All Things Techie With Huge, Unstructured, Intuitive Leaps

The Problem With Social Media Monetization

Now that I have a moment on a weekend, I've been meaning to pen this article before I get down to playing with code. In many previous articles on this blog, I have outlined the failure of Facebook to monetize its almost-billion followers. I point out reasons for the failure of Facebook user monetization and how the stock hasn't been anywhere near its opening day high. As I see more and more startups trying to crack this nut, I had a full insight yesterday as to the intense problems in social media monetization.

I had a visitor from the UK who is a project manager for a global company that is in the top ten of the Global 500. His sons (both of them) work for a small extreme sports company in the UK. One is an instructor, and the other son is in charge of social media marketing. The center is located in a UK city with a population of around 100,000 people. The center offers indoor extreme sports with simulators and expensive equipment.

When the social media marketing guru took over, the social media effort was essentially null. Within a very short time, through the marketing efforts, the center attracted over 10,000 Twitter followers and 600 Facebook followers. Youtube videos have less than 500 views each. The center has less clients on an annual basis than its number of Facebook followers. The effect on business has not been measurable, and the marketing guru is seeking greener pastures.

What this proves to me, is that social media marketing in itself, is a bit of an uncrackable nut. This view was expressed by the social marketing guru's father who said that it is almost impossible to glean KPI's or Key Performance Indicators except by inference when looking at the bottom line. Many bricks and mortar companies have been closing their Facebook stores because of poor performance, and hence poor ROI (Return On Investment). LINK STORES CLOSING ON FACEBOOK

Many of the "Likes" on Facebook are from people who have no intention of visiting the extreme sports center, but want to convey the image of someone who does. On Twitter, many followers hit the follow button to get a reciprocal follow. Youtube is the ultimate arbitrator of numbers because it shows you the hardcore numbers of people who would sit through a video. However, this doesn't necessarily translate to a visit to the center either.

So what gives? It is my opinion that way too much value is given to social media interaction. It is also my opinion that when one visits social media, one is not in a frame of mind to shop. Shopping and socially interacting take place in different areas of the brain. Shopping fires the hunter-gatherer neural nets and socializing is the semantic opposite of that. In addition, it is part of the human psyche to have a delta between what people say they do, and what they actually do. That is the key difference between social media and other internet interactions. Social media is based on what we say, and may or may not have a basis in reality.

So how have companies actually cracked the nub of the problem of social media monetization? It is a tantalizing problem because the rewards of solving it are huge. The way that companies have attacked this issue, is to actually track what we do, not what we say. They do this not with social media, but with other websites.

For example, when you visit the New York Times website, the results of a tracking cookie is sent to 103 separate companies. They know more about you than the government does. Do you want an example of how this happens? Go to and if you have a Safari browser, you can download a plugin to see where your data is going. If you don't, you can watch a simulation.

When you actually make it a point to visit the New York Times or the Huffington Post or any other website, you are making a statement about yourself. Through data mining, they can tell your demographic, your ethnicity, your age, your socio-economic status and anything else they need to know to market to you.

Facebook can't work that way. Facebook itself, admits that 5% of its accounts are fake, and I am willing to bet that the percentage is much higher. And if the account isn't fake, then the personal information such as birthday is fake.

So essentially what I am saying is that Facebook will never see the realization of the full potential of monetizing its information. Companies who mine social media for marketing data will at best have so-so results.

As a good example of this, yesterday I drove a Chrysler 300 automobile -- brand new. It wowed me. There is no key to start it. The key is a fob with a near-field RFID chip. The bells and whistles were mindblowing. The engine was 5.7 liters and when I tramped it, the car almost launched airborne. It had a video camera with a proximity detector while in reverse. In reverse the sunscreen on the back window lowered and came up again in forward gear. The car recognizes various occupants in their seats by their weight, and settings for air can be adjusted on an individual basis. There were lights on the bottom of the doors to light your footsteps.

It was one of the most amazing vehicles that I have ever driven. If I had tweeted that I was in love with the car (which I was) that lead gleaned from social media would be useless. My wife thinks that the car is a leviathan, an example of gross consumerism with a large carbon footprint, and our family would have a nil chance of owning that vehicle.

However, if I had gone to a search engine and looked at various sites selling that car, and I Googled the price, that would be a valid indication that I would be seriously interested in acquiring the car. It would be a matter of checking what I do, not what I say.

So is there a way of cracking this nut? There could be, but I don't think that it come from social media. I ran into a startup last week called . They are redefining analytics using the premise that we as social beings, cluster around and belong to various tribes. It is an intriguing concept and one that could have legs because it has a stronger premise than the one that currently exists where "I should be able to make money off people because I have what they told me is their date of birth and what they say they like".

Since this startup doesn't have the pull to do the tracking cookie bit with Fortune 500 websites, they have to be smarter about it. I really have no idea of how they assemble the tribal information, but there are a few things that they should do. They should use search engines, data mining, mathematical models and Bayesian Inference to tease out the tribes. This process is taking facts and integrating them into knowledge with models that have a very high correlation with real life.

It was the data miners who figured out that a teen at Target stores was pregnant by the probability of buying vitamins and skin cream. It was the data miners who made a mathematical model that showed that combining beer and diapers on a Saturday in a supermarket gives a huge boost to sales. It all comes down to the data miners.

For to succeed, they have to add business intelligence and data mining to their technology portfolio, and then they will have a better chance of making money from their analytics than that of Facebook. This is my own humble opinion.

Disclaimer: I am not associated in any way with any of the companies mentioned above.

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