Upload
brendan-bridgford
View
882
Download
3
Tags:
Embed Size (px)
Citation preview
Growth Strategies for Suppliers of Social Media Management Systems
Brendan Bridgford
London Business School MBA 2012
February 29, 2012
@brendanb4d
1
• Social Media Management Systems (SMMSes) help companies use social media more effectively and more efficiently
• Not all buyers have the same effectiveness/efficiency needs – The SMMS market can be segmented into: Brands, Content Distributors,
App Developers, and AntiSocials
• The SMMS industry is overwhelmingly focused on the Brands segment, but growth options in this segment are limited by the channel structure
• Growth, particularly for smaller SMMS providers, will require developing products and services for new segments
2
Executive Summary
@brendanb4d
• Most SMMS companies are principally software providers
• “The marketplace is becoming crowded with suppliers offering similar functionality”*
• Why is the industry getting crowded, and why are the existing products apparently so similar? How long will this continue?
3
There are at least 40 SMMS companies in existence. Most are small and privately held
@brendanb4d
*"A Strategy for Managing Social Media Proliferation,“ Altimeter Group, January 2012 http://www.slideshare.net/jeremiah_owyang/smms-report-010412finaldraft
This report is based on 15 interviews with:
Founders of SMMS
companies
Agency Executives
Brand Managers
Social Media Experts
Heads of Digital
Interviews were conducted by phone or in person during the fall of 2011.
4
This report was also informed by insights provided by the SMMS buyer’s guides listed in the appendix.
@brendanb4d
SEGMENTING THE SMMS MARKET 5 @brendanb4d
6
Social Media Management Systems provide two key benefits
@brendanb4d
Efficiency: SMMS tools help organizations coordinate multiple contributors on multiple social media accounts
Effectiveness: SMMS tools can also help companies measure the results of their social media activities and understand their users
7
We can segment the SMMS market according to buyer needs
Effi
cie
ncy
Nee
ds
High
Low
Effectiveness Needs
High Low
@brendanb4d
8
Effectiveness Needs
High Low
@brendanb4d
• Simple engagement measures • Low perceived value in
consumer insights
• More complicated metrics • CRM & customer insights • Response measurement • Influencer identification • Industry-specific needs
9
@brendanb4d
• Many social media accounts, multiple platforms
• Complex coordination needs
• Few social media accounts • Simple coordination needs
Effi
cie
ncy
Nee
ds
High
Low
10
We can segment the SMMS market along these dimensions
@brendanb4d
Content Distributors
Brands
App Developers
Antisocials
Effi
cie
ncy
Nee
ds
High
Low
Effectiveness Needs
High Low
11
We can segment the SMMS market according to buyer needs
@brendanb4d
Content Distributors
Brands
App Developers
Antisocials
Brands Typically large consumer product companies with deep pockets, complex coordination problems, and high expectations of social media.
Content Distributors Use social media mainly to
distribute content. They don’t need metrics beyond
a retweet or Like count.
App Developers Build apps or games on top of social media platforms like Facebook. Mainly concerned about user acquisition and retention.
Antisocials Don’t need an SMMS tool right now
– either they don’t use social media or they are satisfied with the native
interfaces.
THE BRANDS SEGMENT 12 @brendanb4d
Brands
• Nearly all SMMS companies are focused here
– Explains why the tools are so similar
• Almost certainly the largest segment today
• Difficult for many SMMS companies to sell direct
– Agencies own the relationship
– Brand managers need solutions, not software
– Brand manager’s dilemma: what marketing activity do I cut back on to make room in the budget for a SMMS tool? (threat to top line)
13
The Brands Segment
@brendanb4d
• Option 1: Sell direct – Pros: Higher margins, shorter cash cycle
– Cons: Many brands need agency services; difficult to find the right buyer “There’s no natural buyer in the firm.”
• Option 2: Focus on channel partnerships – Pros: Agencies get you to the decision makers
– Cons: Channel is fragmented (if agency sells to Pepsi, they can’t sell to Coke); agency won’t want to work with more than 1 or 2 SMMS suppliers
• Option 3: Offer agency-like services – Pro: Extract the full value of SMMS company’s tech expertise
– Con: Split service/product focus is difficult for small companies to pull off
14
How to sell software when the customer needs a solution?
