Why Small Business Fails in Social Media

We were curious as to why small businesses fail in social media. More fail from their attempt than succeed. At least, that’s what our research showed. And there is one leading reason; fear of commitment. We looked at 2,500 businesses in the U.S. and 1,500 in Canada that we considered small businesses (see our methodology below.) What we found was one overall reason businesses just plain flopped in social media engagement. Committment.

It’s a Huge Challenge
Any small business owners out there will probably agree; there’s just not enough time in a day to run the business and pay attention to all the added challenges of engaging in social media. There’s sales to keep the business open, then operating costs like payroll, rent, inventory or delivery of the service/product, taxes, accountants, client follow-ups and, well, so on.

Major Irony: It’s The Best Bang for your Buck.
While at the same time, the small businesses who do succeed with social media will tell you – it’s the most cost effective marketing tool. But patience and commitment is necessary. For a small business, social media provides two critical things to growth: 1) Trust building and 2) Evidence.

1. Trust: By using social media tools like LinkedIn, Facebook, FastPitch, Plaxo and so on, you can establish trust with prospective clients over time. You can show “who” you and your team are – short videos, photo’s of work done, video testimonials (from real people not fake “J. Jones, South Dakota” names that anyone with a keyboard can type in!) and links to referring clients.

2. Evidence: Proof of your work. References and images/video of jobs completed, innovations and helpful blogs and related content are all evidence that you are an expert, that you know your stuff.

The Reasons for Failure:

1. Commitment: This the piece on the pie graph above labeled as “time/commitment” – we analysed comments from small business owners in channels like LinkedIn, Facebook, Twitter and Identi.ca who made comments on why the found it difficult to find value in social media. In large part text analytics only goes so far and some human “coding” has to take place. We also looked at comments in blog posts and news media stories across primary news channels like the Globe & Mail and several U.S. state and localized news media sites. What it really came down to is that small business owners find it takes a long time to find a direct (perceived?) time to an ROI. Unfortunately, this is true. Expecting overnight success or even within a week or two, is unrealistic. This is true of marketing in general. We suspect that marketing/advertising in traditional channels would actually take twice as long.

2. Resources: The second most popular reason cited was available resources – i.e. the humans needed to engage. For a small business, every employee must have a direct and measurable impact on revenues. Small business owners, because they are small, often (and rightly) feel that if they hire an employee, that person must have a positive impact on revenues either through customer satisfaction or sales. It is a major stress point for a small business owner to hire someone. Unfortunately, as social media engagement can take time, many small business owners are (wrongly) tempted to think the required engagement time is a poor investment. This comes down to an equation of being able to carry such a marketing resource until the beginning of a return period. Sadly, what many small business owners also fail to realise is that it takes 6-9 months for a new sales person to become profitable to a company, yet for a lower cost overall, a social media resource can produce similar revenues. Economics here, are failing the small business owner.

3. Content: As many small business owners feel they must “control” all aspects of their business (this may be so until you reach employee number 2) they must control what happens and what is done. It is very hard for an entrepreneur to “let go” of certain aspects of their business because they are (rightly) very passionate about their business. But delegating and letting people do what they are good at it and then letting them do it is often the sign of entrepreneurs who win in the long run. This goes to producing the “content” needed in social media; from blog posts to quick videos.

4. Knowledge: This relates again to staff, but also to the small business owner. On the one hand we mean the “knowledge” of the entrepreneur of the tools that are available. On the other this relates to the entrepreneur feeling no employee can have as much knowledge about the business as they do. Again, that relates to a fear of letting people do what they are good at.

5. Assumptions: This was directly related to the assumptions that business owners make about social media because they don’t use it themselves and is incredibly dangerous. While it may rank as low for what entrepreneurs or small business owners say, it is incredibly important in and of itself. Small business owners will tend to think social media services are used by kids when they service an older demographic. This is potentially lethal and perhaps, the most damaging assumption a small business can make. It’s the +25 demographic that uses social media to talk about products and services more than youth. So much so that a small business may not even realize they’ve been targeted with negative social media.

So…what do you think about why small businesses fail with their social media engagement?

Methodology:
We sampled content from blogs, Twitter, Identi.ca, Plurk.com, Facebook, Plaxo, FastPitch, 100 forum groups, GoogleGroups and other channels. We pulled in the text and ran our Artificial Intelligence engine and then set loose a human analyst on a coding matrix. We then compared results and ran a validation. From there we measured against per capita populations and FTC data in the U.S. on the small business market in targeted regions and Statistics Canada for Canadian businesses and based on the overall findings produced our results. From our overall sample size the margin of error is +/-7% on a per capita, moving average basis.

