Social Media – Business Bonanza or Bubble About to Burst?

Social Media Bubble?

A lot has been made about social media and how it will revolutionize the way businesses market their products and services. All one has to do is look at the growth rates of the main social networking websites to see the marketing potential. In 2009, Facebook doubled its number of visitors to 110 million, Twitter grew at an insane 1,382% and LinkedIn added one user per second during one busy stretch!

Who am I to argue with those numbers!! Any time you have that quantity of eyeballs on one Internet property, you're bound to have huge marketing potential, right?

Not so fast.

A survey done by the Sage Closer of over 130 VARs in North America and Asia points to a serious flaw in that logic. Social media marketing is a red hot commodity – that cannot be denied. But in the haste to embrace all that's new and disruptive to traditional marketing - perhaps in part as a way for new voices and businesses to make their mark, and money - some basic facts are being overlooked.

I speak of a simple expectation gap many businesses have of social media marketing. When we asked if VARs expected social media to be a source of new software sales leads, the majority of them responded positively. It’s certainly understandable given the near euphoric promotion of social media by a seeming new (media) generation of marketing consultants, many of them self-described social media gurus, experts, junkies, moms, dads, rock stars, angels, and more.

When asked what budget assumptions they made for social media marketing in 2010, a majority of the VARs said that no significant amount of staff time or investments were planned. In essence, what VARs said is that they plan to use social media – and hope to gain new sales leads as a result – but had no intention of funding the activities necessary to fulfill those hopes.

While I’m a huge advocate for using various forms of social media in support of marketing campaigns, I’m also a realist. A friend and author from Austin named Tommy Landry told me over a recent lunch that many companies begin using social media with no “particular plan, outlandish expectations, and no clue as to the true cost of social media marketing.” [If you want to learn more about social media marketing, check out Tommy’s excellent blog at http://returnonnow.com/.]

As VARs experiment with social media marketing, many will be struck by how difficult the task is to execute effective marketing campaigns. Nor will they be pleased by the large amount time and resources successful campaigning will require on the Internet.

My prediction, which I discussed in a press release distributed today on PitchEngine, warns that such a disconnect between high expectations for sales growth and extremely modest assumptions of social media campaign costs will lead to a backlash against social media late in 2010. Since VARs are not much different from other B2B companies, there’s a good chance we’ll witness a similar tipping point away from social media in many B2B industries.

Those companies who make realistic, smart investments in marketing are always well rewarded for their efforts. Social media marketing campaigns are no different. In my view, only a small percentage of B2B companies will fully comprehend how to achieve a sufficiently high ROI on their social media marketing activities. Parreto’s Rule (20% of businesses are responsible for 80% of a market) will hold true for social media in the same way it applies to traditional marketing.

So whether you think social media is truly a business bonanza or just another bubble ready to burst matters not. Social media will not provide a way of life to every guru, rock star and mom seeking a quick buck. And only smart, well-balanced companies in it for the long haul will win under the new rules of social media, just the way they always have in the past.

Hey, it doesn’t mean we can’t uncork a bottle of champagne and enjoy the good times while they last! Even I’m in the middle of writing an eBook showing how VARs and small companies can begin using social media to accomplish a variety of marketing tasks.

We just have to remember that bubbles don’t keep growing forever.

I’d love to hear what you think.