Should companies advertise in social network services to obtain substantial financial benefits?

A social network service is an online service, platform, or website that focuses on building and reflecting of social networks or social relations among people. In the following paragraphs I would like to talk about whether companies should advertise in social networking services to reap financial benefits.

Mark E Matthews, an internet market consultant mentions that social networking sites are powerful tools for advertising and improving ones business. He outlines two ways one can improve their business through social network websites. One is setting up business profiles or pages and the other is using paid advertising option, He personally feels advertising through Facebook provides huge benefits. Adam Ostrow, Editor in Chief at Mashable talks about why social media marketing could be beneficial to an organization. He cites even though most marketing executives don’t believe that social media marketing will have direct impact on sales, it still a viable medium for driving customer growth. According to him, the reason is because 85.4% of the executives responded that social media marketing helps them to improve customer engagement and 51% of the executives also agreed that it is of low cost compared other medium of advertisements. Chris Crum of webpronews comments that Facebook could be huge threat to Google, considering the amount of traffic it drives. He feels companies will figure out ways to monetize that traffic to obtain financial benefits. Jack MClaren, a PPC executive at 4Ps Marketing cities that even though advertising through social networking services does not provide immediate tangible benefit it can definitely improve the brand value of a company and also consumers exposed to a brand are 2.8 times more likely to search for that brand’s product. He cities Coca Cola as one company which has considerable fan following on Facebook. He also cites that click through rate in search engines will increase by 50% when consumers are both exposed to influential social media and search engine. This is the reason probably why Microsoft, Google and Yahoo are investing heavily to establish a influential social networking service.

In addition to the above points mentioned, I want to mention some of the reasons why companies should advertise and market their products through social networking services. The number of subscribers of internet is suppose to increase to 2 billion by 2014. Online advertisement comprises only 10% of total advertising spending. Since more and more users are spending a lot of time on the internet through personal computers or mobile, advertising online is definitely a viable option compared to other means. Also advertising through social networking services produces a lot of benefit to companies because it is still growing and has not reached its maturity. Compared to the traditional method of placing ads on websites, social networking services have two other methods which are Direct Advertising that is based on your network of friends and Indirect Advertising by creating 'groups' or 'pages' that social networking services have. Since advertising through social networking services is still growing, there could many other methods invented by organizations and social networking services companies to reach out to potential customers.

On the other hand, Professor Clemens, Professor of Operations and Information Management and Management at Wharton School of the University of Pennsylvania in his research paper – “The Future of Advertising and the Value of Social Networks” argues why advertising through social network services would be unsuccessful. His first argument is that the kind of trusted network that exists between members of a normal social community would not exist between members of an online social community. Online social community members have much more degree of freedom to choose who their friends would be. So companies assuming that a strong trusted network exists between members of an online community and advertising through these social network services in order to benefit from the trusted recommendation one member would provide another would be wasting huge amount of money on advertisements. Second point he makes is that because of a degree of freedom that exists on the online social community, people on the online community might possess characteristics or avatars, that could be very different from their normal characteristics, so how can companies understand user requirements and market their product accordingly. Third point he makes is that users in these sites want a sense of control and active participation. Advertising that is being pushed at them can have unwelcoming effect and popularity of the social network service could reduce.

I do agree with the points Professor Clemens is making but I disagree with his view that companies would not reap benefits if they advertise through social network websites. Even though a trusted network to the level that a normal social group would have does not exist in an online social community, a recommendation made by a member of the group about a product could reach out to potentially a large population which companies definitely cannot ignore. Social networking services have one of the least click through rates because of not able to understand user requirements as Professor Clemens points out but because of the traffic these websites generate, a substantially large number of people would still buy a company’s products advertising on these websites. I do agree with Professor Clemens regarding the annoying effect, advertisements can have on users because users on these websites logon to socialize with others but not to buy a specific product or service. This is one disadvantage social networking services should mitigate in order improve user acceptance of advertisements on their websites.

In conclusion, what I would like to say is that there is definitely a benefit for companies advertising in social networking services to improve their revenues. There are some disadvantages in understanding user requirements, advertising to the right user and improving the brand image of a company, but since advertising through social networking services is still in its nascent phase, there are huge opportunities for growth and companies and social network services can come up with ways to mitigate the disadvantages.

