrics and criteria. Though Moran says most companies can talk the talk, saying they are looking for engagement and word of mouth, they end up measuring in page views. He says that's bad. It probably wouldn't be so bad if they were getting any page views.
Other Perspectives
The study was performed in conjunction with Beeline Labs and titled The Tribalization of Business. How bad do things really look? That depends on who you ask. Beeline's summary of findings don't sound so bad at all. A press release that appears to have originated from Deloitte looks a little more somber. The Wall St. Journal coverage focuses on absolute gloom and doom. The report itself? You'll have to request a copy and get in line, apparently. Look out, here comes the future!
Let's face it, though. Social networks where a brand name product is what everyone rallies around are a dumb idea. They are stupid. No one should submit themselves to the indignity of creating a user profile and friend connections based on cola or cat litter. We have written before about the never ending market for niche social networks and we're down with that. Hell, we like to read about countless niche social networks on the Ning Blog just for fun. If brand-centered social networks are failing, though, it's probably because they are brand heavy and stupid.
The matter could probably warrant more thoughtful discussion, but instead we'll leave you with this image, from Purina's Breeze for Cats. It's a "community" focused on cat litter. Ask yourself, is there hope for humanity?
Fake Smile photo by Lauren Photography
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I couldn't agree with you more. Brands should be more focused on participating elsewhere - you know, all those 100s of other community sites - then building a destination community. Plain and simple.
tell that to edelman marketing
Posted by: Peter Dawson
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July 17, 2008 6:41 PM
Jenifer, that's one thing I planned to include in this post but you put it better than I would have. Participating around the web instead of building a destination site is key. A very rare few corporations are able to produce the kind of content and user experience that will draw and retain people at a destination site.
I can't count the number of people I've told "go to where the community is". Unless you're astoundingly compelling, it's the only hope for social network engagement.
Posted by: Stephen Collins
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July 17, 2008 6:42 PM
When it comes to the web, "If you build it, they will come" does not apply. Every good salesman knows that if you can't find anyone at home in door to door sales, go to where the people ARE.
Posted by: Sean McGee
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July 17, 2008 6:45 PM
This is way too funny. How many cats signed up for the Purina's Breeze for Cats? I will say this. Purina created a really exclusive niche. Cat Crap.
Large mainstream companies don't get it. No wonder their returns are so bad. It makes you think that if they are wasting $1 million on this. Fire them all so they can create their own network - inexperienced incompetence community!
Marshall,
Another fine post. I wrote recently about how the "I Can't Believe Its Not Butter" folks have a Facebook page for Spraychel, their brand mascot. Spraychel is also running for President BTW.
Meanwhile anyone interested in the power of niche social networks who would like to join our lunch discussion in Portland on July 25th with Ning Inc's VP of Business Development, Rachel Masters, please click here for details.
Of course users don't want to be social around a brand - they relate on common interests and locations, rarely on the products they buy.
And $1 million is insane considering it is pretty easy to get 1,000 users. These companies could have bought 2-3 existing socnets for that.
This is what happens when CMOs let their Ad agency handle Social Media Optimization.
But Marshall, I think you make the mistake of thinking as B2B social nets as a place to make friends. In fact they should be glorified message boards (and isn't every SN that?). Yes, friendships can develop, but B2B social nets are more a place to exchange information that is helpful, useful and interesting to fellow consumers.
There are stories of Brand based communities doing some amazing things like Dell and look at gaming with the cheat sites and the like. There is real power of the customer on display here. With that comes a trove of sentiment and "listening."
If I was Purina I would buy the largest cat site out there and spend $1M to add the most advanced communications and create the greatest, most relevant experience possible for cat lovers. My bet is that it would be a success for Purina and cat lovers everywhere.
First mistake, leave it to the marketing department to do this. Obviously, don't bother to hire a social media expert. Some dude in marketing who was on twitter once will do.
There are plenty of quality folks out there (uh, like me) who are looking for social media positions within corporations. Our living resumes are already out there in our blogs, podcasts and discussions on twitter/friendfeed. Don't try this at home corporate America, get someone who knows what's going on.
Social Networking it's a waste of time in general.
Anyone who spends $1m+ for a branded social network should be fired -- either for incompetence or for paying a big agency way too much money per hour.
Smaller, hungrier agencies would never let you endure that type of failure and they'd charge you a lot less for the opportunity.
