The Many Challenges of the Social Media Industry

Like every industry, the social media industry is plagued with problems that for now, are slowly being solved. It’s important to note the challenges in our industry in order to first identify them and eventually overcome them. There is no indicator from our data that Social Media will go away, in fact the adoption rates of Generation Y, indicate this is a trend, but with that said, let’s first examine the issues in the industry:

The Many Challenges of the Social Media Industry

A current lack of profits
The social media space, a movement where anyone can participate has resulted in low or no revenues for most participants. For example, there are millions of bloggers, and only a few of them can claim serious revenues, and even a smaller subset have built media empires. Aside from the users themselves, many businesses focus on generating hits, visits, or registered users and will figure out how to monetize. Take a look at social networks, some valued at billions, yet we’ve yet to hear success stories of hand over fist revenues. Like the universe, stars and revenues are far and few in between, a majority of creators will not generate revenues.

Some innovation spurred by funding –not revenues
Both a problem and an opportunity, investors (VCs) continue to inject money into this space –often funding unproven business models or one-off technology. In more mature industries, it’s unlikely we’d see such an influx of spending, but often because innovation was spurred off the success of actual revenues. With so many companies being funded without actual revenue, the market is exposed to a several variants of the same feature.

Low barriers to entry make competition cut throat
Commodity software is always a concern, and when this occurs, there are so many entrants the market is confused –unable to determine who to purchase from, and competiors may eat into each others margins. Take for example the crowded community platform space (aka white label social networking) industry that has over 100 vendors –all offering very similar software.

Excessive noise drowns out signal
With everyone able to create content and share the details of their personal lives in detailed minutia, the problem of excessive content becomes an issue. Every 60 seconds, 13 hours of content are uploaded to YouTube (says YouTube employee), and millions of tweets are generated every day. With so much content being created, how will one filter out what’s important?

Amateurism threatens professionalism
Nodding to Andrew Keen’s criticism of the dangers of amateurs creating less-than-professional (and sometimes incorrect) content then spreading it prolifically this has caused some concern for those who consume this content. The problem of course, isn’t really the quality of content, but the ability to quickly decipher what’s important –and what’s not.

Marketers move in without community consideration
Wherever people move, marketers follow, while some do it smart and savvy, many will approach it from a different style. For example, the concept of pay for post, social media optimization, bacn, spam-like content on blogs and social networks, and other marketing noise is and will continue to be a challenge whenever communities congregate. (updated per Jennifer’s suggestion)

Corporate and personal brandjacking
Becoming more and more common, brands –and individuals– can easily be brandjacked as others take their user name, domains, and assert themselves as someone else. Given there are hundreds if not thousands of websites to monitor one’s brand, squatting these names will increasingly become difficult over time.

Lack of standards causes disparate experiences
Although better than many industries, the open web still slowly moves towards common standards of logins, social graphs, and content types. Even protocols like Google’s OpenSocial were designed to unite activities and applications across any social network, each container (social network) requires tweaking to customize to each platform, while some –like Facebook– don’t participate at all.

Cultural changes cause resistance
Without a doubt, this movement of self-publishing and connecting is a disruption to the marketplace, media, the buying cycle, and the marketing funnel. Generation old barriers are crumbling from a command and control viewpoint to an open and collaborative style of business and personal communications. With these radical changes comes resistance from those who were previously in power (media, management, marketers, governments) who are slow to adopt –and thus resist.

Identifying true expertise challenging
In experienced industries, track records are defined by years and sometimes decades, in this burgeoning new industry, it’s often difficult to decipher who is a true expert –and those that have actually performed a social media change to make a difference. Mostly, track records only go back a few years, and few can demonstrate a return on investment.

Difficulty measuring ROI
Despite many attempts to measure “engagement” or “ROI” there still is no industry standard to measure the efforts of social media at the personal –and corporate level. While many have developed their own ability to measure on a one-off way, there’s no industry way to quickly –and easily agree pan-industry.

Conversational Marketing may not scale
Peter Kim points out that social media marketing may not scale. Primarily due to the 1:1 relationships that are needed to engage in conversations, it’s difficult for one person (despite how large their platform is) to cover all the conversations in a given market. Be sure to read the thoughtful comments. (added August 23)

Rumors can impact stock prices
This example of a rumor spreading mis-truths about Steve Jobs health actually cost a dip in Apple stocks. With rumors flying around more easily than the time it write an email, the internet often doesn’t have time to self-correct before bloggers hungry for link bait jump on, adding to the flames. We often see this pile on behavior during blog fights too.