Sources --

The Future of Advertising and the Value of Social Networks , Professor Clemens - http://opim.wharton.upenn.edu/~clemons/blogs/socialnetsblog.pdf

Google Vs Social Media PPC, Jack Mclaren - http://www.4psmarketing.com/blog/google-vs-social-media-ppc

What are the Benefits of Social Media Marketing?, Adam Ostrow - http://mashable.com/2008/12/29/benefits-of-social-media-marketing/

Advertising Using Social Networking Sites, Mark E Mathews - http://ezinearticles.com/?Advertising-Using-Social-Networking-Sites&id=4980549

Facebook Can Drive More Traffic Than Google, Chris Crums - http://www.webpronews.com/topnews/2009/03/11/facebook-can-drive-more-traffic-than-google

Google’s strategy unveiled: a little bit of everything you do - http://www.itwriting.com/blog/2254-googles-strategy-unveiled-a-little-bit-of-everything-you-do.html

www.Datamonitor.com, Global Internet Software and Services, Ref Code – 0199-2093, Publishing date. March 2010.

Social network advertising, http://en.wikipedia.org/wiki/Social_network_advertising

Social network service - http://en.wikipedia.org/wiki/Social_network_service

Oops!

or using SNA for Competitive Intelligence

Robert Morgan never thought that a few lines on his LinkedIn profile would have got him into serious trouble. In 2009, the Microsoft R&D employee revealed that his R&D projects included: "128-bit architecture compatibility with the Windows 8 kernel and Windows 9 project plan". The problem? His profile was updated at the same time of Microsoft’s launching of Windows 7, and prior to releasing information regarding its next versions! That is, Robert incautiously revealed one of Microsoft’s kept secrets. Soon after, numerous bloggers found further relevant data on other employees’ profiles.

The rapid rise of Facebook, LinkedIn, Twitter and blogs encourages users to share any information, uncensored and in real-time. This creates an unprecedented opportunity for seekers of corporate information, particularly with regards to competitors. Employees who just wish to update their friends about their doings unintentionally damage and put their employers at risk. In a survey that involved 220 firms conducted by Proofpoint in 2009, 18% of the companies reported illegitimate exposure of confidential information through blogs, 18% - through video and audio sharing websites (e.g. Youtube), 17% - through social networks like Facebook and LinkedIn, and 13% - through Twitter and SMS.

Today, Web2.0 allows performing a thorough corporate analysis of any firm. Using LinkedIn, for example, one can follow its employees, their current and former positions, sort them according to their rank - from CEO and down, and to draw a detailed picture of the firm’s customers and suppliers. Experts believe that 80% of the desired information is held by the employees, and SNs are where this information is unearthed. As a consequence, consulting firms that use Competitive Intelligence (CI) increasingly employ analysis of SNs like LinkedIn for their purposes. An important factor that play a key role is the high frequency of updates by the users of the SNs.

Furthermore, a growing number of software companies are developing tools for extracting valuable information by processing enormous amounts of data coming from SNs. For instance, ClearForest, an Israeli sart-up, which was sold to Thomson Reuters news agency, developed a software that can extract relevant information from any block of text. Its customer range from Brand Monitoring companies to pension and hedge funds, who use such tools for sell/buy decisions. One such customer, a journalist, uses SNA graphing to expose family relations between key actors who frequently win government contracts and key corporate decision makers.

References:

(1) Barnea, A. 2009. ‘Heaven for Corporate Spies’, Status, http://www.ifeel.co.il/page/14126

(2) Barquin, R. 2006. ‘Social Network Analysis and Business Intelligence’, BeyeNetwork, http://www.b-eye-network.com/view/3088

(3) ClearForest. 2010, http://www.clearforest.com/

(4) Darom, N. 2010. ‘Spies on the Web: What Type of Business Information Can Be Extracted From Social Networks’, TheMarker, http://it.themarker.com/tmit/article/10312

(5) Fco Fernando de la Rosa Troyano, María Teresa Gómez López and Rafael Martínez Gasca. 2010. ‘COMPETITIVE INTELLIGENCE BASED ON SOCIAL NETWORKS FOR DECISION MAKING’. International Journal of Software Engineering and Its Applications, Vol. 4, No. 4

(6) Neve, Z. 2010. ‘Business Intelligence: Social Networks – The New Surveillance Arena’, Globes

(7) Trotter, P. 2009. ‘Windows 8 Release Expected in 2012’, PCWorld, http://www.pcworld.com/article/182855/windows_8_release_expected_in_2012.html

Should the ability to socially network be a necessity to become manager?

