Evaluating Reputational Risk
(this post is the third in a three-part series by Jonathan Low, a co-founder and partner of Predictiv LLC, a firm that specializes in providing business leaders with strategic insights on how to better measure, manage and improve the performance of their organizations. The series is debuting on Dim Bulb).
For corporate communications specialists and reputation managers in the post financial crisis universe, the combined elements of distrust for authority and demand for transparency converge on the internet, specifically in the realm of social media.
Hardly a day goes by without a breathless email announcing yet another conference, video, webinar or book providing the definitive answer to the mysteries of bending social media to one’s will. However, the relentless hype that has accompanied its growth may exaggerate or misconstrue its impact.
Professionals would do well to take a deep breath and begin to think about how to build a detailed business strategy that includes but does not necessarily focus on social media so as to create sustainable value. Specifically,
- Define goals specific to SMB involving messages, audiences and media but within the context of broader organizational strategic objectives
- Be flexible; SMB is not appropriate nor effective in all situations; consider it one element of a much larger collection, not the answer to all questions
- Integrate SMB into the organizational and cultural framework of the entity employing it; isolating SMB in its own silo reduces its value and assures its eventual irrelevance
Social media/blog (SMB) growth data
The numbers around social media impact seem compelling. 48% of the total population in the US, 36% of the population in Europe and 11% of the population in Asia access social media.
According to Nielsen’s 2009 "Global Faces, Networked Places" report on social networking trends, social media and blogs are now the fourth most popular on-line category, just ahead of email. Furthermore, the study notes that the "active reach" of social media/blogs grew 5.4% from 2007 to 2008, more than any other category.
Focusing more specifically on business benefits, DEI's study on the impact of social media on purchasing behavior states that of those who report using on-line sources for researching purchases, 70% use social media. PR Newswire claims that companies with the greatest depth and breadth of social media ‘engagement’ grew revenues 4% over a twelve month period versus the least engaged, which saw revenues shrink 6%. The Pew Foundation’s 2009 State of the Media reports that social media use grew 9% in 2008.
These unspecific and sometimes conflicting data underscore Challenge #2; the lack of one comparable and credible data set about SMB usage, which has led to widely disparate statistics about audience, usage and other relevant metrics.
The numbers do agree that growth of SMB usage has continued to increase globally. Usage figures suggest that 104 million people in the US accessed some sort of social media site in 2008. It is apparent that these SMB users are interactive rather than passive.
Recent research from Burson Marstellar reports that in the US alone, there are now 20 million bloggers, some 2 million of whom are paid something for their efforts and almost 500 thousand of whom blog full time for a living. To put that in perspective, more people in the US make their living as bloggers than as computer programmers or firemen.
This means that a growing though not yet dominant element of the population is forming its views based on sources which are not traditionally filtered or necessarily expert. In addition, the demographics on social media participation are shifting: in the US; 52% are women and 45% men. Women over age 40 are the fastest growing segment. The data for Facebook, now the dominant social networking site, support the broader trends; the age cohort demonstrating the greatest growth has been among people aged 35-49 (24 million) and it has added almost twice as many 50-64 year olds (13.6 million) as under 18 year olds (7.3 million). Highly engaged SMB usage is escaping its original youth-oriented demographic and spreading through the wider population.
Exuberantly and - mistakenly - extrapolating from SMB growth data
Social media have become an omni-directional force in communications between and among individuals and companies. It reinforces broader trends that people have lost trust in institutions, government, pundits, celebrities and other authority figures, relying more on family, friends and others they know. Nielsen has reported that traditional forms of ‘outbound’ corporate communication, like advertising, suffer from a ‘major lack of trust,’ with ‘false’ being the word most commonly used. The 2009 Edelman Trust Barometer reports that trust in advertising dropped from an already low 20% to an astonishing 13%, while trust in information provided by CEOs dropped from 36% to 29%.
However, SMB enthusiasts have tended to extrapolate from the positive growth trend data and have ascribed across-the-board benefits to SMB that may well be overstated.