Hyperconnected can’t scale
For some hyperconnected folks on blogs, twitter, friendfeed and facebook, they don’t scale as everyone reaches out to them, as a result, they miss deadlines, opportunities during this long battle to stay up to speed. Technology has created this problem when the world flattens out and there are no more gate keepers, I thought it would be fun to be like this, but in reality, it’s a curse too.

I realize this post could infuriate some social media purists, but I wanted to provide an objective view of what I’m seeing in order to map out danger spots on the map, so we can collectively overcome them. I hope you read my other posts where I list out challenges of social networks, widgets, blogging and others, if you plan to run in this space, first know the hurdles.

If you can think of other challenges in our industry –feel free to leave a comment, I’m curious to hear your reactions. (Update: On a related note, Jeremy Pepper is holding the experts to task)

This post has now been translated to Italian, thanks Marco

73 Replies to “The Many Challenges of the Social Media Industry”

  1. Two quick thoughts from skimming this post:
    First, not only does amateurism threaten professionalism, but it’s also the other way round. Professionalizing strategies can also stifle the self expressions of amateurs.
    Second, I very much agree with your point, that excessive noise is at the moment a true problem. But I am quite optimistic that very soon there will not only be functioning recommendation systems but also noise cancelling devices. I can imagine that in the near future there will not only be the possibility to follow people on social media platforms that are your “newsmakers” but also people that are “noisetakers”.

  2. Thanks Benedikt, I’d agree that as we see amateurism and professionalism collide, each side has to give and take.

    There’s a lot of echoes out there, many not adding additional value.

  3. BTW, from a historical perspective, professionalism had been invented at some point of time (together with hierarchical modes of organization and occupational fragmentation) and could lose importance in the future or even vanish. It is not an anthropological constant.

    For me, the last point, the problem of measuring social media, is the most important right now. In Germany there is a weak trend to try out social media marketing strategies at the moment. But then the success is measured by comparing social media with “old” online media or even offline media like billboard advertising. And reaching a few hundred bloggers or a few thousand Facebook users appears insignificant. But only if you don’t take into account stickiness, reliability, involvement etc. But they will learn eventually.

  4. Great stuff. It is this kind of balance that seemed to be missing on SM for a long time. Execs really want to know this stuff too so that they can make an informed decision.

    I think ‘Future shock’ might be another one. Just trying to keep up with the transient and shifting technology crowd. Are the groundswells getting smaller? With all the noise it is hard to focus, a kind of cocktail party effect.

    There is possibly a sense out there of ‘when things settle down’, a type of paralysis about social media because so many new players keep entering the foray.

  5. Great post!!
    I’m actually in the middle of these conversations between UK and Italy.
    I work in London but I’m writing a book with some Italian professionals about Digital Marketing and Web 2.0.
    The interesting point is that Italy is now where UK was 2 years ago…a lot of excitement and mystification around Digital.
    UK is exactly at the point you are making! Social Media cannot be ignored, they are a reality…though how can we measure the success?
    It’s actually not proven that they ensure ROI…
    I think Social Media and traditional media cannot work in isolation…
    I think now more than ever integration is vitally important. And to all of them that say people don’t watch TV, but spend all the time on the Internet – arguable, but let’s assume it’s partly true – you’ll still need to reach the mass in terms of numbers…Internet is not enough, often for the fragmentation of the offer.
    Measuring success? Even a proven engagement through social media, doesn’t prove these people will buy that product.

    Maria Teresa

  6. I can’t see this blog ruffling any feathers as I think the challenges you state are directly in line with the reasons that so many companies have resisted “social media” for so long. I also think that until some of the social media supporters themselves consider how they might improve the landscape themselves (introduce more professionalism; be more conscious of content; create higher standards that can potentially create higher barriers to entry and therefore result in less noise, etc.) it won’t get much better.

    Question, though — what does spam have to do with marketeers? I can more understand the marketing connection to BACN as so many marketeers push opt-in messages, but BACN is a lot of times the user’s fault. The security side of my brain is having a hard time making this connection. 🙂

  7. Thanks Jennifer, we see spam in fake twitter, blog, and social network features (wall pages) of marketers hawking their services without adding to the conversation.

    I’ll update the post to better reflect that, good points.

  8. Really enjoyed this post. One thing though, since the money is investment, not revenue, is it really an industry yet?

  9. Jeremiah – this is one of the best posts I’ve seen in recent memory. Seriously well done, and I hope all marketers, traditional and “new”, give it a read with deep consideration for the points you make.

