“We have been investing in social media for almost eight years.  It is now time for us to disband all our social media teams and fully integrate them within our business units”.

OK, Mr. Dell actually made no such statement today.  In honor of April Fools’ Day, I wrote this post hoping that the many executives that believe in social business take note.  In my opinion, and as I have already mentioned many times before, there is no such thing as social business, it’s just business.

Social media has long been the shiny new toy and it’s about time we all took a hard look at how we organize ourselves.  Social media is just another channel just like email, your corporate website and your call center.  While consumers’ expectations about how they expect to be treated when they interact with you on social media are different, it is just another channel (oh, and by-the-way, social media is also changing our expectations about all our interactions with the companies we do business with).

• We have seen this movie before

Is this really the first time we have seen such a major disruption in the recent past? No, we are not talking about marketplaces in medieval villages. How many of us remember disruptive concepts such as Business Process Re-engineering (1990), the emergence of CRM (1993), or even web 1.0 (1994)? Each of these movements shared this one core characteristic: break down the silos in our companies so we can provide a superior customer service and experience. While we can all argue whether this promise is fulfilled, can anyone argue whether the underlying promise of social media is that new?

• It still is about the customer experience

Today’s empowered customer has very different expectations of their brands. Not only do they expect a very different interaction in social media, they also expect the same experience in all their touch-points with us. What is the value of having a very strong presence in social media, when your marketing, sales and customer service teams are disconnected? Is it really acceptable for your call center agent to not be able to solve a customer problem, because they are in ‘presales’ and not ‘customer service’? I think not.

• There is no social business

My view is that social media is a means to an end rather than an end in itself. Success in social business is when our companies no longer talk about social media as this is weaved in our corporate DNA. Today’s leaders are born social. Just look at Zappos, the leading online shoes and clothing retailer. Most social media gurus will tell you that Zappos is the ‘poster child’ of social today, but their tag line simply states ‘Customer Service Isn’t Just A Department!’ Most importantly, this is not just a tag line, but rather what Zappos stands truly stands for. I challenge you to find one unhappy Zappos customer! Now, for most us this will be a multi-year journey, but my belief is the sooner we begin to think about social media this way, the shorter our journey will be.

What do you think?  Is it not about time we really started to think about social business in a different light?  As always, your thoughts and comments are welcome.

“Buildings don’t buy from buildings, people buy products from people, and so marketers need to focus on people, not B’s or C’s.” Jonathan Becher, Chief Marketing Officer, SAP

Is this idea that far-fetched? How can this be relevant for multi-million dollar purchases of enterprise software or hardware equipment?  After all, it’s not like a company would ever place an order on the web by supplying its CFO’s credit card.

The answer I believe is not that simple.  Analysts have been talking about the consumerization of IT for more than 10 years.  And let’s not forget how Salesforce got started.  From its humble beginnings in a San Francisco apartment in 1999, the company has grown to a force-to-be-reckoned-with in enterprise software (their revenues in 2012 were $2.2B).  The very first version of their website in late 1999 had one simple message: “Just Sign On”.  Very appropriate message, since they were selling to sales executives who wanted a simple tool to manage their sales opportunities.

Fast forward to this century.  There have been many advancements in technology that I believe are forcing the enterprise technology industry to re-invent itself.  From the emergence of the ‘enterprise’ cloud pioneered by Salesforce, to the explosion of mobile devices (and ensuing Bring-Your-Own-Device (BYOD) phenomenon), the enterprise consumer is fast becoming both more demanding and willing to bypass corporate IT policies in order to get their work done.  What is even more interesting however, CIOs at forward-thinking companies have decided to embrace this movement rather than fight it.

While technology continues to play a key role, the fundamental drivers in my opinion are the increasing expectations and sources of information enterprise consumers have at their disposal.  Enterprise technology veterans cannot help but reminisce the good old days when our sales people controlled the conversation with our customers.  Those days are old gone.  It doesn’t matter if you sell t-shirts on the web or multi-million dollar enterprise systems. Your customers in many cases know more about your product or service than your salespeople.

