The future is social
A common sentiment I hear echoed when I speak with senior executives about the importance of social media for business is that ‘well I’m successful and so are my peers and we don’t use it.’
There are a couple of problems here. While this can be true (and often is) a personal anecdote obtained under different circumstances can’t be extrapolated to understanding trends. More importantly, it fails to take into account that there are billions of new consumers coming onto the market who have never lived without social media.
Social media is 14 years old. These people (consumers, voters) expect to find you in social not because you’re cutting edge but just as we presume we’ll find inventory on shelves.
When Boston Consulting Group (BCG) put out its report on the internet economy in 2013 it showed that engaged, online businesses were outperforming peers by around 20%, a figure confirmed by Capgemini-MIT Sloane and McKinsey in 2014.
These figures are strong enough on their own but only reveal part of the story since only businesses that were still around could be surveyed, this is called ‘survivor bias’ and it means the impact may be greater since many businesses folded with the online onslaught.
The World Bank believes the adoption of digital technologies can be directly correlated with economic growth, claiming that for every 10 additional mobile phones per 100 people (in developing nations), GDP grows by 0.8%.
With two billion already using social media you’ve got to take it seriously; but with this flood of ‘digital natives’ into markets and digital growing at double digit rates it’s going to be mission-critical for the future, stewarding an organization sustainably into it is a leader’s role.
Social media shapes trust
We like to do business with people we know and trust, this much is not new. What’s new is the impact of virtual relationships on that phenomenon.
The Edelman Trust Barometer, with its hefty sample of 35,000, reports a decline in trust year on year in particular in institutions.
The 2016 results reinforce that when it comes to trust, the trend continues to be away from traditional authorities. On the other hand, trust in peers and subject matter experts is high and growing.
The Australian results showed that 46 percent of Australians don’t trust their employer to do “the right thing”. This is very concerning and suggests a different approach at the leadership level is critical. Part of that approach should be to consider how social might help leverage that trust across every area of the business.
As Trevor Young says in his analysis of the results, when you compare the “gaps with 35-44-year-olds – five points (government) and just one point (business) and you can see a major trust issue percolating among the general younger population. Put simply, they’re simply not resonating with government or business.”
In the US, Pew looked at trust from a generational perspective and found similarly that Millennials scored lower on trust than any other age group.
Engaging Millennials: Trust and Attention Survey from McCarthy Group is one of many in recent years that shows how little influence traditional marketing has on younger people, claiming up to 84% of millennials don’t trust advertising and sales messages. They do, however, trust their friends and here again we return to the conversations that these friends are having in social media networks.
This is how it plays out. If I’m coming to see you I would ask what café you recommend nearby, and am likely to act on that no matter how much clever marketing I get from other cafés in the area. From my perspective, you gain nothing from giving me a good steer, other than the warm glow when someone likes a suggestion we make.
These conversations go on all the time in real life and billions of them are happening in social media every day. In August 2015 for the first time Facebook reached a milestone in which a billion people were active on a single day.
The question is – does this virtual trust matter? The answer is yes. We trust a virtual recommendation as much as one we get face to face.
72% of consumers trust online reviews. Bazaarvoice and Kelton Research show Millennials trust the expertise of strangers even more than that of family and friends.
For example, if you’re booking a room on AirBNB you read the reviews, this is called user-generated content (UGC). These are strangers that you don’t know and are unlikely to meet, yet their experiences have the biggest bearing on where you decide to spend money. This trend doesn’t just apply to buying holidays and shoes. We’re seeing it play out in investment choices through business and into politics. When it comes to the influence on voting behavior the role of social is complex and should not be under or over stated as I discussed in this interview with the ABC.
Social media influences investors
Investors are influenced by research they find on social media, according to Cogent Research, 90 percent of high net worth investor groups use social media (a number that seems surprisingly high to me but nevertheless, so says the source research). The report showed a third of affluent investors use social media specifically for personal finance and investing purposes. Importantly as many as 70 percent changed relationships or reallocated investments as a result of content they’d found in the networks.
In the financial services sector Cogent found that 46 percent of investors who used social media did not have a financial advisor, 52 percent said they would connect with an advisor through social media.
From a brand perspective, a further 28 percent of investors said they would see a financial company as “innovative” or a “leader in the industry” for offering social options.
While in the US most Fortune 100 companies use social media and in the UK the FTSE100 Social Media Index shows 86% of FTSE100 businesses used LinkedIn as part of communications strategy, last year research by Web Profits on the social media activity of Australia’s top publicly listed companies found almost half the top 100 companies don’t bother.
Use is however growing. A study conducted in 2013 by Beaton Research and Consulting for Zurich on use of social media for financial advisors showed a ‘123% growth in advisers’ usage of Twitter since December 2011 and a 74% growth in the use of LinkedIn.” (Arguably off a low base.) According to a joint Putnam-FIT Consulting Survey of Financial Advisors’ Use of Social Media nearly half of advisors using social media for business acquired new clients through social networking.
Social drives business growth
Companies are also using social media for equity raisings (within regulatory constraints) and business growth; an Australian security software company recently grew the business into 27 countries using a LinkedIn-only strategy.
In the past if you wanted to buy something like a new car you’d do a bit of research then head off to speak with a salesperson. Nowadays, as social selling expert Timothy Hughes points out, you can be 60 – 80% of the way through a buying cycle before you talk to someone.
It’s still a hybrid approach. People research products online but purchase offline, an effect that is called ROPO. Roughly two-thirds of people use the internet for price discovery and social media channels are of the most important and trusted sources of recommendations. Counterintuitively, customers who are able to price discover through social and mobile access while in store tend to spend up to 40% more with that brand.
While a purchasing decision can be digital, often a physical purchase is made in-store because people enjoy the experience of shopping. It’s likely this effect will grow, which is a good sign for retailers who are able to strike the right virtual/real-shopping model where, according to Deloitte, “competition is moving from products and services to experiences”.
Social’s embedded in a multi trillion-dollar economy
It’s hard sourcing figures on social media value separate from digital and ecommerce because social media is part of a broader ecosystem, but the numbers are big.
BCG said that by 2016 online would contribute $4.2 trillion to the GDP of G20 nations, making it the equivalent of the fifth biggest economy worldwide. More importantly from my perspective, BCG said it would contribute 5.5% to GDP.
In the UK, the internet is already the second biggest economic contributor behind property contributing 10% of GDP, out pacing most of the traditional industry sectors. In Deloitte’s latest report the digital economy in Australia has been valued at $79 billion, 5.1% of GDP and bigger than agriculture, retail and transport.
The Australian economy has been bolstered by resources for some time. A key question for Australian leaders is how we remain competitive as that sector slows. Digital competitiveness is a critical part of that mix.
Social media impacts markets
In 2013 the Twitter account of Associated Press was hacked and a tweet was up for 2 minutes saying there had been a bomb at the Whitehouse. The Dow Jones plummet and $20 billion worth of stock changed hands during the brief trading hiccup. This raised questions both about the security of Twitter and quality control of algorithmic traders.
In Australian that same year Whitehaven Coal dropped 6% after a fake press that claimed to be from the ANZ bank overturning a recent $1.2 billion loan to Whitehaven Coal that would have had a significant impact on its Maules Creek project.
Both Whitehaven and ANZ later confirmed the hoax, but not before $314 million was wiped off the share price and the company was placed in a trading halt. Moylan was subsequently investigated by the Australian Securities and Investments Commission (ASIC) for allegedly engaging in misleading and deceptive conduct.
Such events are creating shifts in the regulatory environment, probably slower than many industries would have liked. The lack of or in some cases misdirected guidance on social media by industry bodies has meant that many businesses have not had the confidence to set out and leverage opportunities.
In April 2013, U.S. Securities and Exchange Commission (SEC) announced social media could be used to let companies make corporate announcements. It’s important to note that disclosure laws vary in Australia, which has an ASX-first approach. Working closely with the Australian Securities and Investment Commission, in 2013 the ASX updated its guidance on disclosure, advising companies to monitor online for sensitive information to ensure that the market trades fully informed.
In September 2015, Bloomberg announced customers would be able to view a live feed of financial tweets into its terminals, the Twitter data will improve alerts and provide sentiment analysis and the ability to “graph historical Twitter volume related to securities or topics”.
In his paper entitled Digital Market Manipulation, Professor Ryan Calo suggests that a market mediated by technology creates a “sea change in the way companies use data to persuade”. He argues that some digital advertising could even constitute market manipulation. This may be an extreme view, but it highlights the legal and business significance of digital impacts. Digital governance is critical and must be managed at the board and senior executive levels.
Social mentors help shape social leaders
Despite these dramatic impacts there’s a low level of awareness in senior leaders about social media, a McKinsey Global Survey conducted last year found 31% believe CEOs sponsor digital. Fewer still use it even though social CEO positively impacts perceptions of trust, reputation and engagement.
According to –
- Weber Shandwick – 81% of executives want a social CEO.
- Brandfog – two thirds of customer’s trust companies with a social CEO more.
- Statista – 82% of employees think a social CEO positively shapes reputation.
Unfortunately, some leaders have been poorly advised on what social is, with a recent AFR report suggesting some Australian CEOs have signed up to fake followers.
As Ted Coine, CMO of Meddle and author of A World Gone Social, says there are numerous problems with executives and other leaders doing a hack job on social, coming across as arrogant and broadcasting or sharing tweets clearly created by PR and not themselves. However, it’s a problem that can be fixed with a good social mentor.
With three billion Internet users and two billion on social and growing, a social CEO may be a CEO for the times.