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Social Media, The Next Big Rvolution in Enterprise
Rishi Taparia
Thursday, March 3, 2011
As the social network continues to expand, the world continues to shrink. Thanks to the innovation that has taken place over the last ten years, it has become easier to stay in touch with friends and family, learn about people’s backgrounds and work experience, and receive real-time updates on people’s lives. Online connections are paving the way for deeper off-line relationships. As people continue to portray increasingly authentic versions of themselves and their interests online, the value of social networks will only increase. This will not only influence personal interactions, but will also revolutionize the interactions that individuals have with businesses. As users come to demand a more customized online experience, businesses will need to interact with their customers on a personal level. Tapping into and developing an understanding of the new consumer, an extremely social and mobile being, will be essential in order to survive in today’s market.

Plotting the social graph: According to a recent comScore report, 12 percent of time spent on the Internet last year was passed on a social network, with one out of 10 website visits landing on a social networking site. But that doesn’t capture the full reach of social media sites. With over 2.5 million websites currently integrated with Facebook, including over 80 of comScore’s 100 most popular websites, people are engaging with their social network more than they might realize.

The penetration of social media has reached critical mass. Personalized online experiences, customizable for the individual based demographic data such as age, gender and location can now be offered. The next step in the proliferation of social media will be the optimization of the web based on the ‘social graph’, the map of an individual’s social connections through which people communicate and share information. The social graph provides companies with a highly advanced means of leveraging one of the most basic principles of human nature: people tend to choose friends who share their preferences, interests, and values. Still in its early days, tapping into the social graph holds promising implications for content delivery and consumption.

While it may take some time for the technology to develop, the path towards a true ‘recommendation engine’ has begun to materialize. Users will soon have access to an online experience customized not only to their demographic data and their own interests and likes, but also built around the collective preferences of their social graph. Shopping online for sneakers will no longer simply be as one-dimensional as visiting websites and scrolling through pictures and reviews, trying to find the right pair. Instead, shoppers will see content driven by their friends’ recent purchases, the types of shoes that are trending for their demographic, and styles specifically chosen to reflect their past purchases and future expected use. As the technology continues to develop, more companies will attempt to integrate data from the social graph into their websites and offer content personalized to their users’ interests and history.

Social media in the enterprise: With more people spending more time consuming and creating social media content, companies have begun to adjust their advertising and marketing strategies to capitalize on the trend. Advertising and marketing budgets for social media will continue to cannibalize those for traditional channels such as print, radio and television. Social media has given companies and brands the opportunity to create online identities that customers can directly interact with, pushing business-to-consumer relationships to a depth simply not possible with conventional media.

Successful companies with an eye to the future will turn their customers into assets, bringing them into the fold and empowering them with tools to evangelize their products. Through messaging, advertising and deals tailored to the individual ‘fan’ based on demographic data, companies can now incentivize, motivate and encourage customers to be brand advocates and share their enthusiasm with their friends. Customers can now ‘Like’ products on Facebook, ‘tweet’ out the latest deals and publicly announce they are a ‘fan’ of a brand—and be rewarded for doing so. Through its Facebook page, a company like McDonalds can now offer Green Bay Packers fans a free burger to congratulate them on the team’s Super Bowl victory. Unlike a television commercial, where a missed or fast-forwarded ad equals a lost opportunity to engage the customer, this offer can be shared on Facebook walls and Twitter feeds and then spread virally, improving the odds that it will be seen and acted upon. This rich and more engaging experience is a powerful tool, and mainline businesses are slowly waking to realize its potential.

As companies continue to adopt this relatively new and ever-evolving technology, calculating the return on the investment in social media—the value of a ‘fan’—becomes essential. But, companies will need to ensure they don’t try to over-extract value from the social media channel. Inundating users’ social networks with messaging, similar to blasting inboxes with spam, will lead to a lower engagement rate and thus a lost opportunity to connect with customers. By squandering the ‘Like’, companies risk alienating the social graph, one that is highly collaborative, influential and now extremely mobile.

Layering in the mobile world: In the fourth quarter of 2010, for the first time ever, more smartphones and tablets were shipped than PCs (including netbooks). Smartphones and tablets give users the ability to be connected at all times and are rapidly changing the way people consume and create content. This constant stream of content is a key driver of the social media revolution, and mobile devices have given users greater access to the social graph resulting in more frequent and regular interactions. It is now possible to access data any time, provide real-time updates on an event to friends, and, perhaps most importantly, broadcast current location.

The location layer is unique to mobile devices and extremely powerful. By enabling consumers to share where they are, mobile devices provide them access to even more targeted and relevant content, specific and convenient to their current coordinates. They also give businesses the opportunity to offer location-based content such as deals and incentives aimed at enticing consumers to visit their locations, potentially changing a consumer’s behavior well before any purchases have been made. A search for ‘coffee shop’ from a smartphone indicates different intentions than the same search from a computer. The mobile search likely precedes a more immediate, actionable task—looking for a coffee shop to go to in the near future—since the search is taking place while on the move. The ability to influence the search results, and potentially manipulate a consumer’s footprints, is increasingly relevant for businesses as they continue to try and differentiate themselves in the social world.

This is only the beginning of the impact that smart mobile devices can have on society. Moving forward, mobile devices will be a horizontal enabler for technology, serving as a platform for advanced technology. As innovation continues, they will potentially be used for everything from making payments at a cash register to monitoring one’s health. The pace of innovation is accelerating and the boundaries of technology are being constantly tested.

The intersection of social media and mobile technology represents a unique opportunity for entrepreneurs to shape the way users consume, create and disseminate content. In this extraordinarily dynamic landscape, tools that help make sense of the social graph and optimize around the complex layers it reveals will be in high demand. With the cost of building technology business at an all-time low, entrepreneurs should seize these myriad opportunities to disrupt the status quo. Those who can capitalize on these trends and continually stay ahead of the curve will be leading the pack.

The author is an Analyst, Scale Venture Partners
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