December 09, 2009

Social Media Snake Oil? Yes? No?

One of our loyal Twitter followers (click here to follow the action on Twitter) asked me to speak about the retailer gold rush into Social Media. This individual wanted to know if this was a broader trend worth paying attention to, or if this was the outcome of the Snake Oil being sold to businesses.

The answer, of course, is "yes".

Yes, this is a broader trend worth paying attention to.

And yes, this is the outcome of an unbelievable amount of less-than-optimal information being shared by a small number of individuals.

The broader trend is that social media is infiltrating daily life for those who choose to let it in. In five years, you'll view the communication tools (i.e. Twitter) much like you view your telephone in your office. Did you know that your telephone is an old-school version of social media? It allows you to communicate with other people. Did you know that e-mail is an old-school version of social media? It allows you to have communications with multiple people at the same time.

Both telephone and e-mail simply become part of the fabric of your daily life. Social Media, for those who want to invite it into their lives, will become another tool, like the telephone or e-mail. That's pretty boring, isn't it?

Now for the snake oil.

Did you hear that Dell has sold $6.5 million on Twitter? This fact is tweeted once a minute.

Did you hear that Dell sells over $60,000,000,000 of merchandise a year, much of it at full price, while the $6,500,000 sold via Twitter is often outlet merchandise at a significant discount?

On an annual basis, Twitter accounts for less than 0.01% of Dell's annual volume.

If you manage a very respectable business that sells $30,000,000 on an annual basis, and you experience Dell's level of unbridled Twitter success (touted once a minute on Twitter), you will sell about $3,000 a year.

Let that fact sink in for a moment.

This is where the snake oil comes in.

I've experienced this phenomenon. Many folks said that I "had to be on Twitter". So I'm there. Big time. 1,372 followers. 1,945 tweets. More free facts and information than you could throw a stick at.

Now let's look at what is important. I analyzed where every consulting dollar I earned from 2007 - 2009 was sourced from. Source can be double-counted ... for instance, one client told me that they follow my blog and buy all of my books ... so the blog and books each get credit.
  • 73% of my consulting dollars can be directly tied to the 1,100 folks who "follow" my blog.
  • 69% of my consulting dollars can be directly tied to people I had a prior business relationship with.
  • 43% of my consulting dollars can be directly tied to people who have purchased at least one of my books.
  • 6% of my consulting dollars can be directly tied to people who heard me speak at a conference, and decide to hire me after hearing me speak.
  • 0.5% of my consulting dollars can be directly tied to the 1,372 folks who "follow" me on Twitter.

What you clearly see is that Social Media is both wildly successful (blog), and a complete, unadulterated snake-oil based catastrophe (twitter).

This, I believe, happens because of the "audience" using each medium.

  • The audience reading the blog are mostly CEOs, VPs, and Directors at non-vendor-based companies. This is the target audience I seek, the folks who are most likely to hire me. These folks can follow me anonymously.
  • The audience following me on Twitter tend to be Sole Proprietors, Consultants, and Vendor-Based leaders. These folks are never going to hire me, they follow me for competitive reasons. These folks usually have to identify themselves in order to follow me, thereby limiting the non-vendor-based audience considerably.

This is Classic Marketing 101, folks. In Classic Marketing 101, you identify your target audience, you identify what their needs are, and you communicate with them in the places where they want to be communicated to.

Social Media has snake oil tendencies when advocates promote the discipline without honoring centuries-old strategies like having a basic understanding of your target audience. If your target audience has no interest in being on Twitter, then your Social Media efforts are destined to fail.

This is what Retail brands are destined to learn, as they move into Social Media endeavors. Clearly, Dell's target audience isn't interested in hearing outlet-based promotions via Twitter, or they'd sell more than 0.01% of their volume via Twitter. $6.5 million sounds like a big number, until context is placed around the number.

So, yes, Social Media is snake oil, when applied without an understanding of basic marketing principals, as is evidenced by my failures on Twitter.

And yes, Social Media is a trend that must be honored, as is evidenced by the 73% of consulting revenue I generate via this blog.

Via trial and error, Retailers will learn which of the two outcomes applies to them.