In December Peter Kim took to his network to crowdsource and create his 2009 social media predictions. One such predictor was Jeremiah Owyang, senior analyst with Forrester in the social computing group, who said "The recession will force revenue results out of social technologies." The key word here is "force." Meaning, that social technologies need to stand up to the expectations set for them and drive real ROI for businesses, and the truly good ones will be able to follow-through. The others, according to Owyang, will get weeded out.
While it's still too early in the year to put any hard metrics against Owyang's prediction -- not to mention a lot of social tech companies are not disclosing revenue and a lot of their customers are not disclosing ROI numbers -- it is a good time to talk about how this trend is tracking. Social technologies and social media in general are under considerable scrutiny due to the amount of emphasis put on it in 2008. In a related note, Owyang wrote last week about how the recession is going to purge out a lot of self-proclaimed social media gurus who may not be able to produce the quantifiable financial results that clients are demanding.
So on that note, I spoke with Jeremiah last weekend to pick his brain about this prediction, about what clients should be looking for as they sift through the bull, about which social technology companies are really proving themselves -- and I even snuck in a bit about Twitter's long-awaited business model.
Q. [Jennifer] When you say that the recession will "force revenue results out of social technologies," what do you mean by "force?"
A. [Jeremiah] The companies that don't provide any quantifiable results or don't understand how they need to help brands develop profits... they are going to go away in one form or another. There's been a lot of innovation primarily due to the influx of venture capital funding but not a lot of business models. We saw this in the last innovation wave before the dotcom crash. The recession will force these social technology companies to meet the needs of the market or they will dissipate. It hasn't happened yet -- people still have reserve capital to lean on. But the VCs are looking for business models NOW.
Q. Of course, the most famous social tech company with a mystery business model is Twitter. How does this apply to them?
A. Twitter has success and VC funding but their VCs are demanding that model. The architecture is ready and they have to figure out how to monetize the community. The VCs might not have cared as much a few years ago but now they need to look at these things pragmatically. Social media playtime is over.
Q. Everyone has their theory and interpretation of how Twitter might monetize. What do you see as their best path?
A. Definitely a lightweight customer relationship management (CRM) solution. An advertising model would be too potentially disruptive to the user experience (as seen with Magpie). Twitter is looking for ways they can meet the needs of brands without jeopardizing that user experience. Traditionally brands spend a lot of money on customer acquisition and many of these customers are already using Twitter. These brands also already invest countless dollars in CRM systems. Twitter has the "C" and the "R" but is missing the "M." The missing piece of that is a tool for brands to track, look for mentions, determine who / what is influencing their customers. This data can be very helpful and right now it is tedious to try to track with Twitter Search and other third party applications. And there is much more intelligent data to be gleaned with the right tools.
Q. So if we're talking lead generation and tracking via Twitter perhaps a partnership with a Salesforce.com?
A. Absolutely. A lot of CRM firms are already pulling in the Twitter API. Web analytics firms and brand monitoring firms are doing the same, trying to glean information. They know Twitter has the kind of traction that their brand clients are looking for. In time we'll see more of a connection here.
Q. Why are more companies turning to social technologies now?
A. These tools are inexpensive and brand budgets are being clamped down on. If used right, these technologies could potential give a lot of benefit for little money. Many big brands are used to spending massive amounts of money on media buys and advertising agencies. The downside is that by foregoing traditional media buys and advertising they might also not be reaching mass appeal since some social networks still house mostly early adoptors. They also have less control (