The proliferation of the social media phenomenon is breeding a new kind of consumer that is constantly bombarded with information, whether it is from your competitors, their peers and advisors, the private communities they participate in, and yes, the public social networks such as Facebook, Twitter and LinkedIn.

So what can you do?  The choices are simple:  You can either embrace the change or fight it.  In early 2011, I wrote a case study of how SAP, my then employer, was leveraging social media to extend the reach of its events and connect with an audience that far surpassed the number of people physically attending the event.  Today SAP is recognized as a leader in embracing this change.  There are many other great enterprise technology companies in that league.  Companies such as IBM, Cisco, Intel and many others have recognized the importance of truly connecting with the people who are using their products on a personal level.

If you are still not convinced, just look at this recent study of the Fortune 100 Social CMOs.  Technology companies dominated the list with seven of the top 10 social CMOs.  Of those seven companies, not one was selling to just end consumers.

It’s your choice…

As always I look forward to your feedback and comments.

Photo by miuenski

My Verizon experience last week reminded me how early some companies are in their quest for a coherent and consistent customer experience.  After having been an AT&T Wireless customer for many years, I decided to explore switching to Verizon.  I already knew Verizon’s coverage was not that strong at my home, so I decided to first get a prepaid phone to really put their coverage to the test.  And this is where my customer experience adventure begins….

Channel conflict

Are we really in the 21^st century?  Do companies still offer different prices across their own channels?  Yes, apparently they do.

After doing my research on their website, I found the cheapest phone and plan I could get in order to conduct my ‘scientific’ test.  Since I did not want to wait for 2 days for the device to arrive, I decided to go to a local store and pick it up.  20 minutes later and after multiple attempts from the sales person to up-sell me to a more expensive phone, I discover that the $18 phone would cost me $45 + a $35 activation fee (no activation fee or shipping charges for buying on Verizon’s website).  I finally walk out and decide to complete this online – yes, I am this cheap…

Technology, technology, technology

Don’t forget the basics….Can you really afford to have a non-functioning website?

That same evening, I open up Google Chrome to place my order only to realize the Verizon website does not like Chrome, so I fire up Internet Explorer.  The moment I start the process, I keep getting pop-up windows asking me to ‘chat with an agent’.  As I am about to place my order, the website crashes, so I start over.  Guess what? I now have 2 identical orders in my inbox. So I finally decide to take them up on their offer, thinking I can resolve this with the chat agent…

One face to the customer….

Do I really care which department you work for?  Aren’t you representing the same company?

Wishful thinking…As soon as I start my chat with the agent, he promptly notifies me that he is in ‘presales’, not ‘customer support’ and gives me an 800 number to call.  While the agent is still on chat with me, I try calling and enter one of my two order numbers only to get kicked out.  I try again, this time not entering any order number, and promptly embark on the next step in my adventure….

 The customer is a human being…

Treat me as you would like to be treated

20 minutes later, an agent comes online and by this time I am done with Verizon.  When I explain the situation, the agent responds by asking “So, you would like to cancel one of the orders?” to which I respond by “No, I want to cancel both”.  Without me even being able to utter a single word, the agent then says “In this case, I will need to transfer you to our Internet department” and promptly hangs up (i.e., ‘transfers’ me).  Really??????

What about the back office?

Are your processes (e.g., logistics, billing) sufficiently integrated?

25 minutes later, a different agent finally comes online, and after apologizing (by of course referring to the iPhone 5 launch), says that he “will take care of it”.  At the end he adds the proverbial CYA statement “Sir, I would like to inform you that our warehouse is closed now.  There is a chance they may not see the cancellation and your orders may be shipped.  If this happens, please refuse delivery”.  It’s been 5 days, their online order tracking shows items as shipped (I should have received them 3 days ago) but with no tracking number, while my credit card statement still shows 2 charges.

Oh yes, let’s not forget social media

Do you really care? Do you know what people’s expectations are in social media? Do you respond in your corporate or human language?

Of course while wasting precious time during my 45-minute hold, I went to Twitter to elicit some sort of response by Verizon.  The only response I got is that their network and customer service is ‘stellar’.  Well I guess this depends on your standards…..

