The Value of Social Media

July 9, 2010 - PRLog -- For hundreds of years now we have all thought one way about business, it is all about the bottom line.  Well, nothing has changed, except for the way we view assets and commodities and the value we place on them.  Previous to the internet, which has only really been around for 15 years in common place, we thought of money and business MUCH differently than we do today.

We thought of value as always having a direct tie to money.  We thought that money was an  immediate thing and it would solve all problems.  But, how many times have we seen a business do really well for a short period of time and then fall flat on its face?  I have seen it, sadly, in my own portfolio at times.

Since the creation of the internet as we know it today, the world has changed financially as a direct result of the internet itself.  Businesses all have a website and emails as a standard and not a luxury, everyone on the planet has a mobile phone and social media is in the hands of 90% of the globe, we are connected.  We are also cheap, because of all this information we now have at hand.  With every business in the world providing an e-commerce solution for internet shoppers we have become educated.  WE can shop prices and make deals without leaving our bedroom in the morning, times have changed.

This means that value is going to be perceived differently, because the times are different.  What people say today about the value of social media is 100% correct and 100% wrong, because it can be.  It is all opinion and public opinion to be exact.  So here is my opinion on the value of social media.  Social Media has the same value that catalogs, ad sections in the newspaper, billboards, radio ads and TV advertising had when they hit the mainstream.  How much was a TV ad worth in the 60’s?  How much more business did companies that mailed out catalogs do versus the ones that didn't?  How valuable has it been to always be heard as a business, radio or TV? Social Media adds one thing these other vehicles could not, optional permanency, which I will go through in the end of this post. The scary thing is that social media encompasses all these tools at the same time.

I believe social media adds value to life, adds value to business and has value in monetary terms.  So lets look at it from a venture capitalists point of view to make this entry one to remember.  Everyone that is reading this right now should understand the power and value social media has as an end user, and maybe even a business.  But has anyone ever thought about this vehicle as a true commodity?  There are really 3 major ways to think of the value of social media, as a commodity, as an asset or as a liability.

From a liquidation standpoint, here is what I see as a commodity.  I see anything that can be sold for any amount of money to cover payroll, losses, corporate bankruptcy, basically anything.  If you can sell it, it is a commodity.  So, does social media fits this bill?

From an asset point of view, here are the questions I would ask.  Can it be monetized and add more than it takes away from a business?  Is it “worth” something?  Does it fill the void in media needed right now AND in the future?  The answers are all yes.

Social Media adds more value to your business than you can possible think of all at once.  Social Media can help you retain customers, gain customers, manage your PR, recruit employees, monitor employees, reduce lead costs, reduce fall out of customers and much more.

So, according to Harvard, it costs 8 ties as much money to find a new customer as it does to keep one you have.  As a retention tool, there has never been a better one created in man’s history. As a prospecting tool, if done right, social media can be a real power tool (seek a professional first).  Now one can link up with a customer and answer questions that they have forever.  Where, in the old days, some businesses didn't have enough phones or bodies to make calls we now have a way to help everyone in real time.

Is it worth something?  Well on a site called Pot Pie Girl they have an auction system for Twitter accounts and the last one sold for $1550 for an account with only 1300 followers and 40 tweets send out.  I repeat, they SOLD this account for $1550, that makes it a commodity.

Of course the best part about social media is the breadcrumb trail it leads.  Once a successful campaign has been introduced to the world, it is usually going to show for quite some time, so it is a long term play in the media space.  This is what I call, optional permanency.  Optional permanency gives the business that is using social media the ability to pull down a campaign if it not successful or leave it on the web forever if it was. When customers have the opportunity to see you, they must like what they see, thus the value of optional permanency, thus the power of social media as an asset.  I believe that social media accounts will, eventually, have the same value in the marketplace that emails lists had in the late 90’s.  Build them, farm them and make it happen!