Just 50% of the population are extroverts however 96% of managers and executives display extroverted personalities. A recent study by Deniz Ones and Stephan Dilchert of 4,000 managers across US corporations shows that there is a correlation between being an extrovert and your rank as a manager in an organization. They found in ascending order of responsibility level the following amount of extroverts:

Supervisors 30%

First-line managers 36%

Mid-level managers 41%

Executives 52%

Top-level executives 60%

As defined by Wikipedia.org, extroverts “tend to enjoy human interactions“ and introverts “tend to be more reserved, less outgoing, and less sociable”. The data suggests that in real life, people with social networking capabilities get more often chosen to become managers by superiors or boards of directors. Is this in the best interest of a company?

Brian J Dunn, CEO of Best Buy would say yes, as he is a vivid proponent of social networking as a major success factor for business. “If a company, or even its chief executive, doesn’t have a presence on social networks today, that company risks not being in the conversation at all. Over time, I believe, that can be fatal to a business.” Brian states that having a “deep” conversation with customers and employees are prerequisites of a deep relationship and the key to success. As CEO he states he needs to be part of this discussion to stay close to the market his company is active in. This becomes the more important as todays buying decisions in the consumer market are often crowdsourced i.e. heavily influenced on social networks. Further, social networking makes sure top-level executives stay in touch with employees, who are not their direct inferiors and with whom they would usually not be in touch with. For example in a direct conversation with employees from one of Best Buy’s stores through his twitter account, he learned how she and her colleague were doing a good job in supporting US soldiers in Iraq. Best Buy made a movie to demonstrate best practice support of soldiers from the Best Buy community, to built internal moral. Brian would have not been aware of this story, without his social networking.

A study by Adam M. Grant, Francesca Gino and David A. Hofmann shows however that in dynamic and unpredictable environments, introverts are often more effective leaders. This particularly holds true, when workers are proactive and offer ideas for improving the business. As extrovert leaders tend to command the center of attention and take over discussions, such behavior makes them feel threatened. In comparison to that, introverts as managers are more open to suggestions and listen more carefully. This makes them more effective leaders in situation of vocal teams. In one of their field studies with 130 franchises of a U.S. pizza delivery company, they assessed how proactive employees and how extroverted / introverted the managers are. Adjusting for variables like location of the pizza delivery, their result showed that in stores, where employees were not very proactive, extroverted leadership was associated with 16% higher profits than average. On the other hand in stores, where employees were pro-active, extroverted leadership was associated with 14% lower profits. The same result appeared in a controlled lab experiment, where college students were grouped in different constellations and scenarios. The student groups with an introverted leader and proactive followers performed better, folding on average, 28% more T-shirts than the student groups with an extroverted leader and proactive followers. The extroverted leaders appeared threatened by their inferiors and unreceptive to their suggestions. Introverted leaders listened carefully and made employees feel valued, motivating them to work hard. Adam, Francesca and David effectively argue therefore that superiors and board of directors should therefore no longer necessarily trust manager roles to extrovert, who have the ability to socially network but rather make their choice of an introvert or extrovert leader dependent on the people they have to manage.

In my mind a role model manager has the strength of both an extrovert and an introvert. A good manager therefore has the ability to socially network and participate in discussions outside his immediate comfort zone. S/he at the same time is self secure enough to deal with pro-active inferiors. When working sometime ago as a junior financial analyst on an initial public offering of a €2,500m market cap company, I got inspired by such a character. The CEO was calm, friendly and open to suggestions. In many meetings I experienced how he welcomed and attended to suggestions from inferiors. At the same time he was known for his high social networking abilities, being a sales “star” on the investor roadshow later on in the process – one of the most important abilities in such a public offering processes. He had however one further quality: he knew “his” business and he knew what he wanted. He wanted to have his company portrait well with the relevant information presented to potential investors in a timely fashion to make the time schedule of the project. With these prerequisites, he was able to value the suggestions he received and accept or decline them on sound reasoning. I therefore conclude that an ideal manager should be both, extroverted with social networking abilities but able to cope with pro-active inferiors. Based on my experience, this person however needs as a foundation a clear understanding, of what he is doing and where he would like to get.

