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Wednesday, 21 April 2010 16:21

Organisations question ROI of social networks

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By the end of the year 71 per cent of Australian organisations intend to conduct some form of social media activity - even though few know how to measure the return on investment from such initiatives.

According to the 2010 Social Media Business Benchmarking Survey, conducted by market analyst Nielsen on behalf of specialist social network developer Community Engine, half of all Australian businesses believe they will lose touch with customers if they do not use social media. Already 27 per cent of businesses have a Facebook presence, 17 per cent are on Twitter, 10 percent on YouTube, 5 per cent on MySpace and 2 percent on Linked In.

Even so, 30 percent of organisations would prefer to use their own social media network if one was available, because they feel it is important to own the information they capture, and believe it is risky to have customer data held on a third party's platform. Most cited lack of skills and resources as the reason for not building their own social networking system, and instead piggybacked on well established social networks such as Facebook.

The number one reason for using social media remains brand-building with half of all Australian businesses acknowledging that they could risk losing touch with customers if they did not link to them using social networks.

At present 15 per cent of organisations have formal social media marketing strategies in place and 9 per cent have staff dedicated to social media marketing. Of those organisations involved in social media 37 per cent said that they were spending 5-20 per cent of their overall marketing budget on social media marketing - funds which had mainly been carved off the traditional marketing budget, rather than representing additional spending.

The big losers as a result of this shift in marketing spend were print, direct marketing and traditional digital marketing spend on websites.

In spite of the apparent enthusiasm for social networks, barriers were still evident. Measuring return on investment was nominated as a key barrier by 28 per cent of organisations polled. Achieving senior management buy-in was also still challenging - particularly in large organisations.


In a separate Web 2.0 survey (which includes social networking), also released today, by security company Clearswift, other barriers to corporate adoption of social media were identified as security threats and the risk of data breaches.

Nevertheless according to Community Engine managing director Piers Hogarth-Scott social media 'Fundamentally changes the way that people interact and the way organisations do business.' He argued that social media channels 'combine the authority of business with the authenticity of customers, which is a way to drive advocacy.'

Whether such opaque spruiking will be sufficiently enticing to sway still agnostic senior managers is moot. They generally like to see the money - and Hogarth-Scott acknowledged that 'ROI measurement is proving difficult.'

He claimed that business nevertheless now had the opportunity to use social media networks to 'establish a long term strategic asset rather than short term marketing campaigns.'

Mark Higginson, director of analytics at Nielsen Online agreed, saying that 'We are at the point now where brands and products have the opportunity to engage in a generational shift' in the way they interacted with one another and customers.

Disclosure: the author has provided consulting services to Nielsen in the past.

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