The first problem is that for all the compelling data about gross SMB growth numbers, there is little evidence that these have yet to be converted into confirmed purchases. The language is vague: 80% of companies ‘worry about’ SMB, according to Russell Herder Associates. A Marketing Executives Networking Group survey that detailed views on SMB benefits: ‘customer engagement,’ 85.4%; customer communication, 65%; and speed/feedback, 59.9%. Though encouraging, these categories are not explicitly linked to customer purchase decisions. Even ‘harder’ categories – which can be proved to link to sales - were ranked by the MENG members as the SMB benefits they were least likely to obtain; reach, lead generation and customer service.
A poll of office workers by Workplace Media reports, “96% of respondents said their opinion of a product brand did not change if that brand had no presence on a social networking site.” Only 11% of SMB users report following a major brand through an SMB site. Just 12% of respondents said their opinion of a brand changes if that brand maintains a social networking site.
EmailVision surveyed 102 company representatives; they found that just 3% were using SMB or Twitter for promotional purposes. Their second finding points to the problem facing SMB as a competitive marketing tool; 50% of those surveyed said they preferred search engine optimization and email to drive their on-line strategies.
The news for Twitter as a sustainable communications platform is ominous. Despite the fascination with this phenomenon, business usage has been minimal. Again, research data suggest that despite the increase in people signing up to use Twitter, the retention rate for the service is less than 30%, which is less than half the retention rate for Facebook and MySpace. According to LinkedIn Research Network and Harris Interactive, only 8% marketers responding to a survey thought that Twitter was an effective marketing tool.
Who is the audience and why?
A broader question has to do with the changing demographics of SMB participation. As noted above, SMB usage is transitioning from an under-30 orientation to a more representative portrait of the overall population, though the percentage of those over 50 using the net still hovers around 22%. Those who seek news on-line still skew more educated and affluent than the population at large. For the past decade, college graduates have been three times more likely to go on-line for news, a percentage that has not changed despite the astronomical growth in on-line access. 61% of college graduates go on-line versus 19% of those with only a high school degree.
This is not bad news for communicators as it suggests influencers can best be reached through these media. For those aiming to target broader demographics – or specifically lower economic cohorts – it means a less comprehensive reach than network, cable and in some cases, radio. This reinforces the questions about allocation of budget and impact.
These questions are exacerbated by the comparative data on viewership among the various media. The number of people who use the internet is about equal to those who watch cable TV. Of those two segments, about 40% get their news from the web, versus 70% who get it from TV. The network nightly news, for all the deterioration in audience, still dwarfs cable as a news source. 22.8 million viewers watched the three network TV evening news shows in 2008, almost seven times the number that watched the three most popular cable news shows.
Related to this, the top internet news sites are primarily the on-line arms of mainstream media providers or consolidators of such news like Yahoo. The top ten news sites in 2008 were, in order, Yahoo, CNN, MSNBC, Google, Drudge, the New York Times, Fox, USA Today, BBC and the Washington Post. By comparison, the three largest news-oriented blogs – Huffington Post, Politico and Real Clear News – drew 3.9 million more participants from 2007 to 2008. Yahoo, by itself, drew 4.5 million more in that period.
For communicators, the point is not to discount the value of SMB but to reinforce the notion that SMB is only one channel among many. Depending on the demographic the communicators wish to target, the most comprehensive and cost-effective means of penetrating that market segment almost certainly lies in a multi-dimensional strategy which incorporates multiple channels.
This raises the crucial question that has plagued SMB and other internet-based enterprises which rely on revenue to support their activities: what is the sustainable business model?
In 2008, total ad spending was down 2.6%. TV remained the dominant medium, with 60% of the total ad spend. Broadcast TV was down 3.5%, internet ad spending was down 6.4% while cable TV ad spending was up 7.8%.
According to Nielsen, "As the value of on-line real estate is increasingly measured by time spent rather than pages viewed, a shift in ad revenue towards social media could be realized if the successful ad model can be found" (italics added).
