Social media is for brands

To some surprise and consternation, social media is not showing up as a significant driver of sale conversions.

Twitter, in fact, has apparently clocked in a particularly dismal 0.00% conversion rate. Nonetheless, in survey after survey, consumers indicate social media as influencing their purchasing decisions. In order to understand the discrepancy we need to recall another medium that is commonly used for advertising that is highly effective in influencing decisions but not at all in driving sales: outdoor. In fact, the more mature social media marketing is growing the more it resembles outdoor advertising in its impact.

Twitter is not a charity

It is true that I have pointed out some shortcomings in Twitter's monetization strategy, but that is a very long way from damning the entire enterprise as somehow abandoning its roots to become an extractive system.

Yes, Twitter has strong incentives to show returns on the billion dollars of investment that it has already absorbed, but that was its purpose in the first place. No more than any other for-profit startup, Twitter was always intended to generate returns. Now most business plans begin with a business model, while Twitte's turning that equation on its head has left it to scramble late in the day to find sufficient revenue streams to show IPO-worthy value. For most enterprises this would be a terminal condition, but as Twitter is demonstrably effective at communicating brand messaging, perhaps it will yet prove an exception.

Twitter responds (sort of and in deed)

As Dalton Caldwell has also noticed, Twitter is repositioning itself as a few-to-many information delivery platform: perfect for getting out brand messaging and less focused on many-to-many microblogging.

As I have already argued, this is an inevitable and -- for Twitter's finances -- necessary move. Now, if its management team would recall that undermining partner ecosystems is not a certain way to riches but rather focus on charging tolls on the value it does deliver.

The ecstasy and the agony of Twitter

Now that the drama of the election is over, at least one thing has been made abundantly clear: Twitter has once again demonstrated its immense value as a promotional vehicle.

The reason for Twitter’s dominance, it seems to me, is its fundamental design, where all content delivered to a subscriber always comes because the subscriber has explicitly opted in to receive it – wither directly from the source or by way of a trusted intermediary. This is where the secret to Twitter’s success in driving consumer behavior really lies and this is the reason that it will always outperform its online competition.

However, it seems that Twitter’s recent moves toward monetization are threatening the very nature of its value-add. First, it burned developers who have done a great deal to help Twitter gain acceptance and made it usable for volume communications. More recently, Twitter began inserting ads into the tweet-stream, which goes directly to undermining the relationship of the subscriber to the information source. The subscriber no longer receives only the information that he or she has opted in to read, but is now bombarded with what amounts to, not to put a finer point to it, spam. Spam, as we all know, is uninvited and unwelcome messaging. There is a largish cottage industry that grew up around defeating spam for email, but Twitter is a walled garden and it will make sure that spam from its advertisers always gets through.

Now, this is not to say that Twitter does not need to monetize its offering, quite the contrary. Without a viable monetization strategy, the company is just as likely to go the way of Netscape (remember them?) as the more recent New Media failures. Still, forcing a steady diet of spam down the throats of its subscribers is rather more likely than not to create an opening for a new entrant poised to eat Twitter’s lunch, because there are few things that people hate as much as they do spam. There are some rather obvious monetization strategies that Twitter does not seem to have pursued in its quest for financial viability. For the sake of its shareholders, not less than for the sake of its advertisers, I hope that Twitter figures out that killing the goose sooner or later will put an end to golden-egg flow.

(Wired article link hat tip: Abnormal Returns)