The Collateral Damage to Business From a Social Media Crisis

Most discussions and case studies around social media crises faced by companies is focused on consumer reaction – and direct loss of sales or brand impact. While these are critical, a non-consumer focused company may think they are more immune to these issues and a consumer product company may think the damage is relagated to the consumer segment, not their business to business side. This can be a dangerous assumption. We look at some of the collateral, perhaps harder to measure, damage that can occur.

Mistake Number One: Many companies who only sell business-to-business (B2B) assume that social media is all about consumers and that they are immune to damage. This is a fatal error. Many industries have niche social networks, forums, blogs, Twitter accounts, where industry news is discussed. Failure to understand this can cause significant problems.

Risk From Government Contracts
If a business also sells to governments, contracts may be lost. Depending on the severity of the issue, such as legal actions being talked about or happening, government agencies may be reluctant to buy products or services from a business they feel may be distracted from a contract or unable to fulfil it. It is hard to know if this happens. Some indicators may help determine the risk however.

Competitor Leverage
The bigger the story via social media (whether general sites or industry-focused channels) the more a competitor can cause harm. Employees can quickly and easily share information, this means relying on stories only being in major news media is dangerous. Competitors can shape perceptions with existing clients of yours and use it to foster perceptions of inability to complete work and more.

Every Industry Has Social Media Channels
We’ve conducted research and analysis on many industries. There is always some engagement by people in the industry in specialized niche networks, Facebook groups, LinkedIn discussions, FastPitch, eCademy, forums and newsgroups. Whether or not a CEO or senior executive is aware or participating in them doesn’t matter – employees are. Including from competitors. And they share information. A lot.

Board Perceptions & Risks
If it is a public company or just has a board and a smaller set of investors, once word trickles out, problems of governance come into play. A board or set of shareholders, may feel management has lost control of the company or are nervous of the management teams ability to contain and deal with the issue. If it is a major shareholder or board officer who raises awareness of an issue to management, they may feel management is not suitably aware of industry issues. There is then the possibility of a fractious board, a senior management battle and so on…

Investment Challenges
Companies looking to raise capital from equity sources or even debt, may find themselves in a challenging place if a negative story has reached the ears of those in the financial sector whom they are courting. If financiers perceive problem or potential escalation, they may either require more security or stall on a deal.

Supplier Fears
Suppliers of services or materials to a company who are tuned into the industry networks (often, they are more connected into online channels than the buyer of their product) may be concerned with the company’s ability to surface from a crisis. If they have extended credit, they may retract that credit or require new terms or demand outstanding payment to mitigate increased fears of risk.

Perception Can Rule The Day
The reality of these challenges are ones that businesses are just beginning to grasp.  Since these issues are  beyond just reputation management and are not as quantifiable being more qualitative in nature. It is not as easy as seeing immediate sales losses or a series of negative “tweets” on Twitter. Often, senior management is unaware of the social media tools being used in their industry. Monitoring tools rarely, if ever, pick these up because they are focused a) on mainstream social media channels for consumers, b) more business-to-consumer than B2B and c) perform poorly with smaller data sets to display.

We live in a world where perception can quickly become the reality. And that can spread across far more than just the consumer market and into supplier networks, financial sector and shareholders.

A Whole New Set of Headaches
All of this to say, the CEO and executive management of a company today have a whole new set of risks to manage. In some cases, they may not even realise an issue escalated as the result of a forum discussion or blog posting. Some research into these deep Web sources (where social media monitoring or reputation management tools simply do not go) can help a) understand the issue and b) help address the issue and give management the opportunity to mitigate risks and deflect the damage quickly.

Why Social Media Really Works in Civil Actions

Issues for protest or causing some form of unrest aside, the real reason social media tools have been a key technology in driving significant societal changes comes down to one reason we propose – lowered individual risk and group comfort. One person protesting in front of city hall is unlikely to cause a change. You need a lot of people. Our research into Keystone XL and the use of social media by civil society groups showed how now even groups can connect with other groups to take action on issues.

Herd Mentality
The truth is that we as humans prefer to act in groups. We have to. One person alone cannot build an office tower. When we see others gathering, we are more likely to join in when we share that groups values, ideas, opinions or vision.

Social Media Shows Commitment
Look at a Facebook group page on an issue of society, a celebrity or brand. If one group has thousands of followers we assume that group is generally more popular. A group page with just a few members isn’t as compelling. We’ll go for the group with more people – in general. An individual will go where there’s the perception of others with similar views. As social media tools thrive on high volumes of users, require little to know technical skills and are available through mobile devices as well, a person can quickly see when something is becoming popular. When we see others are committed, we’re more likely to commit.