Big agencies remain a terrible deal. They take every penny you have, overrun your budget, and consistently underdeliver. And they are *rarely* aligned to enterprise interests.
This finding was so obvious that the study itself was found to be a waste of time.
There are companies out there that can take up the task of providing a customized, branded social network or communication platform with minimum and competitive cost.
All you have to do is search: www.wadja.com, www.ning.com
Great post Marshall - but I'd content the main reason that these offerings fail (beyond the obvious fact that no one wants to create a profile to share their love of cat litter) is their lack of neutrality.
Consumers are just so over being talked to buy marketers, they're also over being involved in pseudo communities that are little more than tupperware parties.
What these corporates need to realise is that their best option to be part of a relevant conversation, is to support and facilitate the creation of strong, independent and neutral communities of interest.
Perhaps a better headline would be "Badly Implemented Corporate Social Networks without clear objectives are A Waste of Money".
Launching yourself into a $1m project without a pilot, proper ROI assessment or a profile of the likely participants: well it's just stupid. Go hire an expert and get them to justify the investment. Start small too.
(Agree entirely with Jennifer Van Grove - go to your customers rather than wait for them. It's the most exciting thing about social media!).
It would depend on the product or service.
for things like Designer fashions or cosmetics or hi tech gadgets - you could potentially meet like minded people.
Products like APPLE and services like Google could probably be quite successful at this because of their loyal and educated following.
So it depends on the product. or service whether this would be as successful as planned.
Also it is not the number of people - but the quality of the people who show up.
100 or 1000 dynamic, intelligent and gregarious people are priceless when attending any party.
I think it is important to note the study finds that poor community management is one of the root causes of the failures. Given my 12 years of experience in running online communities and social networks, I would second that notion. Too often I've seen people just set up an empty community and walk away from it hoping that people would come and find it.
Community management is so critical and often overlooked. Time to start paying attention to the basics of running online communities.
While we're all eager to say "thats frickin obvious" we might as well apply the same scrutiny to other branded social networking efforts like Get-satisfaction? I also wonder about P&G's Moms social network if that was in study as well. Still seems like a good idea although the breeze cat litter one does make me wince a bit.
Purely from a research point of view theres nothing wrong with having a audience of participants engaged in your effort, and maybe thats what these brands really missed out on and in general is the biggest issue with all social networks, what is the engagement factor and how can you keep it up, why do some networks thrive while others die, is it engagement, is it just who has the most friends there, is it apps to play with, is it newness over time, etc.
Dell Idea Storm is a pretty successful branded social networking site, i dont have the stats but MyStarBucks idea also seems lively and god knows they need it right now. I guess all this article really tells me is that participation is key, and that these brands didnt correctly factor in what the engagement/participation factor would be for a bunch of folks hanging out in their living room on a pc talking to other people about kitty litter.
Hi Marshall - I was part of the study and did a lot of the interviews.
Business communities can and do work. There are many companies, Intuit, Dell, Eli Lilly, Tivo and many others who have demonstrated that they can harness the power of communities to do marketing and product innovation with their customers instead of at them.
When communities fail, it is exactly for some of the reasons that you mention: not putting the user at the center of the offering. Unfortunately there are many marketers who still think that their brand and their company is at the center of the universe, and when those people set up communities you get the cat litter example.
There are other fundamental and predictable reasons why communities fail - and ways to avoid those pitfalls. If you'd like I can take you and your readers through some of the findings in more detail.
I also agree that in many cases - but not all - companies should look at where their users already hang out and then engage them there instead of trying to hijack them in a new community.
Lastly - and to the point that dan made, there are many so-called communities out there that are really not communities. I would put the Vocalpoint activity by P&G in this bucket.
I have also written many posts on the subject while conducting the research at http://www.emergencemarketing.com as well as http://www.marketingtwo.com.
Great post. Inspired some excellent responses.
I'm still chuckling over which is the funniest part of this story:
A. companies who spend $1 million to build a social network site...period. So many free resources exist that even if the community was a huge success...you're still out at least an extra $999,000.
B. That this behavior, $1 million for a community, is worthy of a study.
( If either was offered to me, money for a great big study or $1 million to build a social media site, I think I'd laugh too hard and lose the deal. "SURE! I'll take a million...")
