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Investing in Social Media

CMO Survey Results

The August 2011 CMO Survey reported that companies are increasing spend on social media (from current levels of 7.1 percent of marketing budget to 10.1 percent over the next year and to 17.5 percent in the next five years). These are big numbers and they have been waved around a lot on the internet. What’s striking to me is these same companies report that they employ, on average, only two people dedicated to actually doing social media (standard deviation 4.8). Houston, we have a problem—well, maybe three problems.

First, financial investments are leading investments in human capital. On the one hand, this makes sense as the company builds the technological infrastructure to gather, store, and process its new “social” strategy. However, many companies fail to match human investments with these technology investments. This happened with many customer relationship management systems. Firms spent millions of dollars on systems that were never fully utilized to drive strategy decision making. Technology can be a major boost to the effectiveness and productivity of marketing strategy, no doubt. However, technology must be embedded in a larger social media capability that fundamentally involves human investments. In short, people drive what technology does and then use its output to drive company decisions. Without a capability, financial investments—whether in the form of technologies or new designs—won’t really amount to a competitive advantage.

Investing in the stock market also requires a balance between financial investments and human investments. While it may be tempting to solely rely on automated trading systems and advanced algorithms to make investment decisions, it is important not to forget the importance of human expertise in analyzing market trends and making strategic decisions. Moreover, investors must manage their risk by determining the appropriate position size for each trade. A position size calculator can help investors calculate the optimal amount to invest in each trade based on their risk tolerance and the potential return on investment. By taking both financial and human factors into account, investors can make informed decisions and increase their chances of achieving a competitive advantage in the stock market.

Second, my sense from looking around my own organization and many I encounter is that most companies think social media employees can do more than they really can with the time and training they have. Some social media people are designers, others are marketers (about 50% based on The CMO Survey), and others are pure techie types who migrated to social media. The best social media employees are customer-savvy, marketing-minded, design-aware, and technically proficient. Unfortunately, that profile is hard to find. With lean staffs and weak integration of social media into the rest of the company strategy (3.4 on a 7-point scale where 7 is very integrated), exactly how all of this fits together into a powerful social media capability is not clear. That fit can be strong if it is managed or it can be a mess if left to the discretion of social media personnel alone trying to respond to too many requests from too many different groups. Social media must be a company-wide capability to really payoff.

Third, I know a lot of my friends running independent social media shops don’t like it when I say this, but I think it is a problem when the number of company personnel dedicated to social media (mean = 2, s.d. = 4.8, 95% confidence interval = 1.3-2.8) is not higher than the number of external people the company has hired to help with social media (mean = 2, s.d. = 8.5, 95% confidence interval = 0.6-3.3). Capabilities can emerge from strategic partnerships with external agencies, but the company must manage this relationship with strength from the inside. Furthermore, if social media is to be fully integrated with ALL of the firm’s activities—as a way to learn about customers and to deliver more value to customers—and even as a new business model, the firm must be in charge by building the capability with the intention and attention to maximizing its long-term effect on the company.