Social media doesn’t make money directly, but it still has enormous value

Perhaps it’s a function of the intricate tracking the Web provides, but I’m still amazed at media’s inability to grasp the secondary (and often, tertiary) value of community efforts. So let’s make this as clear as clear can be: Twitter,…

Perhaps it’s a function of the intricate tracking the Web provides, but I’m still amazed at media’s inability to grasp the secondary (and often, tertiary) value of community efforts.

So let’s make this as clear as clear can be: Twitter, Facebook, forums and other social media functions rarely make money directly. Their value comes from the attention they gather and the opportunities that attention creates. If you have a mass of people who have willingly opted-in to your messaging, you damn well better put useful, for-pay products in front of them. Otherwise, all you’ve got is a social club.

This recent piece from Forbes does a nice job tearing down the direct-revenue mindset.

Judging Dell’s Twitter revenue against company revenue misses the point

If Dell turned heads last year when it claimed to have made $1 million through Twitter, its revised estimate for 2009 is going to cause nasty neck pulls: the company says Twitter revenue jumped to $6.5 million. (I’m assuming that…

Twitter and DellIf Dell turned heads last year when it claimed to have made $1 million through Twitter, its revised estimate for 2009 is going to cause nasty neck pulls: the company says Twitter revenue jumped to $6.5 million. (I’m assuming that spans multiple years.)

The Guardian has a nice bit of analysis on the announcement. It’s informative and interesting. It weaves in some contextual bits. But nestled amidst the numbers is the “drop in the bucket” paragraph that always pops up in these types of stories:

Although $6.5m sounds impressive, when you compare it with the net revenue of $12.3bn Dell reported in the first quarter of fiscal year 2010 it becomes clear that this is only a drop in the ocean …

Sorry. I guess that’s a ” drop in the ocean” paragraph. You get the idea.

I understand the need to insert this text. Its absence would surely raise a red flag for editors and consumers alike. But there’s an underlying perspective here that I believe is damaging, and I wish more analysts would call this out.

Social media exists in a space totally different from traditional business. Activity takes place at the edges, not the center. It’s ambiguous. It’s fleeting. Because of all this, judging social media efforts against traditional channels obscures the real analysis and the real opportunity.

What’s notable about Dell’s Twitter revenue is that it went from $1 million in 2008, to $3 million in June ’09, to $6.5 million now. That’s an enviable trajectory in any business, but it’s doubly impressive here because Dell is making actual money through a nascent system. It found a way to put social media’s tricky architecture to work.

That’s key. Digital disruption is wiping out the fat revenues from traditional models. Many businesses will get smaller simply because consumers have more power and more choice. The companies that find ways to make money within this new landscape — even relatively small amounts of money — have a better shot at adaptation.

Images courtesy Dell, Inc. and Twitter, Inc.

Twitter’s most impressive attribute, explained in 115 characters [Quote]

“Essentially, Twitter left a ball and a stick in a field and lurked on the sidelines as its users invented baseball.” — Steven Levy in an excellent Wired piece….

“Essentially, Twitter left a ball and a stick in a field and lurked on the sidelines as its users invented baseball.” — Steven Levy in an excellent Wired piece.

“Twitter Effect” Story Covers Consumer Tech Without the Hysteria (… It’s About Time)

I was ready to rip this Twitter Effect story for being one of many “trend out of thin air” pieces commonly found in consumer-centric technology coverage. But I was pleasantly surprised to have my initial assumptions proven incorrect. The headline…

I was ready to rip this Twitter Effect story for being one of many “trend out of thin air” pieces commonly found in consumer-centric technology coverage. But I was pleasantly surprised to have my initial assumptions proven incorrect.

The headline teeters on hype, but the story itself asks a reasonable question — do rapid-fire Twitter reviews influence film revenue? — and (gasp!) presents multiple viewpoints that don’t glom on to comfortable conclusions. The piece, which is really worth a read, says Twitter might influence receipts for some films. It’s nice to see nuance for a change.

Content Creators vs. Content Aggregators: Can’t We All Get Along?

ReadWriteWeb looks at the increasing popularity of Breaking News Online, a news aggregator that’s harnessing the power of Twitter and other Web platforms (and it just happens to be run by a 19-year-old). Within the piece, ReadWriteWeb hits on the…

ReadWriteWeb looks at the increasing popularity of Breaking News Online, a news aggregator that’s harnessing the power of Twitter and other Web platforms (and it just happens to be run by a 19-year-old). Within the piece, ReadWriteWeb hits on the central issue of aggregators: can they use original content created by other outlets to turn popularity into profit?

All of this is fascinating, but isn’t BNO still just an aggregator? In traditional media outlets “aggregator” is a dirty word (unless they are the ones doing the aggregation). In fact, Breaking News Online does very little original reporting. The company is going to monetize its research flow, editorial judgment, distribution channels…and links to other peoples’ content. If BNO is successful, there is a real risk of original content publishers objecting to the fact that someone else has found a way to make money off of (links sending traffic to) their content.

This aggregator antagonism needs to end. Like it or not, content creators ultimately benefit from the increased exposure and traffic aggregators supply. Creators are generally lousy at Web distribution because they can’t shake the allure of lock in (you need to read my content on my site), but aggregators — unencumbered by oldthink — know the value of broad and diffuse distribution. Compare Breaking News Online’s Twitter presence with that of most mainstream outlets and you can see the stark difference: BNO understands you have to serve the audience through the platforms where it’s already congregating. Repurposing RSS feeds as tweets isn’t enough.

What kills me about all this content creator chest pounding is that these organizations are missing the central point: As long as aggregators point traffic back to source sites, both sides benefit in this relationship.