Digital Mob Mentality
When an issue takes off, like #Occupy, Egyptian revolution or the London riots of 2011, people go into what we term Digital Mob Mentality. They are fast to comment and quick to share with their peer networks. This becomes a feeding frenzy of information. Coordination is quick, communication is essentially at zero cost and there is no friction. To those that suggest “slacktivism” takes place, yes, to some degree. But as the above events and many others show, the slacktivists are far less than those who can and do actively participate in the issue.

Hyper-Momentum & Networks
Because of the significant increases in the use of mobile data devices (SmartPhones and Tablets) and the easy access to social media technologies over increasingly higher bandwidth networks, an issue gains what we call hyper-momentum. The story spreads fast and furious. Far faster than ever before in human history. No one has to wait for mail to arrive or has to be at home to take the phone call. And every one of us has social networks of friends, family, co-workers etc. And we trust news and actions of friends very quickly. More so than official government communications. In several research projects we’ve done for governments around the use of social media in both natural and man-made disasters, we see a greater reliance on information passed through social networks or the social graph than that coming from government (including policing and fire services.)

In Summary
When we see other people taking part in something we are curious. Whenever we see a crowd, we are curious as to what has drawn other peoples attention. These behaviours are simply translated to online services through social media. The more we see others with a similar view are committed to an action, the more likely we are to participate. It’s as simple as that. And we have plenty of evidence.

Klout or PeerIndex & Their Value or Non-Value

We’ve been knocking about the value and veracity of Klout and others like PeerIndex in our offices for some time now and we posted before on the issue of Klout. So we looked at Klout and PeerIndex a little deeper recently, to try and sort out just where these tools sit in the greater scheme of marketing. We then went out to look and compare Klout with PeerIndex to understand their place in the social media ecosystem.

Where Klout is Good Etc.
Klout: Is all about marketing. For the individual, it is an “ego tool” kind of like the social media version of “ego surfing”. Perhaps if you were a geek or nerd in high school you may find some greater comfort in having a higher Klout score that the “in” crowd you were left out of.

Aside from the ego aspect, Klout wants you to publish more content and build more of a network because that is vital to their business model. Their business value is eyeballs and people that appear – the word appear is key here – to have some “influence” in one or more online communities. Your value to Klout is how many people you might potentially have some level of influence with. They sell peoples apparent (not real) influence to brands and products. You as a consumer may get some free products in return for mentioning these products or services. We find no problem with this and quite frankly, it is a great marketers tool. It relies on human’s competitive nature and as a result, will likely do fairly well. Klout will also likely anger consumers as much as Facebook. It is the love-hate relationship many consumers have with social media tools.

Where Klout Fails
But Klout will not help with understand the true “authority” of someone. Influence is, well, interesting, but in real terms, it’s not influence that matters, its authority. This is where Klout fails. It also fails in matters of small, but powerful communities. Klout looks at the Really Big Picture – for brands like Coca-Cola, Nike, MacDonald’s or Wal-Mart. But it fails at a very local level and it fails when it comes to non-marketing issues like civil society.

Where PeerIndex Wins
PeerIndex has taken the approach to “authority” by looking at the topics people discuss the most in primary social media channels such as Twitter, Facebook and LinkedIn. Don’t be mistaken, they are targeting to sell this “authority” to brands in the same way as Klout. And why not? They are a business and the purpose of a business is to make a profit. PeerIndex is a second to Klout who has gained more media and social media attention and holds first-mover status. So PeerIndex has a catch-up job. We found that compared to Klout though, PeerIndex was “trusted” far more than Klout at a 3:1 ratio. The key will be if PeerIndex can attract the eyeballs and conversion. Klout has lots of well, inexplicable dashboard things like “reach” that really don’t tell you anything. We see PeerIndex as being a bit more focused on methodology and greater transparency on their science.

Where PeerIndex Fails
Where Klout is focused on “influence” it seems PeerIndex has chosen “authority”. We find the PeerIndex approach easier to understand than Klout, but they exclude the level of influence. PeerIndex, like Klout, also excludes the cultural and smaller social networks where greater value can be found. PeerIndex is focused on more channels than Klout, which helps (including Twitter, Facebook and LinkedIn, plus Quora and some blogs) but they too miss the secondary, but often more active networks that could yield a greater sense of authority. They may include an individuals blog that signs up for PeerIndex, but they don’t capture (and it would be a challenge to do this) the broader blogosphere or Blog Rings.

