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« The Web2.0 era has created new consumer needs »

Social media marketing and its adoption has become a sort of a trend. The fact that its acceptance a service of mass appeal caught many marketers by surprise is perhaps one reason why every brand is hopping on to the social media bandwagon. However, there are numerous hits and misses which come forth every week. What is it that marketers should consider when investing in the medium and what should they expect out of it?

The Web2.0 era has created new consumer needs. The main reason is the fact that Internet is the medium for the instantaneous and uncontrolled transmission of ideas. Consequently, people complain as fast as they are seduced by a brand. Thus, marketers are faced with a daunting question – how do I take care of brand awareness and loyalty in this context?

First of all, before speaking about measurability of a social media campaign, we should think what the Key Performance Indicators (KPIs) are. For instance, most of the companies try to get as many “Likes” as they can without knowing that it is not the most important KPI. A “Like” does not necessarily mean that the user spent time on the page or engaged in a meaningful conversation. However, social media remains a communication campaign. Consequently, companies should further focus on whether the message has been correctly delivered instead of struggling to get thousand of ‘Likes’. Learning to define the relevant KPIs for a company is the key. This approach helps the marketer in understanding what to expect from the investment.

So if marketers are just pursuing qualitative metrics like the number of fans and page ‘Likes’ does that mean that there is an understanding gap? What are the key rules that need to be kept in mind with respect to the Web 2.0 fabric when conceptualising and executing a digital campaign? What if the brand gets trapped in a controversy resulting in a crisis? How are brands supposed to respond to that?

The first thing that marketers need to consider and understand well before plunging into the ‘conversation’ is the nature of the Internet in its current avatar – which is principal transparency.

Whatever happens within the four walls of the world wide web is observable to all stakeholders. As a result, if a social media page contains only positive comments, it will be taken for concocted content. Further, a lot of companies make the mistake of not responding at all. They just choose to ignore the negativity assuming that it will be soon lost and forgotten. This approach mostly backfires. Then there is this breed of social media managers who just can’t withstand anything negative against the brand. They over-moderate the conversation in a bid to persuade people that their brand is the best. Those who do so end up losing to the social power of Web 2.0.

Talking about crises, these are opportunities to understand what works with the discerning consumer in the online space and what doesn’t. It also give brands valuable insights into how netizens respond to different campaign. With this knowledge, brand managers can come up with more impactful strategies. In case there is a crisis, the company should try to look back at what it wanted to achieve. For instance, if the main goal was brand awareness then the company will have to measure the direct impact and plan a new social media strategy to reverse the damage. Before asking how to measure, brands should think about what to measure. There are several ways to engage people online. Cross-branding into social gaming for instance is highly effective.

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Facebook, a post-IPO perspective

Facebook IPO has been without doubt one of the most hyped IPO of the past decade. The disconnect between the actual current level of economic activity and the pricing established by the company’s underwriters has been very much publicized, as a reminiscence of the .com craze, yet in the end, the IPO managed to be priced at the high end of the range. This initial pricing turned out to be a short lived victory: since Facebook grand debut, Investors’ skepticism has driven the price of its shares down by over 25%. Shares have rebounded from the lows since, despite a difficult global economic context, plagued by Sovereign debt crisis and slower global economic growth. So to what extent will this IPO help FB to get to the next level as a company? We argue that at least three elements should be watched carefully and are likely to weigh heavily on the company’s future prospects and on its share price.

First, one must realize that out of the 16 billion dollars raised from the IPO, only 6.84 billion went to the company directly. The rest of the proceeds was used to allow investors from earlier financing rounds, to cash out a (substantial) part of their stake. So how will Facebook use these $6.84 billion? Many commentators suggest FB will embark on an aggressive acquisition strategy, supported by the company’s cash (around 4 billion dollars) and existing $5 billion credit lines. This is probably a likely outcome, however, the true financial capacity of Facebook is going to be constrained by an upcoming tax liability linked to the settlement of restricted stocks, part of the 2005 executive compensation plan. The resulting tax liability, estimated to be around $4.6 billion, means that in the end, less than $2.3 billion out of the total $16 billion raised by the company will actually benefit Facebook’s operations.

