Why Advertisers Won't Invest in Social Media

Implications: Advertisers of all shapes and sizes will continue to hold advertising dollars back when it comes to social media for some very specific reasons.  These center on a lack of understanding of what "social media" entails, high profile mistakes that hit at the authenticity of media (i.e. Walmart and Microsoft's blunders involving money, opacity and bloggers) and the continuing (false) belief that "going viral" is something that you can actually plan for and execute as a marketing strategy. 

Analysis: Sure, they generate serious media buzz yet social networking Web sites like MySpace.com and YouTube have not yet figured out how to use that hype-and-spin to generate significant advertising revenue.  So says IDC who released a report last week in suggesting many social media sites will never figure the game out (turn their site traffic into cash).

In the report the firm suggests that risky, edgy and/or blue content (words, video, audio) generated by users are the main barrier for advertisers who are just to scared to jump in the social media pool.  With Goliaths like Walmart (example) and Microsoft (example one, example two) having taken such a beating others are sitting on the sidelines and rightly so. 

You would think that Walmart would have learned a lesson but apparently not as recently the retailer teamed up with Facebook in a joint venture targeting would-be college roommates.  Says industry rag Adotas:

"The retailer has created a group on the social network called 'Roommate Style Match' which is intended to have roommates discuss decorating options and college life, however the majority of the comments seen on the group’s page have been less than enthusiastic and aimed at the company’s business practices.

Many of the comments are not just aimed at Wal-Mart but at Facebook as well for allowing the page in the first place. Forrester Research Inc. analyst Josh Bernoff said in a statement to Computerworld, 'Wal-Mart has more enemies than most people. Wal-Mart has a PR weakness. If you give people an opportunity, they are going to come after you.'

Despite the abundance of negative feedback, many industry analysts applaud Wal-Mart’s move to use Facebook after a failed attempt at creating their own social network called the Hub. The key will be for the retail giant to get users back on track and discussing dorm décor and stepping over the brand smearing."

Undaunted, Google's YouTube launched new "overlay advertisements" last week... prompting complaints from its users (some who threatened to stop using the site and opening doors for YouTube competitors).  These advertisements "overlay" video content from major entertainment companies for the most part (which Google has struck ad revenue sharing deals with).

Why the lack of deal-flow?  Examination of the high profile blunders reveals the answers: advertisers refuse to understand that authenticity is key.  Ads must be authentic in the world of social media.  They cannot be canned, fake or drummed up by corporate interests.  "Social ads" (in fact, they're not ads at all) require transparency... opacity and, in fact, participation with the audience.

Finally, advertisers continue to believe that "going viral" is something that they can actually plan for and execute as a marketing strategy.  Why not given all the agencies springing up that claim to have the "viral marketing" strategy licked!

Andrew Chen says it best in his piece "Viral marketing is not a marketing strategy."

He eloquently suggests...

"Many times, viral marketing is seen as a 'marketing strategy' that is interchangeable with other methods of acquiring users. That is, you go through three steps:

1. Develop your product
2. Think through a plan on how to make people use it
3. Declare viral marketing is one of N approaches (along with SEO, SEM, PR, etc.)

Or perhaps you already have an existing product, and you have gotten interested in using a Facebook widget or something like that to make it 'viral.' If you are in this boat and think of viral marketing as a compelling marketing strategy, you're in trouble.

Successful viral products don't have viral marketing bolted on once the product has been developed. It's not a marketing strategy. Instead, it's designed into the product from the very beginning as part of the fundamental architecture of the experience."

He goes on to quote Roelof Botha, the venture capitalist that backed YouTube...

"Viral isn't something you can just make happen... it has to be inherent in your product."

Says Chen...

"Similarly, no single product feature determines the viral success of a business. I've seen several product pitches where the business is described as 'viral' on slide 10 of the presentation, because of a particular feature, like 'Tell a friend',Widget embeds, Addressbook importing... or whatever.

No single feature determines the virality of the product - instead, it's part of a viral loop that connects a disparate set of functions into a cohesive motivation for the user to tell their friends. If the fundamental product doesn't drive a viral motivation from its users, then it's very hard to force it."

In the end, viral marketing is a fundamental product design discipline.