Social Media & Corporate Due Diligence

Is there any real value to social media when it comes to corporate due diligence? There is indeed. In the due diligence process, sometimes vital information may be uncovered that could impact an investment transaction; good or bad. The key is to know what you’re looking for, how to ask the question and where to go looking. A Google search will tell you a lot. Perhaps. An online reputation management tool will tell you about the same, perhaps with some nicely designed graphs that, well, mean nothing.

Case Study Example
A client came to us that we had done market intelligence work for. This time, they were looking to invest in a software company in their sector. It was a strategic investment that would give them the software they needed and revenues from selling it to others. They were in the final stages of the due diligence process. So far, everything had checked out; the software was where is was supposed to be and the financials were as they should be. Since the investment included the key management of the company, they wanted to gain a better understanding of these people. That’s when it got interesting. The result of the research we did showed one of the co-founders was deeply engaged with a competitor and there was evidence of a side deal taking place – all of this from publicly available sources. But unless you know where to look and unless you have the ability to connect relationships in social media, this information may not have come to light until it was too late.

Social Media Research in Due Diligence
Just as social media can have an impact on board governance, so can it play a role in due diligence best practices. Arguably, a deep look into social media before the deep due diligence begins, may save an investor or buyer of a company a lot of up front time; and may give clear direction for due diligence. So what can social media potentially tell a VC, investor or buyer? Here’s a partial list;

- Reputation and standing of the founder(s) of the acquisition target

- Business and industry standing (to avoid potential damages)

- Other potential issues with Intellectual Property

- Prior business dealings that could send up red flags or indicate a good outcome

- Validate founder(s) claims of work and past experience

- Provide insight into what customers are saying in case there is cause for concern

Just as an individual can be vetted to ensure accuracy and reliability of claims, so can the company. And lets face it, people like to talk, always have, always will. This is a key underpinning of social technologies – that humans like to communicate. Often times, employees, customers or partners may say something in a blog post, on a public Facebook page, Twitter or other public spot. In and of itself, what is said is seemingly innocent at the time. Within that context, it is. Later on however or combined with additional information – that innocuous comment or blog post suddenly becomes very relevant and very important. Dots can be connected and a picture comes together. Competitors may use this information or investors. Either way, this is incredibly valuable information in the public domain.

Digital Activism: The Message Map

With the advent of so many communications channels today via the Web and mobile networks, creating, executing and delivering a message by digital diaspora groups or social activists, protestors etc., is increasingly easy and very low cost. Consciously or not, and in most cases it is a conscious plan, there is a method to the seeming madness.

In our research, we’ve plotted out the most common route a group will take to push their message. The map below shows this process. In many cases an activist group or social group has an idea of the channels to leverage (i.e. they will establish a Facebook group or a blog/microsite to be the “focal point” of the message) then they will distribute the message across other digital channels such as Twitter. Simultaneously, they will address traditional methods of attracting industrial news media such as international news broadcasters, radio and print publications. Using digital media channels however, they can drive an issue much faster and set the news agenda when they garner a large following with uptake of the message. This was shown in Egypt when Twitter was actively engaged by the protesters on January 25, 2011; The first “hashtag” for the protests was #Jan25 and the second most popular was #Egypt. The volume went viral rapidly in the wake of the Tunisia uprisings. Although it was only part “organized” a form of “digital mob mentality” (a blog on that to come) took over. The noise was loud enough that news media began to pick up the story.

While we aren’t, for obvious reasons, unveiling our entire look at process in the case of using digital media channels to communicate activism, this map can provide some key insights to the process that follows. Even as the Egyptian government disconnected Web access, people found a way around using mobile networks (we’ll have another map on that shortly.)

Time + Profit: The Social Media Marketing Challenge

In business, we’ve heard this often enough: time is money. Which means time is profit. Add to that the business demand of sales now and results are everything and you have an immediate challenge for marketing through social media channels. The added challenge is that “speed to results” isn’t just a business demand. It’s reflected in politics today where long-term goals are for the next guy and short-term keeps politicians elected. Even health care systems in Western countries are more “emergency medicine” focused than they on are long-term issues.

This may in part be the reason so many larger brands engage in social media for campaigns, rather than the long haul. And why there is such heated and ongoing debate over metrics in social media engagement. Rarely do corporately driven efforts in social media pay off quickly. The return rather, is more “soft” for the most part and about a dialogue that is measured over time. Dialogue that develops “reputation” or carries the message over the longer term. Dell dove into Twitter and a year or so later reported $2 Million in revenue via this channel. Not bad, but for a large corporation like Dell, not great either.