C. Cat litter as a community focus..You know, for the agency behind this idea, if this ad agency thing doesn't work out for you, you should try working in the sub-prime mortgage markets 'cause your sales skills are underutilized.
LiviuX said...
Social Networking it's a waste of time in general.
Amen.
My cat loves that site, lots of good advice on "pooping outside the box". Meeeeeeooooow! The phrase "corporate stupidity" is coming up more and more...
Agree with David Sim: there are many focused social networks that work. Implementation is key and *start small.* Reminds me of the early days of folks just throwing up web sites...
Posted by: Barbara K. Baker
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July 18, 2008 9:59 AM
Wow, this post brought out all the "social media experts". Christ people, get over yourselves.
"You're doing it wrong" doesn't cut it.
Plain and simple:
You people are the reason these companies tried this crap in the first place.
P.S. "dan" (#19) before proclaiming any branded socnet a success, you better damn well have the stats. Hint: neither dell's nor starbucks'sites are a success; starbucks is full of employees and dell's is a bunch of IT dorks whining.
I disagree with much of what I read in this post, as well as many comments. Because WE aren't interested in cat litter doesn't mean other people aren't. If people want to rally behind a cat litter, let them! Who are we to judge what is "worth" a community or not?
Someone commented "Of course users don't want to be social around a brand." Hogwash. Those of us who drive a Toyota Prius and use Apple computers blow that theory out of the water.
Someone else commented "Social Networking it's a waste of time in general." Sure it is. Just tell that kid who was released from a foreign prison because of Twitter.
Great post Marshall,
The thing about these kinds of corporate networks is, there's no "there" there. If it's built around press releases and not engaging content it's bound to fail and why should I sign up?
Playing it safe and toeing the company line, tossing out PR spiels and sound-bytes isn't going to build community, it's just white noise.
That said, I think there is still a place for corporate social media, they just have to do it right. They have to get honestly involved and spend time engaging users and giving back value.
That kind of engagement is expensive (read time consuming) and can be dangerous if there's not a lot of love for the company already, but in the end the companies that suced at it will gain a lot form their users and the network.
And Dale missed the entire point of the article,
Let me help you dale:
Large companies have found their efforts to "engage" the consumer through branded socnets have found minimal interest, and therefore, a very low to zero ROI.
Nobody said "people shouldn't join a cat litter socnet" (did I really just write that?), they said nobody joined.
I really believe that a social media specialist could immensely help manage these social networks. Poor management really hurts these SNS.
Let me guess Janet Fouts, are you a social media consultant for businesses?
Self-serve much?
I guess they were doing it wrong, huh?
P.S. I'll shut-up now, but these social media experts/ consultants really need a reality check. None can point to any success they've played a role in at all.
Hi Marshall - I was part of the study and did a lot of the interviews.
Business communities can and do work. There are many companies, Intuit, Dell, Eli Lilly, Tivo and many others who have demonstrated that they can harness the power of communities to do marketing and product innovation with their customers instead of at them.
When communities fail, it is exactly for some of the reasons that you mention: not putting the user at the center of the offering. Unfortunately there are many marketers who still think that their brand and their company is at the center of the universe, and when those people set up communities you get the cat litter example.
There are other fundamental and predictable reasons why communities fail - and ways to avoid those pitfalls. If you'd like I can take you and your readers through some of the findings in more detail.
I also agree that in many cases - but not all - companies should look at where their users already hang out and then engage them there instead of trying to hijack them in a new community.
I have also written many posts on the subject while conducting the research at http://www.emergencemarketing.com as well as http://www.marketingtwo.com.
Frank Church, check the email field on your comment form. I think you made a typo.
So, ultimately, the message is:
Go where the market is. Why waste $ trying to lure them to you.
-Mike
Good post. We've worked with many companies on social media, and the problem many try to impose their old approaches on the new medium. Overly written posts, marketing-speak, and subjects that are not engaging--the list could go on and on. The ones that do work start with a clear theme and approach and bloggers who "get it"--ones who can write clear, compelling posts that are independent of their company's messaging, positioning, etc. Building a community isnt' easy, but it can be done: but first start with your audience, and end game...and work back from there.
would you call xBox Live a failure? did they consider that social network in their study? the problem is not 'social networks for products', it's the products that's don't need social networks. when i was in the market for an HDTV, i would have LOVED a Samsung social network with people talking about settings and all that stuff. what about TiVo? What abou the new SmartCars hitting the roads. Those are products that BREED communities. Cat litter? Maybe not.
