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Posts Tagged ‘network effects’

Don’t believe the hype

If you’re a business owner considering your firm’s social media options, it’s hard not to be distracted by the shiny object that is Twitter. The microblogging service launched in 2006 has purportedly grown to more than 100 million users, been featured on the cover of Time Magazine, and received $48 million a month in free press coverage. If being a media darling signified business value, Twitter would be the Holy Grail of social media. Unfortunately, that’s not the case. For a seemingly simple piece of technology, Twitter is surprisingly complicated – at least insofar as business utility is concerned. Extracting value requires effort, commitment, and an understanding of Twitter’s limitations. Before you cave in to the urge to jump on this social media bandwagon, there are a few things to keep in mind.

Usage statistics are inflated

At April’s Twitter developers conference, Chirp, the company announced their latest usage statistics, including:

  • Twitter has 105,779,710 registered users
  • 300,000 new users sign up per day
  • There are two reasons I suggest these numbers are inflated. First, among these 100,000,000+ registered “users” are single users with multiple accounts and spam accounts. How significant is this phenomenon? According to a study from Edison Research, only 17 million Americans have Twitter accounts, which is an enormous discrepancy even if we factor in Twitter’s claim that 60% of new users are coming from outside the US. Multiple accounts are so pervasive that third-party clients such as Hootsuite, TweetDeck, and Seesmic have made multiple account management a primary feature. Spam accounts not only inflate Twitter’s usage numbers, but also dilute the already anemic follower counts for users (more on this below). Taken together, these factors suggest a high degree of skepticism when it comes to anticipating Twitter’s potential reach.

    Second, and more important than the question of raw user numbers, is the issue of Twitter’s astonishingly low usage statistics. According to a study by Harvard Business Publishing, “among Twitter users, the median number of lifetime tweets per user is one.” The study found that the top 10% of Twitter users account for 90% of tweets, compared to usage statistics for other social networks, where the top 10% account for roughly 30% of contributed content.  A June 2009 report from Sysomos, Inside Twitter: An In-depth Look Inside the Twitter World, found that 85.3% of Twitter users update less than once a day, while only 1.13% of users update more than 10 times  a day.  More than half of Twitter users hadn’t posted a status update in the past week.  According to HubSpot’s State of the Twittersphere report, 54.8% of users have never tweeted. To put this activity data into perspective, consider comparable numbers from Facebook.  According to self-reported statistics, nearly half of all Facebook’s 250 million active users log on daily (48%) and 20% of users update their statuses at least once a day. Media hype aside, Twitter is hardly a hotbed of social activity.

    Twitter takes the “social” out of “social media”

    In addition to Twitter’s inflated usage data, there is the related problem of anemic social connections. One of the primary reasons businesses are excited about social media is the possibility of tapping into the network effects of this new medium – the buzz generated by active, engaged users and disseminated across their peer networks, an amplified version of word of mouth marketing. Unfortunately, Twitter users are among the least connected of any social network. As the Hubspot report notes, 55.5% of users are not following anyone, and 52.71 % have no followers. Moreover, only 18% of all Twitter users have more than 100 followers, and 81% are currently following fewer than 100 people. What this suggests, and as the Harvard Business Publishing study concludes, is that Twitter “resembles more of a one-way, one-to-many publishing service than a two-way, peer-to-peer communication network.” Unless your target audience is among the active 10% of Twitter users, you should probably look elsewhere to capitalize on the network effects of social media.

    Advertising opportunities are extremely limited

    Twitter’s recently introduced Promoted Tweets – a search-based advertising program very similar to Google’s AdWords – marks the company’s initial foray into paid advertising. It’s too early to gauge user reactions or measure the success of this new advertising vehicle, but there are several reasons to approach with caution. Although Twitter boasts 600 million search queries a day, 75% of Twitter traffic comes from third-party applications, which don’t display Promoted Tweets. Twitter’s acquisition of the popular Tweetie iPhone app has led to speculation that promoted tweets will be integrated into the mobile client, and there’s no reason to believe that Twitter won’t pursue integrations with other popular clients, but that hasn’t happened yet. Additionally, Promoted Tweets only appear in search results – not in user’s feeds – although that too may change in the near future. Until that happens, Promoted Tweets will deliver a very limited number of impressions, and user reactions will be difficult to measure. A number of high-profile brands are taking Promoted Tweets for a test run, and businesses would be well-advised to keep a close eye on this emerging advertising opportunity. However, it is far to early for most businesses to allocate precious marketing dollars to this experiment.

    Aside from paid advertising, many businesses are looking to Twitter primarily as a marketing channel, and there’s no shortage of how-to advice from ambitious online marketing mavens. And there are plenty of success stories, to be sure. However, inflated usage numbers and limited network effects make Twitter a less than optimal marketing tool. If you are going to push marketing messages to Twitter users, you would be well advised to follow the approach of Dell and others who have reaped rewards by providing Twitter users with exclusive offers and other incentives. Trying to tailor your brand messaging to the confines of Twitter’s 140 character limit is hardly a recipe for success in and of itself. And if your social media resources are constrained, or you are  under pressure to deliver tangible results, there are other social media outlets that will provide bigger bang for your buck.

    Do the right thing

    So, avoid Twitter like the plague, right? Wrong. Although it’s far from a mature marketing channel, there are some indications that Twitter is a viable component of your marketing strategy. According to comScore’s Q1 2010 e-Commerce Spending Report, 23% of Twitter users follow businesses to find special deals, promotions, or sales. Of that, 14% of Twitter users reported taking to the stream to find and share product reviews and opinions. As users become more active and the social aspects of the site become more robust, marketers are likely to find a number of opportunities to engage consumers. In the meantime, Twitter offers an important case study for the value of social media beyond the marketing silo.

    Customer Service & Brand Equity

    Twitter’s primary business value at this point is derived from the feedback users’ offer about your brand and products. Whether positive or negative, user reviews and recommendations provide valuable insight into your customers’ experiences. A variety of social media monitoring tools make it relatively easy to find out what your biggest fans and harshest critics are saying about you. Companies that are willing to listen, respond, and react to these compliments and complaints have a lot to gain from engagement. Best of all, you don’t have to cultivate a large following or worry about the breadth of your reach to see tangible results.

    Market Intelligence

    Just as customers are talking about your brand, they’re also talking about your competitors. Twitter allows you to learn about consumer needs, capitalize on your competitors’ weaknesses, and draw on their strengths. A well-developed monitoring strategy will allow you to keep your finger on the pulse of consumers, and to stay ahead of the curve when it comes to emerging developments in your market.

    Product Development

    Consumer tweets are not just an index of customer satisfaction, but also a great way to learn about what your customers like – and dislike – about your products and services. Rather than simply reacting to complaints, the most successful companies will proactively respond by incorporating feedback into future development plans. Even a relatively small number of suggestions will provide direction for further investigation through focus groups and other targeted research. Consumer-driven innovation may provide the critical edge your business needs to achieve or maintain dominance in your market.

    These are just a few examples of the real business utility of Twitter as it stands now. Building relationships with influencers and thought leaders in your market, creating relationships with potential strategic partners, and building connections to facilitate sales are also potential benefits that are independent of Twitter’s marketing value. And that’s the main point here: with limited resources and a variety of other social marketing channels available, why spend valuable time and energy trying to make Twitter something that it’s not, when there’s already a lot of value in what it is? So yes, you should be playing with Twitter. Just don’t allow marketing imperatives to skew your focus.

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