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Social Media for Executives

Yesterday I had the opportunity to speak before the Los Angeles chapter of Bruin Professionals, a UCLA Alumni networking group. I love speaking with groups like this because they represent the people who must be educated with regards to New/Social Media. For example, of the estimated fifty people that attended this meeting, only a handful had some working knowledge of Social Media.

I spoke for twenty-five minutes before opening it up to Q&A. That’s when the meeting organizer did something interesting. He asked the group to split into nine subgroups to discuss how Social Media could be incorporated into their businesses. At the end of a ten minutes, he asked a spokesperson from each group to share what they concluded. Recognizing an opportunity to learn something, I grabbed my notebook and tallied the results:

Group 1 saw Social Media activities as too time consuming, that they competed with other tasks that had to be done. They used the word ‘triage” as a method to determine which business activities deserve their time.

Group 2 described themselves as “resistant” to Social Media, claiming that it wasn’t for “our generation.” The group admitted that they needed more education on the subject.

Group 3 saw “problems” with introducing Social Media into their business, but understood that it was “flexible” and should probably be used. Their concerns surrounded privacy. On a positive note, they did present an idea to use Twitter as a convenient note-taking device.

Group 4 proudly announced that its members had 100% participation in Facebook and Linked-in, but differed on the usefulness of the platforms. They explained that “usefulness” was separated by a “generational divide.”  The group expressed concerns about the tools being banned at work, felt that employees needed to be educated in what can and can’t be said online, and worried about Social Media’s affect on corporate confidentiality.

Group 5 reported that although each member used Linked-in, all used it as “a glorified Rolodex.” They saw the value of “blogging and reposting,” but were “mystified” by Twitter.

Group 6 commented that there it had no representatives from the “Web 2.0 Generation.” When discussing Social Media, they feared that it would just be a “time sink” which would require effort in “managing the balance.”

Group 7 called themselves the “Geezer-centric” group, evoking laughter throughout the room. They requested advice on how to use Linked-in and although they were “totally mystified by Twitter” like Group 5, they were still “open to it.”

Group 8’s report came in the form of a joke, claiming to have broken the code on the United States economy. They reported an inverse correlation between the growth rate of Ashton Kutcher’s Twitter follower numbers and the productivity of US employees.

Group 9 was concerned with Social Media activities becoming a “time sink,” but did see the value of using the tools for “listening.”

These raw responses are very similar to the ones that I receive on a daily basis when it comes to introducing New/Social Media tools and techniques to executives. If you run into similar obstacles at your company, please feel free to use the following conversation starters.

1) Yes, Social Media activities are time consuming, and therefore require management to determine what time is spent on specific business activities. Just because a company has done the same thing for many years, it doesn’t mean that those practices are sacred–especially if those activities are becoming less productive over time. Sometimes stuff needs to drop off your plate in order to make room for new ones.

2) There seems to be a myth that New/Social Media is generational. At first, it sounds like a “Mom and apple pie” argument, but it isn’t. Execs need to understand that the use of these tools is not based on demographics. Rather it is based on Passionographics.

3) Privacy is a major concern and must be acknowledged. We live in a world that is far less private than it once was, and it is getting less private by the day. This is a concept that companies must discuss, but it can’t be used as an excuse to thwart the adoption of new information sharing technologies.

4) Confidentiality has always been a concern for companies–AS IT SHOULD. The only difference between confidential information online or offline is the consequences of a breach. If your confidentiality business practices are broken in the offline world, they’ll only be worse in the online one.

5) It’s important to be cautious but open. Anything new creates doubts. It’s a natural reaction. The trick is to move forward, step-by-step. Try something new. Get experience. Learn something. Get comfortable. And then incorporate those experiences into your day-to-day business practices.

Photo Credit: SomewhatFrank

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Filed under: corporate

I’ve been toying with a theory for the past couple of weeks and wanted to share it with the Social Media community for comment. It involves calculating the business value of Social Media.

