July 28, 2011 5:29 pm

Social media management groups target top spot

A cottage industry of firms that offer social media management services is growing up on Facebook, as a race gets under way to become the marketing equivalent of Zynga, the gaming company that has rocketed off the back of the social networking site.

Since Facebook has become the de facto online social network in much of the world, with global users currently at 750m, the demand for services that allow businesses to exploit the full potential of its reach has risen dramatically.

About 28 social media management companies have emerged in recent years, several of them built on top of Facebook’s open platform in the same way that Zynga has. These companies help large brands manage their Facebook presence and maximise their exposure in people’s Newsfeeds, where marketing messages from businesses appear sandwiched between personal updates from friends and family.

“Newsfeed optimisation is where search engine optimisation was 10 years ago,” said Reggie Bradford, chief executive of Vitrue, which provides social media management software services to multinational corporations, including McDonald’s, Procter & Gamble and AT&T.

Large corporations pay, on average, $68,000 per year for these services, but that figure is expected to rise to the six-figure range in the next few quarters, said Jeremiah Owyang, an analyst with the Altimeter Group.

While Facebook does not charge vendors to build on its platform, the company has embraced several of them, including Vitrue, Buddy Media and Efficient Frontier, as preferred vendors. Facebook will recommend these companies to big brands which need help managing the marketing and customer support communications on their Facebook pages. Then later, with the information they glean about their fan base and user behaviour from the campaigns led by the social media management companies, the brands will purchase targeted ads from Facebook.

“All boats rise with the tide,” Facebook said. “We see it as a way to grow the Facebook ecosystem and provide value to all sorts of advertisers.”

As Facebook prepares for its initial public offering in early 2012, several analysts believe the company will eventually look for a way to monetise its relationship with social media management companies, by either charging a fee to use its platform or demanding some kind of revenue share, as it did with gaming companies built on its platform. As of July 1, game developers must use Facebook Credits, the company’s proprietary virtual currency, for the purchase of virtual goods within games, and share 30 per cent of those sales with Facebook.

“Expect to see future dramas along the lines of the Facebook/Zynga battle over the use of Facebook Credits,” wrote Jed Williams, an analyst with BIA/Kelsey, in his report on the social media management industry.

For now, Facebook seems content with the traffic companies are driving to their Facebook pages with the help from the social media management vendors.

The average company has 29 Facebook pages. Large international brands and franchises have hundreds, creating a logistical nightmare for local marketing managers and a potential PR nightmare for headquarters. Companies like Vitrue offer software that helps companies streamline the appearance of all their Facebook pages, then target messages for local markets.

So, in line with local culinary tastes, a Dallas-based Facebook user who “likes” McDonald’s will see a promotion for its Southwestern chicken biscuits, while a Chicago fan will see the McRib sandwich, and a Boston fan, the Filet-O-Fish.

“We work collaboratively with McDonald’s to harness their 8m fans and manage their locations around the US,” Mr Bradford said.

Companies are studying their own campaigns to understand user behaviour on Facebook, then packaging their findings in research reports about how the social network is changing how people hear about new brands and products. Facebook itself is helping to promote these reports, and doing its own research, to convince brands of the importance of spending on social media marketing campaigns.

While the cost of Facebook ads is going up – “cost per click” increased 74 per cent in the past year – the rate at which people actually click on those ads is very low – less than 1 per cent. That has Facebook on a mission to educate marketers about the power of a Facebook Like or a Facebook Fan.

“We’ve invested in new ways to help advertisers to think beyond the click,” Facebook said.

Though it is difficult to put a dollar value on a like or a fan, Facebook and its social media management allies are trying to highlight the viral effects of both.

For every brand post on Facebook, fans write an average of 100 comments in response, said Efficient Frontier. For every fan of a brand, there are an additional 34 friends of that fan that can be reached with a marketing message, said Facebook and ComScore in a joint report.

Though it will still take time to prove, Facebook is working to draw the connection between the moment a consumer sees a Newsfeed post about a new product and the moment they hand their credit card over to a merchant to buy it.

Related Topics

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE