Why and How Businesses Use Social Media

Social media marketing is a developing art form. In fact, you almost would find it odd that budgets to support social marketing and mobile social marketing are growing on a fairly widespread basis even though a majority of companies have difficulty measuring the return on investment from social media.

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In fact, according to a recent survey of marketing executives by Econsultancy, 61 percent say their organizations are “poor” (34 percent) or “very poor” (27 percent) at measuring social media ROI.

According to the Econsultancy survey, 61 percent report that they “have experimented with social media, but not done that much.”

A quarter say they are “heavily involved in social media”, while the remaining 13 percent are not engaging with social media at all.

So why are marketers using social and mobile social media? They do so for the same reasons they use other marketing channels: generation of sales and leads as well as softer objectives such as improved brand awareness and reputation.

As an intermediate objective, social media efforts often are measured by their ability to drive traffric to company Web sites. "Increased traffic to a Web site is the business goal that marketers are most likely to be trying to influence through social media marketing," says Econsultancy. Fully 74 percent of companies say they use social media to increase Web site traffic.

"Direct traffic to Web site is by far the metric most commonly used to measure the impact of offsite social media, measured by just under two-thirds of company respondents (63 percent)," says Econsultancy.

More brand recognition (64 percent) is the second most important business objective in terms of impact of social media. A similar proportion of respondents (62 percent) cite better brand reputation. And that might be a big part of the reason why social media is used.

Just over half of companies (56 percent) say that they try to achieve increased sales through social media activity. But only a quarter of companies (24 percent) use sales as a metric for measuring social media effectiveness.

User Experience Shifting to Mobile

As with just about every other Internet-mediated experience, the experience context is shifting from PC-based to mobile-based. As the way people share information changed in the shift from printed to online products, so the design and display of information and content likewise will be different as the mobile shift continues to gain traction.

People with experience in the production of text content will point out that the way headlines are written, the way text is formatted, the length of stories and distribution channels all have changed. Similar changes will happen with marketing and advertising campaigns as the mobile context becomes more important.

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Academy Awards High Stakes Standoff Ends 13 Minutes into Telecast

A high-stakes "Academy Awards" game of chicken ended 13 minutes into the telecast when Walt Disney Co. and Cablevision Systems Corp. settled their dispute over a new contract.

Disney had said it would pull the ABC feed from Cablevision if the cable operator did not negotiate a more-favorable contract, potentially affecting about 3.1 million homes in the New York area.

The drama, some might say, could have been higher only if the contract dispute had occurred in the hours and minutes leading up to the Super Bowl.

The contract dispute, and temporary programming interruption, underscores the increasing financial stress in the multi-channel video entertainment ecosystem. Both broadcasters and distributors face rising programming costs, lower profit margins and growing competition.

In past years broadcasters have struck different deals, agreeing to allow "no incremental cost" carriage of local broadcast feeds in exchange for operators agreeing to add new cable networks to their program lineups. Programmers essentially bartered "free" local station carriage in exchange for carriage of new cable networks.

But that was then, and this is now. These days, both broadcasters and distributors are trying to squeeze more profit out of their video operations. And consumer opposition to ever-increasing monthly subcription fees is a background issue, at the same time distribution alternatives are growing.

In a sense, the broadcast networks also are looking over their shoulders at the potential threat Internet distribution represents. But so are the cable operators. After watching the music industry become disrupted by online distribution, as well as the continued decline of newspapers, video content owners are trying to avoid "no incremental cost" distribution of their content.

Given those pressures, it does not seem likely this will be the last tussle threatening program carriage. Versus, for example, now is dark on DirecTV and has been for months, as those two firms have not agreed on new contract terms, either.

As content ecosystems are rearranged, disputes between partners are bound to grow. The same sort of ecosystem change is behind the network neutrality debate as well.

10 Times More Smartphone Users and App Store Sales in 4 Years?

There will be 970 million smartphone users by the end of 2013, up from 300 million in 2010, according to analysts at research2guidance, a Berlin-based market research firm. In 2009 there will only about 100 million smartphones in use.

As a result,  annual app revenues will grow from $1.94 billion in 2009 to $15.65 billion by 2013.

An order of magnitude growth (roughly 10 times) in users and app store sales in four years would be steep, indeed.

What Does 100 Mbps for 100 Million Homes Imply About Monthly Prices?

There are only two major problems with the Federal Communication Commission's upcoming National Broadband Plan, says Dan Hays, PRTM director. The aspirational goal of 100 Mbps service provided to 100 milliion U.S. homes by 2020 is a fine aspirational goal, but it isn't clear how it can be implemented, he says.

The other big initiative is in the wireless area, specificially the effort to get TV broadcasters to give up 500 megahertz worth of spectrum so that wireless service providers can use it.

And there are just two problems there: buyers and sellers. Are there willing buyers? Are there willing sellers? Hays says the broadcasters already have said they are unwilling to sell. Even if they do agree to sell, the cost to acquire that much spectrum would be quite expensive, coming at a time when service providers are straining to justify further investments in their fixed plant.