A second aspect of the IPO will probably have much influence on FB share price dynamics during fall 2012. So far, 180 million shares of the company are being publicly traded. What will happen when over 1 billion of Facebook shares, owned by early investors and employees, are no longer under lock-up provisions? Of course investment banks will strive to support the stock price, but there is little to prevent a fall in share prices, should those restricted shareholders try to exit their positions too aggressively. The choice of those insiders may be very revealing of potential anxiety linked to the company’s future prospects.

But what could insiders be anxious about? Is Facebook part of a new bubble, the bubble 2.0?  The latest financial figures for Facebook display extremely high top line growth rates and very strong profit margins. The company has already warned such growth rates were unsustainable and are already decelerating. It is generating both net profits and positive cash flow, yet, in order justifies its IPO price or even current pricing, Facebook will have to succeed in maintaining above average growth rates and profit margins for years to come.

Thus, it’s now time to explore the current Business Model of Facebook which is founded on a two-sided market, a very common trait for high-traffic web sites. The amount of users (free on one side) justifies a selling price for announcers. Theoretically, Facebook, by increasing its number of users, should proportionally increase its cash flow. Even though the UK market seems to have reached its growing pick, the worldwide market is still progressing. The Boston Consulting Group reckons that around 3 billion people will be online by 2016, up from 0.73 billion in 2012. On top of that, the rise of mobile will give an advantage to Facebook vs Google.  But number of users is not enough to maintain such a growth.

Even though Facebook highlights its main selling points (the time that internet users spend on this social network), the real indicator for announcers is the Click-through-Rate (CTR). Here, the figures speak by themselves. The Facebook’s CTR (0.051) is dramatically low comparatively to Google (0.4). Moreover, it’s necessary to keep in mind that the social network market is recent. It implies that challengers can make their entries at any time. Let’s remember the MySpace case, one of the pioneers in social network with Friendster from 2005 to 2007. The company has been bought by NewsCorp in 2005 for 580 million dollars. Over the last 3 years, the social network environment has been totally metamorphosed. Only 3 of the main players have kept their top position. The worst downhill was for MySpace (9 times less unique visitors than Facebook). To survive, MySpace could move its activity to the entertainment. In June 201, MySpace was estimated at 100 million dollars (almost 6 times less that its buying price by NewsCorp in 2005).

Has Facebook reached its zenith and is now entering a phase of decline?

Economics, digital or not, follows market rules. Launching a start-up without a strong business model can’t work eternally. Mark Zuckerberg says “Facebook was not originally created to be a company. It was built to accomplish a social mission – to make the world more open and connected … Simply put: we don’t build services to make money; we make money to build better services.”  But, today, Facebook survival relies at 85% on advertising incomes.

What is to be expected in the coming months for Facebook investors? The current price may represent to many an interesting entry point but new investors should keep in mind that Facebook has to meet a series of (economic) milestones and any negative surprise in its economic perspectives will be welcomed with steep reactions.

Dr. Grégory Moscato, Professor of Finance, Program Director, Masters in Finance at the International University of Monaco
Mr. Stéphane Cozzo, Professor of Digital Marketing, Program Director, Master in Digital Marketing at the International University of Monaco

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Mob rule: Iceland crowdsources its next constitution

See on Scoop.itCyberdemocracy

Public sphere meets collective intelligence. — Howard

« It is not the way the scribes of yore would have done it but Iceland is tearing up the rulebook by drawing up its new constitution through crowdsourcing.

As the country recovers from the financial crisis that saw the collapse of its banks and government, it is using social media to get its citizens to share their ideas as to what the new document should contain.

« I believe this is the first time a constitution is being drafted basically on the internet, » said Thorvaldur Gylfason, member of Iceland’s constitutional council. »

See on www.guardian.co.uk

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Cognitive Democracy — Crooked Timber

See on Scoop.itCyberdemocracy

Networks, media, collective action, public sphere, markets, hierarchies, politics, decision-making — Howard 

 

« In this essay, we outline a cognitive approach to democracy. Specifically, we argue that democracy has unique benefits as a form of collective problem solving in that it potentially allows people with highly diverse perspectives to come together in order collectively to solve problems. Democracy can do this better than either markets and hierarchies, because it brings these diverse perceptions into direct contact with each other, allowing forms of learning that are unlikely either through the price mechanism of markets or the hierarchical arrangements of bureaucracy. Furthermore, democracy can, by experimenting, take advantage of novel forms of collective cognition that are facilitated by new media. »

See on crookedtimber.org

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