Even if you argue that the iPhone 5 launch put an undue strain in Verizon’s processes (after all they didn’t really know this was coming!), most of the issues I experienced are unfortunately a lot more far-reaching.

I believe this experience is the norm and not the exception in business today.  What do you think?  As for me, I am sticking with AT&T for now, at least I know what to expect.  Verizon, can you hear me now?

PS. Apparently, I am not the only one enduring a ‘stellar’ customer experience, Verizon’s own community has many recent similar posts with Verizon noticeable absent from most threads.

I have been reflecting on this topic for at least a year now, and many people have published their views on this.  If you don’t believe me, just google ‘social media maturity model’, I got 1.7 million hits.  My fundamental problem however with most of the ones I have seen is this:

Most start at some well-defined state where an organization has developed some (listening) capabilities and end at this nebulous thing called ‘social enterprise’ or ‘social business’.

Yes I did google ‘social enterprise’ as well, and came up with 249 million hits; that is on top of the 2.9 million hits you get when you google‘ social business’. Based on my experience and beliefs, both of these are fallacies and do not reflect reality.

The over-arching message for me is that social media is a means to an end rather than end in itself.  Success in social media is when the entire organization looks at it as a lever to achieve a certain business objective, regardless of whether you are in sales, marketing, product management, or customer service.  In my opinion, there is no such thing as social business or social enterprise, the same way there is no such thing as a web business today.

So here are my thoughts:  I believe there are four stages in total, and I have tried to capture some of the key differences across each stage.

The first stage (‘Organic’) is where employees in your companies start to experiment, frequently with little or no guidance or objectives, simply because they are intellectually curious or motivated.  Many people will call these folks rogue, I personally like to think of them as pioneers or champions.

The second step (‘Enabled’) is where you start to see emerging roles and processes such as the so-called centers-of-excellence.

These first two steps are typically orderly but this is where chaos comes in.  In my view, the end state (‘Embedded’) is where social media is just another tactic / channel, or whatever else you want to call it, that is fully embedded in your corporate DNA.

How you get there however varies.  I have seen two dominant paths as companies evolve to this state:

The first way is the straight line.  Once companies have built some of these enablement capabilities across some functions, they truly integrate social media across all their functions (e.g., sales, marketing, and customer service) with one coherent strategy.

The other way, is where companies initially bypass the ‘Integrated’ stage, and embed social in some of their functions, such as customer service.  They will eventually come back and integrate all the functions but will typically do this later.

The reality is that we have already seen similar major disruptions in the past 20 years, whether it was Business Process Re-engineering (1990), CRM (Siebel, the CRM pioneer was founded in 1993), or the web (Netscape, the first web browser was founded in 1994).  At each of these inflection points, we initially got enamored, but eventually moved on.  Why should this time be any different?  Would the ‘social enterprise’ exist had it not been for the web?

All of this really reminds me of Amara’s Law: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run”. My opinion is that the sooner we remove the word social media from our vocabulary, the shorter this journey will be.

Of course this topic is all the more timely given the recent uproar towards Salesforce’s attempt to trademark ‘social enterprise’.  I personally believe they should take a page off their playbook and trademark this instead:-)

What do you think?  Are my views totally off-the-mark?  Am I really missing something?  As always, your thoughts and comments are welcome.

For those of you that wish to look at my slides, I have embedded them below.  They include some more details for each stage and transition to the next.

This is a follow-up post to Part 1 on the same topic.  If you have not read Part 1, I suggest you start there.  The chart below includes my assessment of the social enterprise software market.  The size of each bubble reflects my estimate on the size of each sub-sector, while the axes represent the relative growth and ‘consolidator’ potential of each.  It is not too surprising to see the most mature sub-sectors on the lower growth quadrants.  My fundamental belief is that the sub-sectors that are trying to stitch the various elements of the stack together (namely Engagement and Integration) will be the ones to watch.  Please note two caveats: (i) I am not accounting for the enterprise software mega-vendors entering the market, and (ii) I am not referring to specific companies, but rather the sub-sectors themselves.  As a matter of fact, I believe most companies today are present in more than one sub-sector for that very reason.

So here are the details for each sub-sector:

Profiling

These companies help their customers develop a 360^o view of their own consumers by mining the social (and 1.0) web, an area historically dominated by companies such as D&B and Hoover’s.  This area is critical to fulfilling the promise of SocialCRM by allowing companies to link their consumers’ digital profiles to those in their internal CRM systems.  Salesforce was the first enterprise software vendor to enter this space with their acquisition of Jigsaw back in 2010.  Vendors in this space fall in two categories: Companies such as Jigsaw, InsideView and Reachable that build social profiles, and companies such as Klout and PeerIndex that attempt to understand influence scores. Most capabilities in this area are still rudimentary, and companies such as Reachable are trying to improve their accuracy by leveraging internal enterprise data.  I expect significant innovation in this area, although it is unclear whether it will reach maturity before getting consolidated.

Integration

While social single-sign-on integration is well understood and mature (i.e., companies like Gigya and Janrain take the pain out of the ever-changing social network APIs from their customers), other areas such as a true integration layer across the entire social enterprise software stack are rudimentary.  I expect a middleware layer to emerge, akin to what happened in the enterprise software industry.  I see Profiling as a potential sub-sector to be eventually subsumed into this.

Campaign

This is a very mature space, with increasing M&A activity.  Five of the nine social enterprise software M&A transactions during the past 12 months were in this sub-sector.  These include Buddymedia (Salesforce), Vitrue (Oracle), Involver (Oracle) and Wildfire (Google) in the past 2.5 months alone.  All these companies started by providing tools to create social network- (predominantly Facebook) and web-based campaign apps and pages, and many have since expanded to Engagement.  Given that all large players have been acquired, I don’t expect much innovation in this sub-sector, beyond the acquirers’ integrating these products into their offerings.

Engagement

This sub-sector is fairly immature and crowded, but growing fast with many early-stage companies.  Vendors like sprinklr, Buzzient, Spredfast and viralheat help their customers manage their own engagement on social networks.  Companies such as purechannelapps and Hearsay Social help customers with extensive franchise or partner networks.  All companies in this sub-sector offer some analytics capabilities.  Some, such as NextPrinciples, not only provide CRM integration but also novel ways to extract insights by providing recommendations as opposed to ‘eye-candy’ charts.  I expect more innovation in this space, especially in the areas of integration and analytics.

APIs

This sub-sector emerged as a vehicle to allow full access to the Twitter firehose.  A handful of companies like Gnip and DataSift have had licensed access for a while, and as of last June so has Salesforce’s Radian6.  Separately, Twitter quietly announced last month they will start allowing individual users full access to their own tweets.  As Twitter starts to become more serious about the enterprise, I expect them to take the brokers out of the equation.

Monitoring / Analytics

This is by far the most mature (a.k.a. commoditized) part of the social enterprise software stack, with hundreds of companies present.  These companies provide capabilities for their customers to monitor social conversations.  They deliver both quantitative (e.g., share-of-voice, numbers of fans / followers, engagement metrics) and qualitative (e.g., sentiment) metrics.  Salesforce was the first enterprise software mega-vendor to enter this space with its acquisition of Radian6 in 2011, and Oracle acquired Collective Intellect last month.  By now, most companies in the adjacent Engagement sub-sector provide varying degrees of listening and monitoring capabilities.  Although some vendors in this sub-sector tried to provide publishing and engagement capabilities, none have really succeeded to date.  I expect further consolidation and limited innovation in this area as other large enterprise software companies enter this ‘table-stakes’ space.

Gamification

This emerging area within the social enterprise software stack is currently dominated by two companies, Badgeville and Bunchball.  These companies provide capabilities to influence consumer behavior by using concepts borrowed from the gaming industry.  In all cases, these capabilities are exposed through their customers’ own websites or communities.  For more information on gamification read this report by Ray Wang of Constellation Research, or visit this site managed by Mario Herger of SAP.  Other players across the stack have already started to incorporate gamification components into their offerings.  I expect this sub-sector to be absorbed, most likely within the Integration layer.