Sources:

1) http://en.wikipedia.org/wiki/Extroversion_and_introversion

2) How special are executives?, Industrial and organizational psychology, 2009

3) The Hidden Advantages of Quiet Bosses, Harvard Business Review December 2010

4) Best Buy’s CEO on Learning to Love Social Media, Harvard Business Review December 2010

5) Own empirical evidence

Thank you to Hyunsoo for his pointer to the Best Buy CEO article.

Are social networks making us unsocial?

Social networks such as Facebook, StudiVZ, Xing etc. belong to our daily routine. There we can chat, comment and profile. It is beyond controversy: they change our social behavior – especially for adolescent persons. Whether this change describes a relatively positive trend towards our social behavior or a rather crucial development of our ability to physical interaction with people, should be content of the following discussion.

According to Katrin Göring-Eckardt (1) every person that measures its social life by counting the number of contacts in social networks must be assumed to be unsocial. Apart from the fact that social platforms are providing useful tools such as finding old school friends or to receive almost every real time information of a friend´s activity most of these contacts cannot be considered as social friendships as most of our senses such as smelling, listening, feeling etc. are not involved in this non-physical activity. Most of these contacts and the information they provide are addressed to the general public and can therefore not be called “friends”. Concluding from this, she argues: “True friends need care; something one´s will forget while actively gathering contacts”.

Furthermore, 58 percent of Germany´s population agree on the argument that virtual contacts cannot replace real relationships to human being due to superficiality and arbitrariness. These people believe that the promised numerous possibilities social networks provide (referring to interaction among people) will lead to isolation. In addition social networks can use the “anonymity“ to distribute crucial information of people that discriminates them. The bad conscience occurs often too late, at the point where the evilness has spread via the internet and perpetuates the victim.

By contrast, supporters of social networking such as Ilse Aigner (2) argue that these networks enrich our life as they provide a platform for contacts and debates, ideas and innovation. “Online-Networks bring people together, independent from their geographical location and nationality.” People can use the network to increase their profitability, reservation of providing crucial information. This allows the network to be the “virtual supplement” of everyone’s real daily routine and leads therefore to a new understanding of the term “social”. Sascha Lobo (3) refers to a study undertaken by the University of Amsterdam that shows that the internet is improving the social behavior of adolescent persons because of social networks. After a BiTKOM study in March 2010 over 30 million German over 14 years are members of communities. In several school classes 100 percent of the pupils are active in social networks. “These facts proof that we are at the beginning of a digital society where their social structure will be visualized in the internet. Everything which seems to be unsocial in the network – is nothing else but the reflection of the carbon world”.

With regards to the debate I must admit that I stay rather reserved to the fact that (online) social networking can positively impact our social behavior which is in my belief defined as a physically exchanged good from the members of a society. Apart from the useful tools the social network offers (some of them mentioned above) the paramount interest (and for me the most important factor) of a social network the “holistic social interaction between people” cannot be covered by a virtual environment. Furthermore we should rethink whether the current development that forces us to be more efficient on each single transaction artificially hypes the positive perception of social networks so that using them provides the perfect excuses for our time constraints in the today’s working environment. Defining our social life by these networks leads to a certain extent to a pseudo participating society, thus to anonymity. Thinking more abstract one can raise the question: Can anonymity be social?

(1) Katrin Göring-Eckardt, Green President of the Bundestag and the synod EKD

(2) Ilse Aigner, CSU-Member of the Bundestag (Ministry of Consumer protection)

(3) Sascha Lobo, Blogger, Author, Journalist and Web-2.0-Pioneer

Sources:

http://www.taz.de/1/archiv/digitaz/artikel/?ressort=me&dig=2010%2F04%2F10%2Fa0015&cHash=4b3ed122d4

http://www.davidwmullen.com/2009/02/05/do-social-media-tools-make-us-less-social-where-it-counts/

http://mousumi-randomideas.blogspot.com/2009/02/are-social-networking-sites-making-us.html

http://mashable.com/2010/08/02/stats-time-spent-online/

SNA in Action: Catching Roadside Bombers in Afghanistan

This is really where SNA gets about as practical as it can.  Click on the post title for the article. BTW, look at the photo of the soldiers looking at a screen.  The slide title is Newman Grouping, and they are most probably reviewing basic centrality measures of the type that you have learned.  So you all are now armed with the knowledge of how to go out and find IEDs in a war zone! If you don't believe me, take the quiz at the bottom of the page.