Using Social Media to Generate Revenues
Heidi Cohen | March 13, 2008
Can social media generate revenues? Five points to consider when adding social media to a Web site.
Recently, I moderated a panel for the Software and Information Industry Association (SIIA), with participants from established offline media outlets, well-known online brands, and newer user-generated sites. The central question was "Can social media generate revenues?" Social media usage has exploded over the last few years, but marketplace uncertainty still exists about how to best monetize this tremendous potential traffic source.
It's About the Audience
Whether starting a new site or adding new social media features to an existing media venue, you must think hard about your audience. The user is at the core of every social media site. Assess the following issues:
- Who's your audience? Spend time defining your target market. Think in terms of the these factors:
- Demographics. What attributes describe your market, such as household income, geography, age, education, profession, or household composition?
- Psychographics. What other traits does your audience have? Are there special interests that influence their actions? These can be work-related, such IT, or hobby-related, such as knitting.
- Behavior. How do users' online actions reveal their interests? Do they use specific products or content? Do they read whitepapers or watch videos?
- How do you want to the audience to participate? Make it easy for users to contribute and share, in addition to providing site capabilities that are intuitive to use. For example, rating content or uploading photographs often takes less effort for users than expressing themselves in words.
- What's the benefit of participating, both passively and actively, for users? The reader is thinking, "What's in it for me?" Is it being part of a community, getting feedback, having a public forum, earning respect, being heard, or some other reason?
Allow participants to give you feedback about site functionality. This is particularly important during early stages of site development, when your participants can tell you what they want and need from your site as well as complain about what doesn't work.
Points to Consider When Adding Social Media
- Create a strong process for site moderation with well thought out and established guidelines for what's acceptable. ITtoolbox's George Krautzel points out that this must be done subtlety; it doesn't mean becoming an obvious presence on your site.
- Have a willingness to fail publicly, because social media requires a level of transparency. For some companies, this can be difficult to accept. Transparency is important to understanding what works and how you got to your current offering.
- Understand the speed of change involved. Every day brings new changes and challenges as your site evolves. This can be difficult for some offline media companies to comprehend.
- Commit to making it succeed. Social media isn't "build it and they will come" functionality. It takes ongoing work to nurture and keep the community expanding and evolving.
- Recognize that building a social media site is an iterative process. It requires continually testing new ways to improve the site. According to Spiceworks's Jay Hallberg, it often takes three attempts to get a piece of functionality to work properly for the community.
Different Revenue Models
Social media provides publishers with a variety of revenue models, including:
- Advertising. Despite publisher concerns, social media, especially for niche or B2B (define) markets, provides well-developed niche opportunities that can evolve into a variety of offerings. Among the advertising opportunities: banners, sponsorships, lead generation, and behavioral targeting that can be sold directly or through third parties.
- Subscriptions. Subscriptions can be offered in a number of ways. For example, they can be used for additional functionality, as with LinkedIn, or they can blur the line between print and online, as with the site for "Engineering News-Record."
- Other forms of revenue. Given social media's evolving state and the strong online advertising market, many companies haven't fully explored such options as revenue shares or affiliate-type sales, research sales, and data sales (without revealing personal information). (For other content revenue generation ideas, see "Develop Supplemental Content Revenue Streams.")
Measuring Social Media's Impact
Many marketers continue to use older metrics to assess a campaign's impact. In part, this is because they like having metrics that are consistent across campaigns and that they understand. But other, less traditional metrics are also important. Among the salient factors to consider:
- Pageviews. While this is an established indicator, it can put your social media efforts into perspective. For example, McGraw-Hill's Dora Chomiak pointed to a roughly two- to three-fold increase in pageviews per session from the newer social media sections of the publisher's site. For an advertising-driven site, this translates directly to the bottom line.
- User involvement. This can be measured in terms of time on site as well as activity. For example, how many comments or photographs are added each day, week, or month? Has user time on your site increased due to involvement with these sections?
- Advertiser interaction. Does the site enable advertisers to participate in a dialogue with their consumers? For media entities concerned about advertisers that receive negative customer feedback, it's important to put this in perspective since the conversation is already happening. And these newer formats enable them to address these issues head on (albeit in a public forum). Note: this can also be useful for editorial team members who, until this point, may have only had a one-way communication with readers.
- Revenues. As always, assessing revenues and positive cash flow are critical components of any campaign.
- Costs. It's important to track costs associated with these efforts. Remember to consider expenses broadly, because it may touch a number of your organization's areas.
While adding social media to your site can be a difficult decision, the most important step is starting. Social media features aren't a quick fix for a boring site. But many online marketers have found they're great tools for expanding reach, building involvement, learning from visitors, and, yes, even bringing in new revenues.