Community / Collaboration

Companies in this sub-sector provide capabilities to develop private communities (akin to the public / open social networks).  They vary from full-blown platforms like Jive and Lithium, to the more targeted / micro-blogging platforms like Salesforce’s Chatter and Microsoft’s Yammer.  This is a fairly mature sub-sector that boasts the only pure-play public company (Jive went public last December) and largest social enterprise software acquisition to date (Microsoft acquired Yammer for $1.2 billion last June).  By now, almost every enterprise software mega-vendor has some capabilities, given the relevance of these capabilities to their customers’ core business processes.  Most however, fall short of that integration promise today.  I expect most innovation in this area to come from the large enterprise software vendors as they try to integrate the capabilities to their core business process offerings.

As I mentioned in my previous post, the innovation and expected growth for the social enterprise software market will continue at a breathtaking pace.  I look forward to revisiting this topic in a year from now.  In the meantime, your thoughts and feedback are more than welcome as this is still work-in-progress.

Social enterprise software is only now entering its rambunctious adolescent years.  The McKinsey Global Institute just published a report placing the ‘annual value that could be unlocked by social technologies’ at up to $1.3 trillion.  See chart on the right for the distribution of those benefits.  While one can argue whether this figure is realistic, few will argue on the overall potential.

In addition, McKinsey highlighted that ‘realizing such gains will require significant transformations in management practices and organizational behavior’.  As I mentioned in an earlier post, people are the weakest link.

The emerging Social Enterprise Software stack

 The chart on the left represents my depiction on the social enterprise software stack – it looks messy because it is.  The colors represent how mature (i.e., commoditized) each sub-sector is.  In general, I expect to see more innovation from the less mature sectors over the next few years.  At the same time, the more mature sub-sectors will consolidate much faster.

So here are my observations:

• Enterprise software vendors signaling importance of the market:  While their approaches may vary, by now all enterprise software mega-vendors (Adobe, IBM, Microsoft, Oracle, Salesforce and SAP) have either built and / or acquired social capabilities.  This is a strong indication that, despite the hype, the social media transformation will only accelerate in the coming years.
• The platform wars are only beginning: In addition to the acquisition spree, pure-plays are also expanding across sub-sectors with the intent of becoming true platform / suite players (e.g., Engagement vendors entering the Monitoring / Analytics and Integration sub-sectors, Campaign vendors entering Engagement, Community / Collaboration vendors building Gamification capabilities, etc.).  My depiction maps companies to a specific sub-sector based on their core competitive differentiation. Most companies today will claim they play across multiple sub-sectors, but few do well.
• User experience becomes a key competitive advantage: As I have argued before, user experience will separate the winners from the losers.  The consumer web has fundamentally changed enterprise users’ expectations.  As a result, companies stuck in the old paradigm will be left behind.
• Emerging sub-sectors driving innovation: When Jeremiah Owyang from the Altimeter Group published his perspective on the stack in 2010, there were no Profiling or Gamification companies present.  Today, companies in these sub-sectors are driving much of the innovation.

In closing, I want to ensure my views on market maturity are taken in context.  According to IDC, this sector will grow by 42% each year over the next 4 years.  I do not believe there is any other enterprise software sector coming even close to this figure.

What do you think?  Do you believe IDC’s predictions?  Do my observations reflect the state of social enterprise software today? I will provide more details for each sub-sector in the next installment.  In the meantime, your input and feedback is, as always, welcome.

Update (August 15): You can continue to Part 2 here.

Content: According to Outsell, a leading market research firm dedicated to this industry, the data industry is worth more than $400B.  While this figure includes categories such as news, search, education and directories, the addressable market for data consumed within the context of enterprise applications is more than $45B.  Companies such as Nielsen, IRI, Thomson Reuters, and Dun & Bradstreet have built multi-billion dollar businesses on the premise of getting access to enterprise data (such as point-of-sales and financial performance data), aggregating it and selling it back to enterprises.  In addition, a number of smaller companies such as ZoomInfo and Jigsaw (which was acquired by Salesforce in 2010 and is now integrated in data.com), leverage publicly available contact information to help sales and marketing professionals target their campaigns.  And of course, let’s not forget LinkedIn with its recent forays to monetize its 150M+ user base beyond its core recruiting market.  No enterprise software company however has been able to tap into its rich customer data at scale.