Bernard Lunn, you had me howling or should I say Meowwwwwwing... I suppose, and you would have hoped that they had had some focus groups in which they said, "yes give us a social net for cat litter"! We need it and want it...etc etc..
But ouch, a Million bones is a whole lotta scratch...hissssssssssss...
This is exactly why many companies are moving their community efforts to traditional social media sites. A good example is Verizon, who moved their community from their own site to Facebook (www.facebook.com/verizon)
Brands can "socially-enable" many parts of their website without resorting to just a pure social network. Too often we confuse the terms social networks and social media. Providing avenues for people to share opinions, information feeds and other digital assets like videos, blogs and photos is different from yet another social network. Let people use whatever profile they currently maintain, but give them a chance to participate in the web experience. Companies like ThePort Network (www.theport.com) can easily make this happen at very reasonable costs.
This post really points out a learning that should've been obvious from the beginning. Why would anyone want to form a community around most brands (only a few brands are genuinely iconic)? Even in the old media world this should have been an idea that was questioned. It merely shows us that some people don't understand their own brands & how their customers already relate to the brand. If you have an iconic brand that people love then a community might work. If you have a utility or commodity brand then perhaps a re-think on the spend for a community is in order? Can anyone spell ROI?
"Go hire an expert" - you mean the social media consltant's ? that ones that outnumber the users on twitter ?http://friendfeed.com/e/7b7641c2-db7b-47ef-b48f-1c773ce0a7c9/The-amount-of-people-calling-themselves-social/
Posted by: Peter Dawson
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July 19, 2008 5:24 AM
While the research unveiled interesting facts, but I think the blanket condemnation is not constructive.
Anytime you foray into something new and untested, you expect to make some mistakes. And a few commenters have pointed out, there are many successes if you want to see them.
My few thoughts for brand managers and marketers are as follows:
a) Look around, you will find successes for inspiration for examples you want to pursue.
b) The key mistake pointed out in this article is that your brand should NOT be the center of attention. It should be about what is in it for the consumer and user when they participate.
c) It takes more than just technology to succeed. There are other resources and skills needed. The book Groundswell provides a good list. The most important I think is your company's mentality and effort to participate and engage.
d) Start SMALL. I do agree that $1M+ is way too much to start as the first effort. There are so many options out there now and that can scale if you're wildly successful. My company(www.orbius.com) focuses on small-medium sized businesses and organizations or small-medium sized communities within enterprises like departments, collaboration projects, Human Resources new employee orientation, focus groups with distributors or key customers, product innovation task force, etc. You can even try us for FREE. Many other vendors do the same. There is long list here (http://www.web-strategist.com/blog/2007/02/12/list-of-white-label-social-networking-platforms/)
e) Be aware that there is much to learn to be successful. You can hire somebody to teach if your risk of failure is high as was suggested. Else just get on the bike and try with a less riskier project! You'll fall off the bike, but it won't kill you. Whatever your situation, there is a way to contain risk - be it financial or personal or with customer reaction. You cannot learn simply by reading. Sooner or later, you have to PRACTICE it.
f) Social is an over used word and I think is less applicable in the business world. I choose words like participation, interaction and engagement with and among customers and other business stakeholders (internal or external). Perhaps that can help you reframe your business objective better. Many of your vendors can help with this conversation.
Lastly, just because you don't understand it, does not mean you have to avoid it. If you like some of the results you have witnessed elsewhere, make that a similar goal. Being outside of our comfort zone is part of the journey for worthwhile things to get accomplished. If you feel optimistic but unsure, just start small and get help! But do get started. Don't let articles like this paralyse you but use it to be more aware of challenges.
I hope I injected some courage back to readers who are struck by fear with this article.
Cheers.
Oh we are social around brands... where we want to be. Plenty of video review of brands sites around - try http://www.expotv.com/ - or do a search of Facebook groups or even hang around Vogue forums to watch the Chanel vs YSL fights :P
Align purpose, places/tools, profiles, roles, leadership, etiquette, rituals, events and subgroups and you have a fighting chance of building something worthwhile. Go down the route of chucking up a bunch of social media tools (blogs, wiki and a forum) and you'll fail. Without a doubt.