Typically, the Social Media/ROI debate is split into two camps:

1) those who seek to calculate the dollars directly generated from the dollars invested into Social Media activities, and

2) those who argue that Social Media activities should be considered a cost of doing business, such as management, human resources, or investor relations–departments who give up their profit and loss (P&L) lives daily for the benefit of the entire organization.

I’ve been thinking about the problem from a different perspective. What if we’ve been trying to force-fit Social Media onto the wrong financial statement? What if, instead of making it a line item on an income statement, it actually belongs on a balance sheet?

Accountants also Tally Intangible Assets

Corporate assets come in two forms: tangible (office equipment, real estate, etc…) and intangible (patents, trademarks, personnel, goodwill, etc…). Wikipedia describes intangible assets as “…nonphysical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place.” As someone who believes that Social Media activities do indeed create marketplace advantages, I decided to pursue a theory that Social Media is an intangible asset. But before I could move forward, I needed to figure out what “asset” I was measuring.

Audience as an Asset

The entire advertising industry is based on the value of an audience. Whether called “eyeballs,” “listeners,” “viewers,” or “circulation,” publishers and broadcasters are happy to rent access to their audiences through the use of column inches or thirty-second spots. Both describe access to their audiences as “inventory,” a common term that shows up on non-publishing balance sheets all around the world. So, what if we considered the audiences that corporations build through their Social Media activities as an asset to track?

I dug through some financial statements to see if publishers assign some sort of asset value to their circulations and found that the New York Times’ balance sheet carries a $661 million intangible asset called “goodwill.”

Just for kicks, I decided to compare its goodwill numbers from FY2007 and FY2008.


2007 2008
$683.440M $661.201M


Between fiscal years 2007 and 2008, the New York Times reports a $22.239 million loss in goodwill–a 3.25% year-over-year reduction. Interestingly enough, the paper also lost 3.6% of its weekday circulation over the same period of time. Could the circulation of the New York Times consist of 90% of its goodwill?

Although one data point doesn’t determine a trend, the result was enough for me to continue exploring the concept of audience as an asset. If audiences are assets to publishers, can the audiences that companies earn through their Social Media efforts (communities, RSS subscribers, website visitors, etc…)  be considered a corporate asset, like that of a patent, or any other intellectual property?

Investors Assign Value to Audiences

In May 2006, Google paid $1.65 billion for an 18 month old video sharing site called Youtube. Although the website had no revenue stream, it routinely logged 12 million monthly unique visitors, thus translating into Google paying $137.50 per unique monthly visitor.  And according to statements made last month, Google gave us another hint as to how they valuated this audience. In a recent interview, Google commented that it knowingly overpaid for YouTube by $1 billion, after considering the steep growth rate of those monthly uniques. Taking this new information into account, Google’s own bean counters valuated the 2006 YouTube audience at $54.17 per unique monthly visitor with a premium of $83.33 per unique as upside!

Analysts Assign Value to Audiences

For the past two years, Techcrunch has been trying to calculate the value of social networks. The common denominator in its financial model? Audience. In its 2009 calculations, Techcrunch values a unique user for the United States, UK, Australia, and Denmark at $132, $213, $148, and $144 respectively, based on each country’s advertising expenditures.

Businesses Value Other People’s Audiences

There’s a term in financial circles called OPM, meaning “other people’s money.” Well, businesses have been paying for access to other people’s audiences (OPA) for a very long time. The advertising industry is built on the fact that businesses value access to OPAs so much that they are willing to rent them…even if it’s for only a day.

Sprinkles Cupcakes is a five-year old Beverly Hills-based bakery that produces cupcakes that its loyal customers describe in terms usually reserved for religious experiences. Along with its website, the company also maintains a Facebook fan page, complete with 77,600 fans.

Question: What is the value of this audience to the company?

One way to calculate the value is to compare it with the value of OPAs. For example, The Los Angeles Times would charge Sprinkles $972 per column inch for a one-time access to its print audience. If Sprinkles wanted to purchase a non-discounted full page ad, it would cost them $125,388 (at 129 inches per page) to deliver its delicious message to the paper’s 657,000 daily readers.