Advertising based monetization:  This is an area that is largely untapped within the enterprise.  The one glaring exception is Spiceworks, a company most of us have never heard of.  Spiceworks was founded in 2006 on this very premise and has already raised $54M in venture funding.  They provide a free network management solution for IT administrators, and have since built a 2M member community that they monetize exclusively through targeted advertising.

In my opinion, the largest opportunity lies in the enterprise SaaS market, both because of the implied consistency of the underlying data models across customers, but also because of the increased flexibility to serve this advertising.  The four largest enterprise SaaS companies claim more than 125K customers and more than 18M users.  Now imagine the value of being able to benchmark your sales, supply chain, financial, HR, etc. performance with that of your peers all from within your enterprise solution.  Now also imagine that while you are reviewing the performance of your widget suppliers, you receive a targeted advertisement from a supplier you are not currently doing business with.

Now I do realize, there are many potential concerns for both

• SaaS enterprise software vendors: How can I fund my significant upfront R&D expenses if I can’t monetize immediately, and their,
• Customers: How could I ever possibly entrust a vendor with my sensitive data, how could I allow my enterprise software vendor to distract my employees with advertising while on the job?

But, are they really that insurmountable?

What do you think?  Is this a far-fetched scenario, or is the SaaS enterprise software industry ready for disruption?

Get as many ‘eyeballs’ as you can on your platform, and monetize them (mostly) through advertising.

In order to make an apples-to-apples comparison, I focused most of the analyses on similar periods in their lifecycle, namely years 4-8 (2002-06 for Google and 2007-11 for Facebook).

Based on today’s IPO, Facebook’s valuation is 2.1x that of Google when it was 8 years old

(12-month trailing P/E ratio of 88 vs 41).

But I am getting ahead of myself, let’s look at the similarities first…

• Both Google and Facebook were founded by 20-somethings, the first one at Stanford and the latter at the Stanford of the East (a.k.a. Harvard).

• Revenue growth rate: Both grew at an astounding 122% compound annual growth rate over years 4-8.
• International diversification: By the end of year 8, they both relied outside the US for more than 40% of their revenues.

• Margins: Their net and non-GAAP operating margins almost converged by year 8.  Although Facebook started from a very different place in their year 4 (2007), they were able to increase their efficiency significantly in the following 2 years.  Sometimes I wonder what influence Sheryl Sandberg had in this eerily similar performance. She has been Facebook’s COO since 2008 and had spent the previous 6.5 years at Google, laying out many of the same underlying processes during Google’s early explosive growth years.

Now, what about the differences?

• Absolute revenues: Despite the fact that they both grew at the same compound growth rate during years 4-8, Google was almost 3x the size of Facebook by the end of year 8 ($10.6B vs. $3.7B).  This is because Google grew much faster than Facebook in their earlier years (e.g., Google hit $1B in revenues in 5 years, while it took Facebook 6.5 years). (+1: Google)
  

• Advertising revenue dependency: Google was (and still is) significantly more reliant on advertising, as it depended on it for 99% of their revenues, while ‘only’ 85% of Facebook revenues were derived from advertising (12% of the remaining 15% comes through Zynga). While at a first glance Facebook appears to have been able to diversify their revenue stream earlier, Google did not have a single customer / partner accounting for 12% of their revenues. (+1: Unclear)

• Advertising revenue efficiency: The advertising industry uses ‘intent targeting’ to denote instances when people are expressing their specific intent (e.g., when running a Google search).  This is typically not the case for Facebook, as people are not necessarily looking for a product when on the platform. As a result, their demographically-targeted ads are focused higher at the conversion funnel (i.e., brand awareness), an area still dominated by offline media. The implication is therefore that Google’s ‘eyeballs’ are a lot more valuable as a result. This and that study I recently saw show that Google’s click-through-rates are ~10x that of Facebook.  Forrester Research also recently published this post on some of the challenges Facebook is facing.   General Motors just this week, also decided to stop advertising on Facebook, since ‘paid ads on the site have little impact on consumers’ car purchases‘.  I have not seen any more extensive studies, but if you have, I would love to see them. (+1: Google)