  10. Great post Jeremiah. I think there is a lot of black and white thinking in social media space right now(either you fully embrace social media methods or you can’t get its benefits). In reality, enterprises need a way to both align their structures with all of the user generated ideas and content coming in and find a happy medium between structure and organic initiatives. When companies can see a path to using social media tools in a way that enhances their relationships while mapping to their structure, they are willing to invest because there is significant pay off for doing so.

    On the enterprise side, it can’t be a complete free for all – content has to be linked to how the company thinks about its investments. That may sound very old school but it is an enterprise reality.

    Rachel Happe
    Mzinga

  11. Jeremiah,

    Thank you for posting this. I grow tired of constantly hearing from the Kool Aid drinkers about how social media is the greatest thing in the universe and every person and business should be involved, etc. It’s nice to see someone who appreciates the value of social media with a more balanced POV.

    Cheers,
    Scott

  12. Terrific post! I can agree with all points except excessive noise. If the problem is that we can’t filter it out well enough, that’s true. But it can’t be avoided, nor should it. Some noise is spam, some is personal, and some is professional. Sounds like any other medium that already exists. A lot of shows on Bravo might just be noise, they’re not important. BUT I’d never dream of getting rid of them.

    We just need a better personal filter. Noise to you, might be music to me.

  13. Brian, Web 3.0 should involve the use of recommendation agents and artificial intelligence technologies, which should be able to provide a filter type intelligence, I guess to provide a more selective user experience, music and noise to target willing to receive any of them…

    So, we need to be patients! 😉

  14. Great post as always…

    I think your challenges are right on the money, and you shouldn’t worry about offending anybody. Honesty about limitations is only going to help adoption.

    I currently work in the Canadian market, and like Italy, I think we are a couple of years behind…

    There is a lot of curiosity and it really is Asian that this is coming soon but certainly not the adoption among big business and government that I would like to see.

    In regards to filtering the good from the bad, don’t we already have good mechanisms for this, (i.e. page ranking, authority, user tagging and voting, etc.) I continually get this concern raised when speaking the Web 2.0, and my responses been that while the tools can be improved upon, filtering is largely a built-in mechanism of this space.

  15. I think your list is a great reminder of the issues to consider before jumping into social media marketing. Actually, I am wondering if it is possible to have a succesful marketing strategy for in a space that is continously shifting. How would we measure success? Defenitely not by ROI. At best, social media marketing strategies can be measure by level of engagament without any expectations for financial return. Yetignoring social media, just because there is not ROI, is not a good strategy either.

    As long as our marketing practices in social media are honest, considerate of the conversation, and open to risks and failures we have an opportunity to at least position our brands for future positive returns.

  16. Solid article Jeremiah. Common sense is another key ingredient that many tend to forget in the ‘rush’ to process and disseminate information.

    Thanks again and look forward to seeing you in upcoming social media/networking venues.

  17. Jeremiah, great post. A lot of the issues you are raising point to the chaotic state of the affair in social media. I think the 2 most important issues are “Identifying true expertise” and “Marketers move in without community consideration”.
    Marketers are still having a hard time understanding social media and their clients, companies looking to advertise, won’t let go of the old “I-want-to-control-everything” model. Meanwhile, how do you find the real influencers in social media (they can be bloggers, photographers, video producers, amazon reviewers …) who already know how to reach consumers?
    That’s the question we are trying to answer at http://www.traackr.com

  18. Great post! A couple of quick points:

    —You have been touching on the fragmented nature of this market as a theme in some of your posts. When I “talk shop” with others in the industry I often tell them that in comparison to web 1.0 we’re basically in the 94-95 wild west era, with companies popping up and rolling over on a week to week basis. We’ll just have to wait it out and find out who the survivors are. Clearly there isn’t room or market need for over 100 white label online community software platform providers, but early going vc’s will always fund multiple companies in a single market as a hedge, and then they will wait to see who has a better business team to go along with their software.

    —I don’t think all the “white noise” and background clutter are really an issue at all. Moderation is part of Nattergalen’s service, and one of the best practices I always counsel clients with built in forums is to use the admins delete privelages only when absolutely necessary. Online communities are Darwinian and self-sifting. A compelling post will get response and rise to the top, everything else will fall to the bottom. Social media as a whole works the same, compelling voices gain traction, everyone is looked over and evaluated, and people get a reputation for interesting and accurate content and develop branding over time. Everyone else is lost in the clutter.