Where Klout & PeerIndex Utterly Fall Down
Both Klout and PeerIndex pretty much ignore non-major social media services in North America such as Orkut, BigAdda, MySpace, hi5, AllAfricans.com and many other vital cultural and hobby-based networks. Essentially, both Klout and PeerIndex really only care about the big brands and the U.S., UK or Canadian markets. They completely miss the influence and authority of the Web as a whole and its interconnected communities which is very multicultural and global in scale.

In Summary
Klout and PeerIndex both offer some value for marketers. In major Western markets and well, that’s where the big bucks are and they’re businesses. But when it comes to where the next growth area is in social media, which is civil society, they both fail terribly. But then so do all social media monitoring and reputation management tools. PeerIndex hopes to own the “authority” segment while Klout wants to own “influence” and there is a difference between the two. Someone should own, or attempt to, both influence and authority. That will be a challenge, but isn’t impossible. So choose your poison as a marketer.

Why Social Media In The Enterprise is Failing So Far

Culture and established process are the key reasons for social media failing in the enterprise. Social Enterprise tools (essentially a Facebook for business use) is a very logical tool for businesses and can be a game-change. And that’s the problem – it’s a game-changer. It’s disruptive. It sets everything on it’s ear. Larger businesses, the Enterprise segment, has spent billions of dollars integrating tools like SAP, or SharePoint etc. SharePoint is a great tool – yet has not truly succeeded when it’s biggest competitor is DropBox. DropBox is used by employees to store and share files online – because SharePoint is too complex. Enterprise tools are complex by nature because they focus on the nirvana of bringing clarity to all aspects of the Enterprise.

Big Doesn’t Quite Get It
The other reason social enterprise tools are struggling to find a grip is that the enterprise management solutions offered by Oracle, SAP, IBM and others don’t really have a truly “social” element to them.  Sure, they include some pseudo “social networking” tools, but they aren’t truly reflective of what a social networking tool should and can do. Just as the social enterprise tools are anathema to corporations, so they are to the manufacturers and implementers of existing solutions like SAP and Oracle. They haven’t figured out how to make money off these tools, so they’re advising against them to their clients. Some elements of social media are in these tools, but not enough. Yet.

We Don’t Want People Partying All The Time
This is a perception issue with social media. We see it all the time in our own research projects. The C-suite is still under the illusion that “social media” or “social networking” is only about kids, teens and college students and that these tools aren’t used in serious ways. We definitely saw this attitude shifting in late 2011 and we suspect in 2012 it will shift even more to the C-suite taking social media seriously, beyond reputation management and simply marketing.

But many a senior executive also may see “social enterprise” meaning people are going to be sending each other jokes and silly videos and planning luncheons with these tools, rather than being productive. Our suspicion is this is largely a problem of wording. The word being “social”. There is a connotation with social, that it is not “working”, that it means being, well, social. This couldn’t be farther from the truth. But perceptions are what they are and so good, effective marketing is needed.

We Haven’t Hit Decade One Yet
The reality is, all these social media tools and services that exist today, haven’t even been around a decade. Enterprises move slow. Adoption of new technologies takes time. The commercial Internet has only just reached 15 years of age. Today, business takes advantage of and leverages the Internet. But social media services, even though they are delivered via the Internet, are still less than 10 years old. Blogging is approaching a decade, but only just. Blogs are the most adopted tool by large corporations, but it took them nearly a decade to get there.

The Marketing Echo Chamber of Social Enterprise Solutions
For the most part, the companies marketing social enterprise tools are doing an amazing job marketing their tools. Not. The problem is, they are marketing them via social media channels. Not where their market is. Some no doubt, are getting to the CEO. But marketing inside your echo chamber is not going to get the message out. As we know, the C-suite reads news online, but social enterprise needs to be the channels they are reading. Engagement by the majority of CEO’s in Twitter, Facebook, LinkedIn etc is still very low outside the tech industry. Publishing articles in LinkedIn is good to garner lower echelon support, but not much more.

2012 Could Be The Year
In 2012, we’ll see a lot more focus on the business value of social media, as we’ll see similar value for social media in civil society. In large part it will be up to the software companies that can figure out a better way to market to and reach the right CEO’s, CIO’s and CTO’s in the enterprise. We also suspect that the likes of SAP, IBM and Oracle will start to look more closely at the value of these tools.

In the meantime, the other big challenge is dealing with the “social” perceptions of the C-suite. And that is not easy. There’s an interesting and good article on Forbes that discusses the logical benefits of Social Enterprise tools here.