• Operating cost structure: First of all, Google’s cost of revenues is significantly higher than that of Facebook, accounting for 40% of their revenues (as opposed to Facebook’s 23%). The primary difference is Google’s traffic acquisition costs they pay to their Google Network members as part of  AdSense (if you back that part of their business out, cost of revenues drops to 14%).  At the same time, Facebook spent 10% of their revenues on Marketing & Sales, as opposed to Google’s 7%.  Lastly, Google outspent Facebook on R&D by more than 3.4x, accounting for 9% of their revenues as opposed to Facebook’s 7%.  (+1: Google)

• Network structure (i.e., walled garden vs. open): This has been an area of much heated debate over the past few years, with many people comparing today’s Facebook to the 1990s AOL (and we all know where AOL is today).  Sergey Brin gave this interview last month at the Guardian, and while it may appear self-serving, many of the points are valid I believe. While Facebook now has over 900M users globally, their much-touted social graph is still a closed graph, and I believe this might be their Achilles heel. (+1: Google)

Google has continued to grow at a respectable 23% compound growth during the past 5 years to almost $38B in revenues last year, and is still commanding a healthy 26% net margin. As of today, Google is worth $195B, with a P/E ratio of 18. At the same time, despite their attempts to diversify their revenue stream, Google still relies on advertising for 96% of their revenues.

In their amended S-1 filed last Monday, Facebook reported Q1 revenue of $1.058B, up 45% YoY, although their Average Revenue per User (ARPU), a closely-followed metric, only grew 6%.  So, is Facebook still worth $104B after today’s IPO? Only time will tell, and although I do not believe so, I said the exact same thing during Google’s IPO in 2004, so please don’t take my word for it.

PS. I also ran these analyses accounting for inflation, but the results did not fundamentally change and hence decided to stick to non-inflation-adjusted figures for simplicity.

 For the record, I am not trying to put down these vendors, their solutions can be quite powerful if used properly, although for many of them user experience still remains a challenge.  So what should you be doing instead?

Start with the business goals in mind

1. Think use cases:  There a myriad of analysts and consultants that are continuing to help us make sense of the emerging social business.  The Altimeter Group published its second version of social business use cases earlier this year, Constellation Research has one, as do Forrester and now McKinsey & Company.  Although I am not going to try and re-produce my own version, I want to highlight a few that are fairly easy to set up in most social media listening platforms and can help make this data actionable:

• Innovation: Can you get any interesting insights for what your customers might be looking for?  Are there any big themes emerging for your industry?
• Marketing / PR: Are you using the social media listening platforms to monitor the effectiveness of your campaigns?  Are you monitoring your competition looking beyond share-of-voice at the brand level? Are you monitoring real-time spikes in key metrics such as volume or sentiment to avert potential crises? Are you looking for potential influencers and communities to engage with?
• Sales: Are you monitoring the social media channels for potential leads?  I think even if you are in B2B, you might be pleasantly surprised with what you find if you, for example, search for keywords such as your name next to that of one of your competitors, or with words such as ‘buy’, ‘compare’, etc.

Run some of these analyses and share the results with the right people in your company…which brings me to the following point:

2. Think business, not social business (i.e., what the business cares about): I have long argued that social business will only succeed if we can produce measurable business benefits.  While the consolidation in the pure-play enterprise social media vendors started a few years ago, enterprise software vendors outside the core social media space have also started to invest more aggressively (Adobe, Salesforce, SAP, Tibco and now Marketo, based on last week’s acquisition of CrowdFactory).  This is encouraging for me as a consumer, since I hope it signifies the beginning of a shift as customers start to demand closer alignment of social media with their core business processes.

 So here is my challenge to all of you:  Don’t publish your brand listening report next month and see if you get an executive breathing down your neck as a result; you might be surprised.  As always, I am very interested in your reactions and look forward to your thoughts…