True Costs of Social Media

This is a longer version of my article that was published in “Today,” a Singaporean newspaper.

One of the most attractive features of social medium is that usually it costs nothing. For example, two of the most widely used social networks, Facebook (more than 900 million users) and Twitter (more than 500 million users), allow individuals as well as businesses to use their services for free. No wonder companies rush to set up Facebook fan pages and Twitter accounts to engage with their customers, all at low to no direct costs. As the old saying goes, the best things in life are free. For the companies battered by economic downturn, rising costs, and fierce competition, the apparently costless social media indeed seem like the best things.

Skeptics argue that there’s no such thing as a free lunch. Although social networking has fundamentally changed the way consumers communicate with brands, there is no reason to believe that everything about it is positive. The most often cited concern about social media is the privacy issues surrounding user data. Facebook and Google, for instance, have been subjected to numerous criticisms about invasion of their users’ privacy through monitoring user activities. For the companies using social media, however, the same privacy concerns are hardly relevant. If so, are there any real social media costs to companies?

I identify two critical costs that many companies seem to be ignoring at their own peril. The first cost arises due to the lack of understanding of the actual working of social media. Starting a Facebook fan page is indeed very easy. The real challenge is attracting consumers to the fan page by creating engaging content and continuously participating in a genuine dialog with them. Similar devotion is required to manage Twitter, corporate blogs, or YouTube brand channels. Content creation is perhaps one of the most difficult challenges managers encounter while using social media. Ideally, companies should hire and train talented employees to do this. But influenced by the fallacy that social media are free, many companies are unwilling to invest in them.

A firm that desires a meaningful social media presence needs to pour resources in content creation and user engagement. As a testimony to the importance of this endeavor, countless dormant Facebook pages, Twitter accounts, and corporate blogs demonstrate the lack of resource commitment. A firm also has to develop processes internally to ensure seamless working of the social media team. For example, if customers complain about product quality, the social media team should be able to communicate the problem to production or quality control department immediately, get the problem resolved, and communicate back to the customers. This requires setting up a system that fundamentally differs from most existing systems implemented in organizations. More importantly it requires a shift in the organizational culture, which is perhaps the hardest thing to do.

The second cost emanates from the risks that come with the viral nature of Internet. Just one mistake on the social media can wipe out brand equity worth millions of dollars. I document several such examples from the USA in a developing manuscript.[1] Whereas social media enable instant communication with consumers, they also lead to increased risk of magnifying small errors into gigantic blunders. A recent case of the US automobile manufacturer Chrysler exemplifies the presence of such risks. Last year Chrysler ran a multi-million dollar advertising campaign and branded Detroit as “Motor City.” It was a branding effort that aimed at solidifying the identity of Detroit as the birthplace of indigenous American cars. However, one rogue Tweet from Chrysler’s official Twitter account jeopardized the entire campaign and brought it to brink of collapse.

An employee of the social media agency in charge of Chrysler’s Twitter account Tweeted complaining, “I find it ironic that Detroit is known as the #motorcity and yet no one here knows how to [expletive deleted] drive.” The offending Tweet appeared on the Web only momentarily and was pulled down almost immediately. In pre social media days, such mistakes would have been less visible and more controllable. However, today this rogue Tweet remains alive on several blogs in the form of screenshot image. It is far more likely that such incidents get noticed on the social media, which spreads the news like a wildfire. The viral nature of social media can be devastating. The benefits of social media can’t be isolated from the enhanced risk of sudden development of crises, which may bring down the whole business. If companies don’t account for this risk while weighing costs and benefits of social media, their illusion of “free marketing” remains unaltered depriving them of a rational analysis.

To summarize, managers and owners of businesses, especially small businesses, should take into account at least the investments required in creating and maintaining social media presence and the enhanced risks of crises due to viral nature of social media. Indeed there is no such thing as free social media!

One thought on “True Costs of Social Media

  1. Pingback: Social Media Dilemma of Luxury Brands « Micro-Positioning

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