The 100-Mbps access plan likewise has just two problems: who will pay for the investments, and whether end users are willing to pay substantially more than they now do for the upgraded speeds.

Estimates of how much that might cost range from a wildly-low $25 billion up to $350 billion, says Hays.

Commercial organizations aren't terribly interested in investing now to provide speeds that high, as there is little consumer willingness to pay much more than what people pay today, Hays says.
The percentage of household income spent on communications in the United States is in line with the rest of the world today, he says. So it does not make sense to assume a step level change in spending even if much-higher speeds are made available.

Beyond that, there is a generational and cultural issue at work. A good percentage of broadband non-adopters are older than 65. But as younger users who "cannot live without broadband" move up the age cohort, that particular non-adoption issue fixes itself, says Hays.

Once upon a time one could hear many doubters about why people would buy cable TV when they could get off-air video for no incremental cost. Over time, people decided they really did need it. The same thing has been at work with mobility services and will be true of broadband as well.

None of this is to argue that, over time, access speeds will increase. But investment capital cannot be raised unless there is a plausible business case. So the catch is that investors will want to see some plausible evidence that $300 billion worth of investment will lead to a return on investment.

Assume there are 65 million U.S. households spending $40 a month, on average, for broadband. That works out to about $2.6 billion a month, or $31 billion a year.

Assume a base of about 115 million U.S. households. Assume 90 percent broadband penetration, or 104 million connected homes. That would represent about $4.2 billion in monthly spending, or about $50 billion in consumer revenue.

How much incremental revenue would an investor want to see to justify investing $300 billion? Assume a 15 percent return as a hurdle rate and 104 million customer households.

The debt service implied is $45 billion a year. Assume borrowers also want to repay the principal over a 10-year period. That would very roughly imply a need to earn an incremental $75 billion a year.

Assume 40-percent margins. That implies gross incremental revenue has to be about $187.5 billion a year, or $1630 per customer, or an additional $136 per customer, per month. That implies a monthly price of at least $175 a month.

Do you really think every broadband customer in America, at 90 percent penetration of homes, is willing to pay $175 a month for broadband access?

Of course, maybe I have blown the math here. If not, I think 100 Mbps access, using networks built with private capital, are unlikely to happen. It would require consumers to do something history and logic suggests they will not do.

Mobile Service Providers Jockey to Maintain Relevance in Value Chain

Oddly enough, mobile service providers and device manufacturers are being forced to redefine their value and roles in the mobile ecosystem they long have shaped and dominated. The reasons are not hard to fathom.

The mobile industry's center of gravity is shifting from hardware to software, from voice to data and services, and from traditional telecom stakeholders to new entrants, says Thomas Husson, Forrester Research analyst.

But it is more than that. The mobile industry is reinventing itself, and the biggest changes are the addition of new providers in the value chain. The new and independent role of handset suppliers is one example, but so are software and content providers now parts of the value chain.

In fact, "the mobile environment as we knew it at the end of the 20th century is disappearing," says Husson. Firms such as Apple and Google now are playing huge roles in the business, for example.

That creates new tension as value--and revenue--shares now also are rearranged. In fact, access providers must contend with rapidly-changing shifts in value creation. That does not necessarily mean ISPs are destined to become low-value suppliers of commodity access, though that could happen.

It does mean all the contestants now are in an extended and crucial race to secure their own roles within the value and revenue chains.

Service providers face a limited window of opportunity to reinvent their business models and become smart enablers, says Husson. In part that is because software innovation, rather than hardware, is driving the business.  Increasingly, that innovation is coming from new participants in the business, not the legacy participants.

Global growth also will center on China, India, and emerging markets, as has been the case over the last several years.

In developed markets, the issue will be selling more services and applications to a relatively fixed number of users, as children, seniors, and technology pessimists, the remaining untapped user segments, largely have been tapped. Broadband and data services are the clear focus.

The big question is how well service providers will compete with new value chain participants to create and maintain direct relationships with end users, which traditionally has been the province of service providers. These days, application and device suppliers increasingly are poised to create direct retail relationships on their own.

Global Mobile ARPU Now Depends on Broadband and Data Services

Mobile end-user average revenue per user dropped between six percent to nine percent globally, in the third quarter of 2009, says ABI Research.

In the U.S. market, overall ARPU decreased by $0.45. Average voice ARPU declined by $0.98 while the average data ARPU grew by $0.53, according to mobile analyst Chetan Sharma.

By the end of 2009, average voice ARPU was less than $10 a month while data ARPU was about $15 a month. But average blended ARPU has been flat at around $49.50 since 2003.

ABI Research estimates that ARPU decline is likely to flatten out in developed markets in Europe and North America as mobile data revenue increasingly replaces falling voice revenue, as it has in the United States.

Globally, the growth in minutes of use has also peaked, and is expected to grow at a compound annual growth rate of only 1.4 percent between 2009 and 2015, with much of this growth driven by developing markets in Africa, Asia, and the Middle East.

Minutes of use in the U.S.market are growing at about a three percent rate, says CTIA: The Wireless Association.

Whether in the U.S. market or elsewhere, broadband access and data services are the clear way forward for mobile ARPU, gross revenue and profit margin.