Anyway, if you truly want to hand over the community to the community, sponsor the ecosystem communities, don't provide it yourself. eBay storeholders drive more loyalty than eBAy forums do, no?
I think corporate social networks can be like people who think they can run restaurants because they like food.... The 'build it and they will come mentality' is hardly new - but of course what would we all know, we're just the tech community! ;)
Nice article. I can pontificate to colleagues ad nauseum about the silliness of business social networks (linkedin is the only one I can think of that is successful and I personally am not a fan and know no one who is a fan ... who are the people spending money for linkedin subscriptions?) but now we have cold, hard statistical data telling us these things don't work on the micro level. Macro? I'm waiting for linkedin to fizzle. They need new and different features to survive IMHO.
Gee Frank/Fred, you musta looked me up huh? I'm flattered. Yep, true I'm a social media consultant, and I've been an evangelist for communities since before we were using the word social media. I stand behind my beliefs.
If a company wants to play, then they better do it right or sit down and watch until they figure it out. Otherwise they run the risk of throwing a lot of money down the drain and turning off the consumers they're targeting.
It's a little hard to take articles like the WSJ one seriously if for no other reason than the premise is:
1) Throw a lot of money at an ill-defined problem.
2) Under-staff it with people working outside of their core competency.
3) Be surprised when it turns out to be a waste of time and money, not to mention, brand equity.
Yes, you need a plan. Surprise! And part of the plan involves decisions of what the core "job" is of the community.
Is it an extension to your direct mail/email/lead gen strategy? Is it a sandbox for your customers to share knowledge and best practices relative to your product or service? Is it a means to embed your most vocal customers into your product development/evangelism process?
Then you need to decide whether your target are people already in your database (such as your mailing list) or folks hanging out in the myriad of social nets already out there.
Finally, you need to reconcile that this is akin to deciding to start a garden. It's a lifecycle process. You can't simply plant the seeds and expect the garden to do the rest. Someone has to take responsibility to till the soil, provide light and sun, etc.
It's the antithesis of a 'if you build it, they will come' proposition. And guess what? When they show up, the REAL work begins!
Here is a post that disseminates some lessons learned in community building with brands.
Online Community Building: Three Critical Ingredients
http://thenetworkgarden.com/weblog/2008/03/online-communit.html
Check it out if interested.
Cheers,
Mark
Part of the discussions in this post was based on the Wall Street article assertion that 60% of the communities who participated in the study spent more than $1M on their community.
In reality less than 6% of the study participants spent more than $1M, and 58% spent less than $50K. Somehow in the whole spreadsheet shuffle, a Y value axis got switched upside down. Ben Worthen, the original author of the article fixed the article - http://blogs.wsj.com/biztech/2008/07/16/why-most-online-communities-fail/
All that being said - many communities do fail, predictably so - and I have added some commentary on what we found out in the study vs. what people commented on at http://bit.ly/261sXz.
Feedback is always welcome... - Francois
Considering that there are now so many social networks catering to such a wide range of niches, my biggest problem is finding ones relevant to me and related to my specific interests or product niches. Google seems to be inefficient and returns alot of irrelevant results. A good resource that I use to find them is this directory of social networking sites
Say what you will, but that Purina site is actually pretty helpful. I mean, c'mon, it's not supposed to be a MySpace substitute! There are, however, a lot of participants on that site that share some pretty good information on what many cat owners consider to be a tough problem. If you don't believe me, read the reviews of that product on Amazon and compare them to the Purina website's.
For the most part, I agree (though there are exceptions). I’ve always thought it seemed way too contrived.
I would need to really think through it, but off-the-cuff I would say the biggest problem with this approach is the failure to recognize that people don’t usually connect around a product. Of the thousands of products you use, how many are you “rabid” about? Probably VERY few. And of those few, how many of those excite you enough to make you want to engage a community of fellow fans on a regular basis? Chances are that neither Purina, Pepsi nor Pop-Secret can garner that kind of excitement. The domain of interest (one of the key ingredients to a successful community of practice) has to be transcendent in some way, bigger than a common house-hold product. I mean, I love my shampoo, soap, deodorant and cologne, but I don’t really want to sit around with other fans talking about those products. How ‘bout we just sign on to Facebook and exchange a piece of flair instead (or click to become a “fan”)?
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