Then there’s the whole angle of delivering better customer service through social media channels. Jury still seems to be out over successes versus failure or a viable solution here. Some pundits hailed the business version of the second coming with regard to social media and customer service. It is impossible to truly have a 1:1 engagement with clients on any scale with an enterprise of any significant size – A good blog post addresses this by Beth Harte at the Harte of Marketing.

In a world that is hyper-connected ever driving hyper-fast results, social media engagement is antithetical. Still worth the effort for brand engagement, reputation management and customer service, but companies, our research shows, would be better served by managing their expectation of an immediate return. Social media marketing is true to what marketing is – a strategic part of the revenue process, not tactical sales, or at least very rarely so.

(Author: G. Crouch)

Limitations of Brand Communications in Social Media

While we continue to see companies dancing around their level of engagement and commitment to marketing through Social Media channels, some interesting limitations are apparent with these channels. Limitations in communication that are not easily overcome;

Textual Channels: Twitter, blogs, wall postings…anywhere where text is the primary method of communication. The issue here is “context” as it can be hard to identify what the person is “feeling” or how angry they are. Aside from perhaps a profile picture, it’s not easy to define an image of someone either. As we know, 60% of human communication is non-verbal. One might then say it is hard to truly engage in a medium with limitations to emotional expression. Emoticons are clever, but they only go so far. Flame wars erupt easily in textual channels.

Video Channels: With a service like Chatroulette this is a litter better for communication. One can see body gestures, facial expressions and denote tone of voice. The limitations here are what can be added to the conversation, such as other visuals, since you are often more dependent on location and form of camera. When it’s combining text and video response to posted videos in a sharing service like YouTube there is often delay in engagement and the chance of missed communication that can have any desired effect.

Audio Channels: Like a phone or Skype or similar IP Phone. With video enabled it helps, but similar restrictions to video channels apply. In audio communications we get tone of voice as an aid to completing the communication objective. But still, gestures and facial expression is limited.

So what does this mean in corporate attempts to engage with customer service or marketing through social media channels? Not understanding these limitations can negatively impact the outcome of the desired objective.

As with Nestle’s Facebook experience, the entire issue erupted over statements made by a Nestle marketing employee on the Facebook page for Nestle. It was purely textual. It was also a permanent linear string that all could see. This means the original context or framing of the issue rapidly spins out of hand. Nestle could have added some video response or offered a Web chat with video. This may have helped add elements that would’ve reduced the overheating of the issue. May have.

Each social media channel has its challenges. Understanding the limitations and the risks are key to success. They also add another level of education and knowledge development for a business, which adds cost to the management of these channels and reduces profits.

Do you see any other limitations?

(Author: G. Crouch)

When Your Social Media Star Falls

She got your brand out all over Twitter, to the tune of many thousands of followers. He built a huge presence on Facebook and NetLog for you. Nary a negative word was said about your organization. It was all great, until they resigned. She got a plum offer from a PR agency and he got hired by your competitor. Now what? And just who were all these people engaged with? Your brand or the person behind it? Both really.

So. Now what? One was an intern the other was a junior. Yes, they were building positive vibes for the brand, but conversion to sales wasn’t really there yet, or you’d only just started to define success metrics for engaging in Social Media. We’ve seen this with a few clients. It creates a difficult situation. A few quick do’s and don’ts based on our experience:

Don’t:

- Leave The Kingdom Doors Open: Make sure you change all the passwords to the accounts. Just to be on the safe side.

- Drop it Cold Turkey: If you assume all those followers were a bunch of teens and 20-somethings who don’t care, you’ll be in for a little Social Media crisis. If you want to wind down your engagement in Social Media, then plan it carefully.

Do’s:

- Have a Transition Plan: Have the person’s supervisor develop a plan to transition to a new person if possible, or plan disengagement. Carefully, with solid, honest messaging.

- Be Open: Let the person who’s leaving talk about in a positive manner. If it’s possible, have them introduce the new person.

A little forethought when a situation like this can save a whole lot of grief down the road. It’s also good practice for the senior manager in the organization to “listen in” on what’s being said on a regular basis. To make sure the message is clear and on target.

(Author: G. Crouch, Managing Partner @webconomist on Twitter)