    —-as far as spam goes, particularly spam by twitter-marketers and forum vultures I also don’t worry at all. I am marketing myself right now. If I was one of the bad marketers as mentioned, I would simply say “Great post Jeremiah, sounds like all these companies need to try Nattergalen wooha!!!!!” or something like it. Easily recognizable as spam, it would be deleted as part of a daily check-in, and anyone who did see it would recognize it as bad fieldcraft and I would get a negative branding impact for my brief efforts. But by responding to this post intelligently, with relevant and knowledgeable comments, the post stays up, I keep in the conversation, and since most people read comments check the names next to them I am being noticed and evaluated by industry insiders, and I get a positive but subtle branding response from my more careful effort. Good fieldcraft on my part, and it pays off in this self sifting world.

  19. Excellent post and all true. The problem is that social media is only a tool or means to an end. It has virtually no value itself, and really only has value as part of an overall strategy of some sort. And while it can contribute to ROI, the connection is at best weak and the sales cycle long.

  20. I think the lack of revenue is a serious issue. As a community manager it is very important to me that my community makes money, so that it will continue to make good business for my organization. However, the more I hear about advertisers’ unwillingness to associate with UGC and this fear of the unknown, I wonder where the breakthrough will surface. I am really beginning to feel like I need to try to sell the product even though it isn’t my role within the company. I recognize that I could completely fall on my face, but quite honestly, no one knows the community the way I do. Could that be a new model?

  21. Angela (#23), of course this the new model. Community managers, influencers, mavens are best positioned to communicated with theirs peers. They are already doing it and quite effectively I might add. Now the companies have to let go and work with the mavens (the experts) in reaching out to communities (instead of jamming what they think people want to hear down their throats).

  22. It’s great to see this conversation taking shape – has been a long time coming. Up until recently, the industry has remained focused on the bells and whistles, who’s getting VC or acquired, and what’s the hottest new widget. So congrats to you and the industry as a whole for taking this quantum leap and realizing that the underlying value is far more meaningful/sustainable than the buzz.

    That shift in focus is what’s going to drive this industry forward; clearly separate the leading vendors; and enable enterprises to realize the full potential of social media.

    Kristi Grigsby
    Neighborhood America

  23. From a company Marketing perspective, seems to me the best social media budget you could ever spend would be on improving company products and service. Then the social media element would take care of itself.

  24. Great Summary and analysis.

    I agree with your points, however, I would like to put some prespective into this new industry. Not too long ago, after the initial hype and the bubble burst, people questioned e-commerce too. For ex. Amazon was growing a lot (as social media now) but was not making a dime. Analysts forecasted that they will never will make a dime as shipping costs will be always eating their margins. Some years later, Amazon is making a ton of money and nobody questioned the viability of e-commerce. I believe Social Media will follow a similar cycle.

    Clearly, this new industry has a lot complexity but the potential and growth is there. I am positive that some of the current players will figure out how to be sucessful and drive amazing ROIs. Sure that a lot of them will fail but we will see a lot winners too.

    For example, in our segment of community plattform with cut throat competition, I believe success will come down to exceptional execution, not funding or hype. It’s clear there are low barriers of entry but exceptional service, normally translated as “great customization of customers requests” will difference the current vendors and at the end, market leaders will emerge and consolidation will happen to clear the field.

    As I said at the beggining, I agree with the all pain points that you described but I am really positive about the future of this new industry to generate valuable business.

  25. Eventually some of the problems you highlighted will go away with consolidation, which is a natural evolution with any new form of media. Great post!

  26. these problems are just pebbles on the road.

    the road is going somewhere, we can call it infinite connectivity.

    social media is only a baby step. yes, human proclivities are exposed.

    it doesn’t matter. and maybe the transparency will help

  27. Completely agree and often wonder how social media is making our lives better and not just noisier. I understand it is a living thing and constantly evolving, but I’m wondering if it’s not just being exploited for financial gain without real societal benefit.

    I don’t know. Just my thoughts…

  28. Great post. But I hope that people don’t fail to see that you are only describing challenges to overcome rather than making an indictment of social media at its young age. The road to improvement starts with awareness of issues. Anything highly disruptive to things that have long been done in a traditional way will have some bumps in its journey! Luis Carbajo described a good case in point.

    You have done a fantastic service in articulating issues for us as service providers to this industry to strive to solve and improve. I thank you very much. As you say “Social Media is not going away”, it just needs to evolve to a more sustainable paradigm. And a few of us in the business will take a shot at the challenge!

