My Take:While social media is widely used on the national level, few local, small-to-medium sized businesses (SMBs) have added it to their marketing mix. Can social media become an effective tool for local SMBs? Absolutely! In fact social media can be more profitable for small business than it is for national advertisers - if it can:
1. Support real, local, business-to-consumer relationships
Millions of SMBs rely on word-of-mouth (WOM) as their primary source of sales leads. Yet, while their customers are rapidly joining social networks and using them instead of e-mail or instant messaging, social networks offer no opportunity for consumers to connect with their network of trusted local businesses.
SMBs serve millions of consumers and their total sales are comparable to the combined revenues of all national brands. Considering the size of this market, why has it been overlooked by social networks like Facebook, LinkedIn or MySpace?
Maybe because of the immaturity of this new media. Maybe because the low per-client-ad-revenue slips under their radar. For whatever the reason, there is a suppressed demand by consumers to use social media for consumer-to-business (C2B), word-of-mouth referrals.
When local businesses are finally able to simply and efficiently engage their customers and neighbors on the social Web, large sales revenues will follow. The sum of these revenues will be on the same scale as the combined social media revenues for all national brands.
2. Provide real, social revenues
All social networks have struggled with the question, “How do we make money from this cool idea?” Social media will need a simple and efficient way to monetize the value it creates as it increases WOM sales for local SMBs.
Paying for clicks was great in a Web 1.0 world. Statistically speaking, clicks equate to revenues. But small businesses are not easily persuaded to pay for something as nebulous as a click. They want to see a return for their ad dollars.
Social media offers measurement capabilities far superior to Web 1.0. By offering a way for consumers to transact online the millions of organic WOM conversations that occur daily, social media can provide businesses with full lead measurement and tracking. This is the “holy grail” of marketing.
Picture a social network that supports this C2B WOM. It could allow its member businesses to be found by the friends of the friends of their satisfied customers. It would merge the power of WOM with the Internet-based social graph.
With this model, member businesses would be able to increase and track their WOM leads as well as reward consumers for referrals that result in new sales. This would make possible a fully variable, results only advertising model that rewards and strengthens SMBs’ relationships with their most valuable customers. 100% effective advertising!
Engaging real, local relationships in a social network and deriving revenues based on measurable results – that’s the future of social, local media.
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