@brendanb4d
CONTENT DISTRIBUTORS 15 @brendanb4d
Content Distributors
• The Brand Manager’s problems aren’t found here
– The organization is already designed around content creation & publication (these are not new corporate functions)
– Publication procedures already exist
– Uses of social media are largely an extension of what they’re already doing
• Measurement is easy
– Social Media drives traffic to websites
– Existing site analytics tools measure inbound traffic flows
16
Content Distributors
@brendanb4d
• The buyer is looking for software, not solutions
– Most of the solution already exists in-house
• A technology-driven buying process
– Comes out of the IT budget (no threat to top line)
– Techies will be involved in the buying process sell features, but possible risk of feature creep
– Customer is less likely to need the services of an agency sell direct
17
Technology-savvy buyers make for a more straightforward sale
@brendanb4d
• This segment may also include:
– PR Agencies
– Online review or travel sites
– Any company that is in the business of monetizing content*
• Key takeaway: this segment has significantly different needs than the Brands segment.
– Can a single product be optimized for both segments?
18
Content Distributors
*Naturally there are some exceptions to this. TripAdvisor for example uses Twitter in a way similar to some large brands.
@brendanb4d
APP DEVELOPERS SEGMENT 19 @brendanb4d
App Developers
• This segment uses Social Media to acquire and retain users – User acquisition costs are their primary business problem
– Use Social Media to drive traffic to app page
– Get users to introduce their friends
• The entire customer experience from acquisition to monetization is through the social media platform – Google Analytics & Webmaster tools won’t help here
– Interaction with user is likely to be in-game*
• Little need for channel services sell direct
20
App Developers
@brendanb4d
*See Dumas, “Switch from Consoles to Social Games”: http://goo.gl/vJ7fS
WHAT’S COMING 21 @brendanb4d
22
• Today the industry appears to have:
– High profits (?)
– Low entry barriers
– Little competition between incumbents
– Little product differentiation
• Rapid growth & channel fragmentation have shielded SMMS companies from intense competition
– How long will this last? Will there be a shakeout?
A coming industry consolidation?
@brendanb4d
23
Channel fragmentation leads to SMMS industry fragmentation
• The SMMS industry is fragmented because:
– Channel partners (creative industry) have a lot of power vis-à-vis the SMMS industry
– The creative industry is itself highly fragmented
• Channel fragmentation will make it difficult for SMMS providers to gain market share
– Good news: limited competition should boost profits
– More good news: existing clients are increasing their social media budgets like crazy*
– Bad news: Small companies will find growth difficult
*Per the cmosurvey.org 2011 report: Currently 7.1% of total marketing budget is spent on Social Media; this is expected to grow to 17.5% of marketing budget by 2016.
• How to differentiate in this industry?
• Focus on a customer segment & figure out your unique value proposition
– Understand the segment’s SMMS needs better than it does
– Understand how the segment derives value from SMMS
– Don’t let the SMMS buyers’ guides dictate your product roadmap
• Build a company around delivering on this value proposition
24
“Focus is scary” – Clayton M. Christensen*
* From The Innovator’s Solution
@brendanb4d
25
"A Strategy for Managing Social Media Proliferation,“ Altimeter Group, January 2012 http://www.slideshare.net/jeremiah_owyang/smms-report-010412finaldraft "Social Media Management Systems Buyer's Guide 2011," Econsultancy, October 2011 http://econsultancy.com/uk/reports/social-media-management-systems-buyers-guide "Social Media Buyer's Guide," IAB, February 2010 http://www.iab.net/media/file/IAB_SocialMedia_Booklet.pdf "Socia Media Buyer's Guide," William Gaultier and Chris Heuer AdHocnium, April 2009 http://www.slideshare.net/socialmedia/social-media-buyers-guide-preview
SMMS Buyer’s Guides
Pierre Dumas, “Switch from Consoles to Social Games”: http://goo.gl/vJ7fS
Other References
@brendanb4d