Conclusions; Towards a credible model for valuing SMB impact
In order for that requisite ad model to be created, it behooves corporate communicators to develop a better understanding of how social media participants choose and sustain affiliations, form opinions and make their social or economic decisions.
The data suggest that while there is rampant experimentation with new forms of media in a time of economic and communications transition, traditional media may currently provide the most sustainable impact on target audiences. The crucial missing element is a set of credible, comparable measurements that provide advertisers with the assurance that their investment in SMB advertising is having an impact.
That older Americans have begun to embrace SMB is a positive sign, since the perception that this was a younger person’s venue was a limiting factor. The primary challenge to broader acceptance of social media as a dominant channel for communications and reputation building is two-fold: its uncertain growth across all segments of the population, not just better educated or wealthier individuals, and the absence, to date, of a sustainable revenue model that will underpin the continued investment necessary to build the channel’s strength.
In its current evolution, SMB is following a well-trod historical innovation adaptation process. As with automobiles, electricity, information technology, quality, knowledge and most other bleeding edge concepts, companies are appointing executives with exclusive responsibility for social media and blogs, e.g,, the VP of whatever is perceived to be new and meaningful. Though slow and wasteful, this approach has led to success over the longer term both for the innovations and for the companies that adapted them.
However, it was not until an integrated solution strategy was created that these innovations were able to deliver on their truly scalable and sustainable promise. The putative "VP for Social Media" is a step on the path, but his or her very existence is a demonstration of the as-yet unfulfilled promise that SMB holds. Only when line managers understand that SMB is one of their responsibilities, will it have arrived.
There are particular economic challenges in the SMB realm. First, the SMB arena has developed as a highly personal rather than commercial space. Participants have embraced the opportunity to share themselves on-line with friends and relatives, as well as to meet others who share their interests or passions. Measuring social impacts on target audiences and resultant financial results – common in most business fields – is in its infancy in SMB and may be regarded as an intrusion.
SMB partisans have been vocal about what they see as violations of their engagement with the sites and each other. Privacy concerns have been raised about records. There is also a pervasive sense that advertisers are gate-crashers thereby lessening their effectiveness for the advertiser.
The problem these obstacles pose is one of reach and impact: if fewer people are participating or they are not from a target demographic or the ethos of the medium is hostile to commercial messaging, the ultimate utility of that medium is questionable.
How, then, can communicators and reputation managers most efficiently utilize the SMB opportunity?
- Define goals specific to SMB but within the context of broader organizational strategic objectives involving messages, audiences and media
- Be flexible; SMB is not appropriate nor effective in all situations (for instance, on-line readers may be most interested only in breaking news); consider it one element of a much larger collection, not the answer to all questions
- Integrate SMB into the organizational and cultural framework of the entity employing it; isolating SMB in its own silo reduces its value and assures its eventual irrelevance
- Remember that legacy systems like TV, radio and email remain immensely powerful and may be the most effective means for disseminating a specific message or reaching a particular audience
- Think strategically about new opportunities to utilize SMB and other tools; mobile communications may be the ultimate vehicle for SMB messaging; how does your message or reputation defense play in that context?
As the Edelman White Paper on Social Media put it, "Corporations can’t buy reputation or broad loyalty anymore. These are earned through performance over the long term."
Communicators and reputation managers have both clasped and fueled the hype around SMB. It has provided a raison d’etre for industry professionals during a period of economic dislocation and downsizing. It has also presented them with an opportunity to appear as experts on a subject of great interest to many others. There is nothing wrong with this – and much to be admired. Ultimately, however, for communicators and reputation managers this must be about business impact; falling in love with a technology or a process reduces ones ability to see the next application opportunity clearly. To be sustainable as a profession, communicators must be clear-eyed and cold-hearted about using SMB only so far as it demonstrably benefits the client.
The second essay in this three-part series ran yesterday, entitled Public Actions; Private Reactions
The first essay ran Wednesday, entitled From Pitchforks To Profits
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