In this example, Sprinkles is paying $0.19085 per LA Times reader for a single day. But with its own audience on Facebook, Sprinkles doesn’t need to rent OPAs. Assuming conservatively that a Sprinkles Facebook fan equals an average LA Times reader (a FB fan should be worth much more!), then the Sprinkles’ Facebook audience might be valued at $14,809 (77,600*0.19085)

But that’s still not the full story. Sprinkles has access to its Facebook audience 365 days per year–at no incremental cost per new message delivered. Today, Sprinkles is taking advantage of this economics of influence by using the channel to deliver daily challenges such as:

Sprinkles uses vanilla from Madagascar! The first 50 people to whisper “Bourbon Islands” at each Sprinkles receive a free vanilla cupcake!

Is it possible that the value of the Sprinkles Facebook audience could be calculated through saved advertising costs? Might it be considered a corporate asset of $5.4 million ($14,809 * 365)?

Seem a bit too high? Let’s use another yardstick. Online banner ads can be purchased around the net for between $20 and $100 per thousand (CPM) impressions. Using these numbers, conservatively, every Sprinkles message sent to its Facebook audience might be the equivalent of renting OPAs to the tune of between $1,552 and $7,760 per day. Over the course of 365 days, such an asset could be worth between $566,000 and $2.83 million.

Wrapping it up

Social Media is about creating content so compelling that your customers will not only return to consume it, but that they’ll forward it to their friends. These returning visitors can be considered an audience.

Businesses have always understood the value of audiences, having budgeted for access to other people’s audiences through advertising. But now, with access to New Media platforms such as blogs, podcasts, online video, or Social networks such as Facebook, businesses now have the opportunity to develop their own audiences.

Perhaps the value of corporate audiences should be calculated as investors do: at $54.17 per present monthly visitor with an upside of $83.33. Maybe they should be calculated through an algorithm based on advertising spends, falling somewhere between $132 and $213 per unique visitor. Or perhaps your accountant is more comfortable with considering what your company could sell its audience to itself for, giving the audience a value of 19 cents per reader per day, or somewhere between 2  and 10 cents per impression/fan per day.

Whatever the method of calculation, can we come to some sort of agreement that the audience your company has built through its Social Media efforts is a cherished corporate resource that gives your company competitive advantage?

Filed under: corporate

Last year I founded OC New Media, LLC to help executives incorporate New and Social Media technologies into their corporate communications strategies. I’ve spoken with hundreds of execs during the past seventeen months and have learned that although most realize that New/Social Media is initiating a business communications revolution, they just don’t know where to start their education on the topic.  As a result of these conversations, I wrote Read This First: The Executive’s Guide to New Media–From Blogs to Social Networks.

The book offers a step-by-step approach for making important business decisions with regards to technology adoption. It teaches managers how to measure and evaluate the effectiveness of their New/Social media endeavors. And lastly, it outlines the organizational changes that upper management must consider before blindly presuming that these technologies must reside within the staid confines of marketing or public relations.

With the ink-and-paper version of Read This First soon to be released, I’m excited to share the fruits of my labor by releasing the audio book for free. My hope is that if you like what you hear, you just might decide to purchase one (or ten!) copies of the physical version when it’s available in late November 2009.

The entire book was recorded a few weeks ago and I’m in the process of editing those audio files. My goal is to complete one chapter per week for the next eleven weeks until I’m done.

So, without further ado, I present to you: Chapter 1: The Economics of Influence.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Note: The chapter is 26 minutes long.

If you’d prefer to download the file, please right-click on the following link to save it to your computer:

Read This First: Chapter 1: The Economics of Influence

Lastly, if you’d prefer to subscribe to the podcast, you may do so through the following iTunes or RSS Feed buttons:

Feel free to share this audio book with anyone who is trying to make business sense out of New/Social Media. For example, do you have a boss or a client that you’ve been trying to convince to use New Media tools? Perhaps Read This First will help you make your case:-)

I’ve established both the Twitter hashtag #ReadThisFirst, and the bit.ly URL http://bit.ly/ReadFirst for your convenience. Please feel free to use them liberally:-)

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Filed under: Read This First