June, 2012

One of the chief criticisms of social media has been a lack of any discernible business model. This has made some seasoned marketers with business sense leery, as they could not connect the dots between Likes and ROI. It has, rightly so, concerned investors deeply. The week before the Facebook IPO felt like 1999 all over again in investing circles, but journeymen investors stayed away and were vindicated by the epic post-IPO swoon of FB’s stock price. The price has since recovered a bit of ground, but that only makes the company more overvalued. Longer term, it will be hard for either investors or marketers to ignore the mass of humanity involved in social media, but the challenge for social platforms will be to stay around long enough to figure out how to adequately monetize this ant hill of activity.

Social media have been like toys. We meet there with our friends (or total strangers) to have a good time or to kill time. Being social is fun, but it is a huge time sink. Just calculate the number of man hours your business deliberately spends on social media, then calculate the revenue you can hard link to that activity. Ouch! Exactly. But what if all these Friends and Likers and Pinners were Buyers instead? What if all this activity involved commerce? Yes, that changes the very nature of social media. Maybe it’s not even social media any longer. Perhaps only a fraction of these people would even go to such an online environment. As a business person, would it still be compelling?

Business models seem to be the latest trend in social media. FB is scrambling after getting IPO-slapped. Twitter is doing a bit better – at least they are confident in their plan. Google+ introduced a possible game-changer a couple of weeks ago. On a much smaller scale, Pinterest has some business-savvy competition in Fancy. Multiply, a social network around since 2004, is shifting to a “social shopping” platform. Read more about these trends here and here. Will these new social-with-a-business-plan models survive? Only time will tell if any appreciable number of the social media masses migrate toward social commerce or if they soundly reject money changing in their temple. But this much is certain: social media must figure out how to support itself, or eventually die. Maybe it will become a government-subsidized entitlement. Bread and circuses, anyone?