    While I sense the same confusion, I also sense lots of hope and optimism amongst our target of small-medium business communities within and outside companies. They don’t have a big budget and many are looking for a way to experiment and learn without large financial risk and with small scope projects. I strongly believe such universal strong desire at the masses/SMB level (i.e not just for the elite with big budgets) to learn/try is a powerful force that will surely get us past this point.

    Thank you again Jeremiah!

    C.H. Low, CEO, Orbius

  29. Jeremiah,

    Thanks for putting this out there to burst the bubble a bit, its definitely needed. Two things – one, I didn’t realize how crowded the white label social network space is – I think there’s been over-investment in that area.

    On the measurement side (being that’s where I mostly play) I think that different departments, industries and companies will come up with those measures. A standard is difficult – look how challenging its been in the web analytics space, with vendors defining their own parameters of click throughs. This industry will have the same issues because each vendor uses their own proprietary technology to, for example, define influencers, or determine aggregate sentiment.

  30. I think part of the reason measuring ROI is so difficult is because most companies try to quantify social media results in the “traditional” internet metrics of impressions and click-through rates. Because of that, companies often find themselves unconvinced and underwhelmed with the importance and impact of social media.

    While a lot of this comes from a basic lack of understanding; the pragmatic reality is that a client-side manager has to justify allocating ad-dollars toward social media when most of the time they can’t show any sort of result.

    Engaging your customers/influencers/audience has a very real value to everyone. Unfortunately, until us marketers can establish a definitive value on the conversation, it’s going to be a pretty uphill battle.

  31. Social media is not an industry. It is an inflection point in the evolution of communication.

    This post could have been published 10-12 years ago, replacing ‘social media’ with ‘the web’ or ‘e-business’.

  32. Pingback: broadstuff
  33. First, I very much appreciate this discussion! I was wondering, what is in your opinion the “missing link” between:

    Engagement in Social Media -> ..?.. > uplift in sales?

    Would it be the “old” formula, that increased awareness, likability etc. will lead to a higher buying intention, and ultimately to higher sales?

    @Lori: In my opinion Social Media (from a company’s POV) is a marketing/communication tactic whereas the market for Social Media consulting (-> agencies) is an industry.

  34. Jeremiah, you are on the money again here. These issues are real and we all need to deal with them, but sometimes we ignore them or we don’t see them as we are too busy writing blogs about others.
    Some of the issues will also create bigger problems for the big companies, who are still sitting on the side line and trying to figure out what to do.

    I would love to see a post from you about the good thing that is coming out of the issues as well, the other side of the coin. For example, you will never see innovation if there were 100 companies trying to make it big here. This is creating lots of pressure for the big companies like IBM, MSFT, Oracle. We are taking rev away from them and this will make them change their ways of doing business and take us more serious. The power of the many will change the landscape again.

  35. Vassil

    Most of my other posts are on the other side of the coin, this post is actually balancing it out. What’s important is that we take an objective look –void of the hype.

  36. If a brand cannot push command and control at key target market segments through advertising campaigns, that condition exists without the presence of social media. The costs of building a good name (and acceptance of the brand) through advertising are infinite in such cases. Look at the case of Starburst sponsoring indie web video as a channel to associative imaging: http://richreader.blogspot.com/2008/07/starburst-enables-indie-web-video.html. The people at Mars Corporation are wise in this particular investment in social media, and others should observe how this works out.

  37. As a marketing professional, measuring social media has the same problem as public relations, social responsibility initiatives or community relations, and marketing. Business execs must understand that while social media may not directly add to the bottom line, it is necessary just like public relations. Connecting the customers or market segments is critical for branding efforts. It’s just something that companies have to do in this day and age. Never mind the amateurs. I look at them the same way that I look at knock off fashion designs. Everyone will know the real ones when they see it.

  38. Thank you for the very good post.
    I would like to point out that first I read your article and then, being my self Italian, the italian traslation and well, the italian version is a very good traslation of the original.
    Well done to both of you.

  39. I recently read a report on how scientists use social media to help them do their jobs, make purchasing decisions, collaborate with other scientists, and much more.

    Check out the website here: http://lifesciencesocialmedia.com/ , where the FREE ebook is available for download.

  40. Great post. Insightful and smart.

    Aren’t these some of the same things that were said about the entrance of the web to a traditional and largely unchanged media mix 10+ years ago?

  41. I like your comment. Regardless of the problems we face you still have to do what needs to be done. The truth will shine through.

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