Tag Archives: Social media

Successful Social Media Giants Fail in Profitability

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Despite the importance and influence social media sites have had on the way we journey through the world, as businesses, they are almost universally failures.

Yelp was founded in 2004, and went public in 2012, boosted by the millions of people who were using the site to rate local businesses and read those ratings. Prior to the IPO the company raised $56 million in venture capital investments. The IPO brought in an additional $107 million. Still not able to switch to black ink after all this time, a secondary stock offering raised $250 million. Yet, profitability remained an elusive dream.

Before we judge Yelp to harshly, this is a good moment to point out that profitability for social media sites is the exception and not the rule. Today there are only two such online platforms that can be said to make money rather than lose it. Those two are Facebook, which took years to reach profit-making status, and LinkedIn, which has a paid pro subscription, making it less dependent on advertising. You will be looking long and hard to find another social media company that is in this exclusive club. Not YouTube. Not Twitter. And not Yelp.

Now Yelp is looking for a buyer. But its prospects are not good. This is a quote from the company’s annual report:

“We expect that our revenue growth rate will decline as a result of a variety of factors, including the maturation of our business and the gradual decline in the number of major geographic markets, especially within the United States, to which we have not already expanded.”

Over its lifetime Yelp has raised a total of about $400 million from investors. The company has a market value of $3.51 billion, and in 2014 they did manage to eke out a profit for the first time in their history. Over its lifetime, however, Yelp has reported a total of $34 million in losses.

Who will buy this company is yet to be seen. If they do, it will be not as a source of income, at least not soon, but as a way to provide this service to its otherwise loyal customers.

Saudi Billionaire Buys Shares in Twitter

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Prince Alwaleed bin Talal, active Saudi global investor, has just become part owner of the

Prince Alwaleed bin Talal

famous micro-blogging website Twitter for $300 million.

Breaking Into Global Communications

Alwaleed is one of the Saudi King’s nephews was estimated to be worth at least $19 billion and is already has a 7% stake in News Corps and is considering beginning his own cable news channel.

It is interesting to note that Twitter was one of the major tools used for communications between the protestors during the famed Arab Spring revolts a year ago, including violence which posed a threat to the ruling family of Saudi Arabia. The revolt was quelled after the kingdom proposed a $130 billion social spending package.

Months of Negotiations

The purchase of Twitter came after months of intense negotiations between Twitter and the Prince and his Kingdom Holding Company investment firm.

The investment transaction was what is known as a secondary transaction, which means that the shares that Alwaleed and his Kingdom Holding Company purchased were from shareholders already invested in Twitter, and not a direct investment in the company.

Owns Four Percent of Twitter

Chief executive of Twitter Dick Costolo said that the company is valued at about $8 billon in the secondary markets as of October, making Alwaleed’s investment worth about 4 percent of the company.

The co-founder of Social Media, a firm specializing in analysis and advice, Bernhard Warner said,

“The Arab world, of course, knows full well the value of Twitter. In the past year, it has been a force in politics, in regime change, so there is not a single person in that region in a position of influence who is not following the increasing power of Twitter.”

“(Alwaleed) must see Twitter as something that is going to be a really powerful broadcast channel,” he said, and added that the Saudis got into the internet craze relatively late, which has been a bit of a problem, and it could still be “kind of late” again to this game.

Bye-Bye Social Media; Hello e-Mail

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According to Chris R. Keller of Profitworks, all this fuss about the importance of social media and how this is the way forward, just may turn out to be somewhat inaccurate. Everyone whose anyone has been making such a fuss about how social media is the way forward for marketing purposes, but now this theory is being questioned in a recent article by Keller, who claims that “email marketing is currently superior to social media at attracting and getting new customers.”

Boast Marketing Efforts

So in an effort to really boost your marketing efforts, the message seems to be, stop trying so hard. Send an email as that “directly” reaches the consumer. The Inbox is the first place people look at. Social media is great, but more as a browser than an information collector. Keller points out that this is why Facebook developed its message center as Zuckerberg understood that people first go to check out messages. Further, delivery is better with e-mail as it can use an HTML code so provides more flexibility. Keller concludes thus, “given the flexibility and tracking features of email marketing it has a far more superior delivery method than social media.”

More Likely to Read

Keller’s study also found that the “average email marketing open rates are anywhere from 10-20%,” whereas with FB or Twitter this is around 2-4%. Where social media is good however, is that users spend more time on such activities, around 22%, as opposed to 8% for e-mail. Keller also commented, “I do not have any figures but my estimate is that the amount of time spent on marketing related pages when on social media sites is low compared to the amount of time spent reading marketing emails.” Further, “58% of internet users check their email when first going online versus only 14% checking social media sites first says something about which gets the higher amount and level of attention.” Bottom line? Email is still the main source of Internet communication and is thus still “given the most attention.” This may not be the case forever as more and more tools are developed and tactics learned for how increase interaction rate, but right now, Keller believes, “email wins hands down.”

Success of Social Media Marketing

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It seems like today, if you want your business to succeed and you are looking for good marketing tips, it seems like everyone is in agreement on one area – social media. This would be great – and good for their businesses – if they understood how to use it to their advantage but apparently in that area, they are lacking.

Most people are looking for quality content which is probably why all types of newsletters (print and digital) are still popular. Ultimately it’s all about making a connection. The advice thus given by InformationWeek employee Michele Pepe-Warren is to “discuss topics that are relevant and interesting to your readers. If they know they’re getting useful information, they’ll continue to subscribe.” It’s also a good idea to keep it simple and ensure the design is clean-cut and not complicated since “poor design…can deter readers from any publication.”

According to statistics from iPressroom, Twitter is most popular with PR and marketing professionals, attracting a staggering 85.5 percent of users. But even with that there are 65 percent of users who believe Facebook will replace Twitter for media use.

So why is Twitter so popular? Apparently it is the “circulatory system of the news cycle,” which provides a “constant stream of valuable information and perspectives for PR and marketing professionals to watch in real-time.”

Social Media and Customer Service

Companies and organizations are starting to understand very quickly that potential clients are increasingly sharing more about their lives on social networks. Thus it is their role as a potentially successful business to “not just listen, but to understand what’s being said in order to act accordingly.” To jump on the bandwagon, companies thus need to assess the “combination of social tools” and work out how a “solid CRM strategy” can set up strategies between “customers, partners and other stakeholders.”

So there is much to be done and lots to learn for companies who want to stay one step ahead of what is going on social media today. While it may initially seem a bit daunting, once you’ve gotten the hang of these new social media tools they can help your business no end.