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
2 comments:
Given what you've written, a better title might have been "Can companies afford not to advertise on SN sites?" As for what my friend and colleagues Eric Clemons (with an 'o' not an 'e')says, he is an established 'contrarian.' on this subject. Read a later article of his to see how his thoughts have developed: http://techcrunch.com/2009/03/22/why-advertising-is-failing-on-the-internet/
Dear Sir, thanks for providing the better title, I should have spent a lot more time analyzing about the right title for the topic, which I probably did not.
I am really sorry for making the mistake of spelling Professor Clemons' name wrong. I did not re verify the spelling on the internet, which I should have. I will definitely read his later article which you have mentioned above.
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