Monday, July 26, 2010

Social Media Monitoring Goes Bust

A Brief History

To start with a brief history of social media: from cloudy beginings in nerd talk and security services personal info boards, social media came to the public internet in the late eighties and early nineties as the newsgroup: a simple text based repository for messages and early blogs, with circulation by e-mail subscription or internet boards.....and these were indeed monitored then, mainly by police in connection with the p├Ždo rings and other unsavoury comms.

Newsgroups quickly went HTML on the World Wide Web and evolved into the forum, which is still the best repository for accessible, high value and trackable information on the web. This is where most consumer involvement with products and brands takes place. Although the micro blogging / glue services like Twitter are rapidly becoming a larger, faster resource they are still less useful for examining consumer attittudes over months of time or in detail.

Little Brother is Watching You

Now there are a host of agencies offering "social media monitoring" and these currently run the risk of creating a bubble soft and venture capital will feel the implosion of. Currently the most advanced indexing tools are not much better than stringing together several specialist hot shop functions, a core data depository and crawler and monitor and "deck" resourcest which are free on the internet. The larger agencies, like Meltwater are able to attract the larger brands while the major players of Trad' market research are still testing the water and holding off on acquisitions.

Why is Social Media Monitoring Going Bust?

The whole market for social media analytics, is in peril of undervaluing it's core pricing. Put simply, the barriers to entry are rather low given that comp'sci' students are often given crawler-indexer or deck meta data projects in undergrad years. Most of the new emerging agencies are student shops: comp sci and MBAers slung together to play at business. Problem being that they want to set experience before value and are cutting each others throats by going into brand names on "loss leaders".

Another key issue is the propagation of free services: "amsterdam hooker windows" as one software engineer called them in another area. The problem here is that you can begin to string together enough free services to make a picture of your brands' position in SM and then just go into the key forums and twitter yourself with your short-suffering marketing interns. The initial "Brand X status in CGM" is devalued as are tha later tracker reports: the key value for agencies is in presenting the statistics and sentiment mapping, but this is so relative and subject to the media surface changing itself that you really have to question the value of it for brands with less than 2000 hits per month in SM.

Scalability ....lack of it.

Although a few of the new starts may have strong crawler-indexer technology, one major problem is that the technology has to monitor a diverse range of sources out there on the internet, and those sources are not always too keen on being crawled. Programmer time is used in not just attaining sources, but retaining them. Also indexing for relevance and speed takes programmer time,and unfortunetly a new arena for a new brand may not be as fast or inclusive/exhaustive as the last indexing which had been optmised.

Put on top of this the awful costs of account management and new business development in acquiring and maintaining brand name clients and the issue of scalability just in this one area, is the one which will kill off most of the new starts.

Lumpy Custard

This economics of SM monitor agencies is actually nothing new: most small 1970s-80s advertising agencies failed because they tried to scale and could not make the leap from the core owner-manager team to an expanding, system driven agency.

Most of all in marketing services, it is horrible risky business with huge over reliance on a small number of customers ( clients in agency land) . "lumpy custard" as I used to describe it. In the 1980s the expression "lose a client, lose your job" was the mantra of account directors, while today it is more likely to be "lose a client, lose your VC funding".

To give some detail on this, when a new project is taken on then it inevitably comes with new sources or indexing demands. Also it comes with a new set of expectatons and because Market Research is still cinderella to the communications side of on line marketing, then new demands of the clients are usually out of line with charging the baseline 85€ per man hour to even break even in business services.

Winners and Losers

The largest, most comprehensive indexers will probably win over and then get the third level funding or even IPO / alternative exchange floatations. I'd expect these technology and brand become acquisition hungry and buy up the hot shops with key expertise in delivering more from fewer man hours. They in turn will want to either exit from VC or the stock exchange, by being eaten by the MB/TNC or Frosts of the world.

This would be the current exit model for the numerous university spawned start ups in SMM.

However, another huge issue they have is in defending their IPR: outside the US very litte will be patentable and a copyright can either be worked around or be somewhat irrelevant in a David-Goliath situation. So rounds of acquisition will come down to " can we get there cheaper ourselves? Do we head hunt out the key techies? What value do they really add ? How will they integrate technically and cutlurally to us?" for the potential bigger fish.

Acquisitions rounds will become window shopping with all the above questions firmly in mind once they get a look behind the scenes. Small companies would be wise to limit their exposure in terms of their "black box" code and indeed the identities of their staff.

These days you are open to headhunting through facebook and linked-in, so Social Media monitors may be eaten up by their own poison.

No comments:

Post a Comment