This is the first of a two-part paper by ACE’s Toby Merrill and Kenneth Latham, InfoLawGroup’s David Navetta and Richard Santalesa, now of The Sm@rtedgeLaw Group
Overview — What Is Social Media and Why Should Your Company Care?
In less than a decade, social media, in many ways, seems to have “taken over the world.”
This statement is not hyperbole. As one of the largest social networking sites in the social media universe, Facebook boasted more than 750 million people actively using its service. If it hasn’t already, Facebook will soon grow twice as large as the population of the United States, which currently hovers at 311 million.
Even so, the vast majority of companies did not immediately join the social media revolution. Instead, they spent varying amounts of time observing from the sidelines. But when the first wave of companies did join, it was because they anticipated the significant business benefits of this “brave new world” — where the personal, the professional, and the commercial combine seamlessly, and in the blink of an eye.
Many others, however, remained unconvinced—often because of a lack of information and an unclear understanding of how social media could be beneficial. “What is this ‘social media’ thing all about?” they wanted to know. “And why should my company care?”
Unlike traditional media, which offers a one-way experience (in which media outlets broadcast information for public consumption), social media offers a two-way interactive experience. Consumers of social media, unlike consumers of traditional media, can interact instantly and directly with either the originators or the authors of the proffered information. They can interact with each other, too. The interaction and cross-communication that social media makes possible is precisely what makes social media so world-changing.
As with any new technology, there is a downside. Social media also creates a whole new world of privacy, security, intellectual property, employment practices, and other legal risks, to name just a few. But the opportunity to interact with anyone, anywhere, anytime is too world-changing to ignore.
It has altered the traditional media expectation of consumers listening passively to radio and television broadcasts, or reading newspapers and magazines, with no hope of an immediate interaction (and no
way, certainly, for customers to converse with companies). With social media, all that changed. Individuals and groups suddenly have a radical new ability to voice opinions through this new media, a channel never before available. Using social media, everyone can become a commenter, editor, content creator, producer, and distributor.
Not only that, but the entire world has become accessible in ways that are disorienting for traditional media and those accustomed to its cultural hierarchy. Consider the popular social networking site, Twitter. This platform allows anyone with an account to post short messages. To tailor the onslaught of messages being broadcast from the “Twitter-sphere” of 200 million current Twitter subscribers, users can create lists of those they wish to “follow” so they only receive Twitter feeds from those they select.
With Twitter, anyone can send a short message of 140 characters — called a “tweet” — about any topic, including the famous and the infamous, the holy and the ethically challenged. Anyone, for instance, can tweet about President Barack Obama and Lady Gaga, or the Dalai Lama and — well, you get the idea.
Twitter is just one of the components in a social media portfolio. England’s Queen Elizabeth II, already with a Twitter account, added a Facebook page to complement her YouTube channel, Flickr account, and website.
Perhaps most surprising, social media has been an enabler of grassroots revolution in countries where such an event seemed impossible. As a case in point, look at the impact of social media on the governments of Colombia, Egypt, Indonesia, Iran, Libya and Tunisia, to name but a handful. In summing up this trend, author David Kirkpatrick in his book, The Facebook Effect, observed that the “large scale broadcast of information was formerly the province of electronic media — radio and television. But the Facebook Effect — in cases like Colombia or Iran — means ordinary individuals are initiating the broadcast. You don’t have to know anything special or have any particular skills.”
The social media universe encompasses a much broader array of interactions than those that occur on popular and familiar social networking sites like Twitter and Facebook. “Social media” actually refers to a growing galaxy of sites that includes: personal and business blogs, news sites with interactive or comment features, group forums, wikis, social and business networking sites, online community sites, social bookmarking sites, microblogging sites, and gaming as well as virtual world sites. Social media embraces a cyber-universe of websites that promise to expand — virtually — forever.
In short, like earlier methods of communication that seemed new and a little strange when they first appeared, social media, writes Facebook Effect author Kirkpatrick,“…is a new form of communication,
just as was instant messaging, email, the telephone, and the telegraph.”
How Can Social Media Benefit Business?
“The exponential growth of social media, from blogs, Facebook and Twitter to LinkedIn and YouTube, offers organizations the chance to join a conversation with millions of customers around the globe every day.” Harvard Business Review, “The New Conversation: Taking Social Media from Talk to Action”
The key word in the quote above is “conversation,” since attracting customers by creating a social network is entirely different than broadcasting ads, or employing marketing strategies to convert targeted groups of consumers into customers. Creating online conversations also requires a whole new approach and skill set.
Social networking sites encourage businesses to change their traditional marketing strategies and focus on talking with — not at — prospects and clients, with the goal of developing and “deepening the relationship” between the company and customer. But what’s the business benefit of that deepened relationship? When prospects grow to “know, like, and trust” a company, through interacting with their representatives on social networking sites, they are much more likely to do business with that company.
“It is well-established that people feel more connected with a company when they have direct communication on an ongoing basis and opportunities to express their opinions,” commented Lisa Brown, in an article about the use of social media risks in business.
Indeed, social networking conversations create a level of immediacy and a kind of public intimacy that is impossible with traditional marketing. And since most large or medium-size companies are perceived by the public as relatively “faceless,” social networking gives companies the opportunity to present a human face in the form of a social media spokesperson — an individual who can nurture person-to-person conversations which builds trust in the company’s authenticity as well as its professionalism.
But there is something else that social networking sites offer a business that no other form of public interface does: the ability to monitor public perception of its brand, products, and services in real time. As an accompanying result, companies also have the opportunity as well as the responsibility to provide a quick and effective response, if a negative perception goes viral through social media’s worldwide interconnected platforms.
Reputation monitoring and repair aside, there are multiple strategies companies can use with social networking sites. As cited in The Harvard Business Review, a large U.S. construction materials company employs a variety of social networking platforms in order to accomplish a handful of business-supporting aims. According to the report, “the company uses Twitter to get news in front of reporters;
LinkedIn is where company salespeople post scholarly articles to share with each other and their customers; their Facebook page focuses on the company’s social responsibility efforts, while the company blog is more of an exchange with customers.”
As comprehensive as that may sound, it is in reality just one aspect of how a business can harness the power of social media. Several additional popular strategies companies employ include:
• Branded “Fan” Pages on Social Networking Sites
• Quick Online Response to Rumors and Negative Perceptions
• Information Disclosure — Public Broadcast
• Employment Practices
• Customer Service and Feedback
Promotions and Contests
• User-Generated Content Promotions
• Word-of-Mouth Marketing via Blogs
These diverse forms of social networking may cover a lot of business bases. But how do they translate into business benefits?
For the most part, the business benefit of social media is indirect, in much the same fashion that
public relations is, although some companies can point to a measurable relationship between their social networking efforts and sales. If we look at the social networking strategies of a national chain of coffee shops, we see that their overall business benefit comes in the form of customer “identification” with the company and its products.
Identification is critical: from it grows online interaction, and from online interaction grows customer loyalty. Being able to claim more than five million loyal customers is a “bankable” social media benefit.
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Toby Merrill is a vice president in ACE USA’s Professional Risk division, where he is the national product manager of the Network Security, Privacy, Technology and Media Liability products.
Kenneth Latham is vice president of ACE Professional Risk, and product manager for Employment Liability and Fiduciary Insurance.
David Navetta is one of the founding partners of the Information Law Group.
Richard Santalesa is founder of Sm@rtedgeLaw Group. He was formerly senior counsel at InforLawGroup.
