Tim Ferriss is an angel investor (Twitter, StumbleUpon, Evernote, etc.) and author of the #1 New York Times bestsellers The 4-Hour Body and The 4-Hour Workweek. In his spare time, Tim has doctors stab pen-sized needles into his thighs.
Ah, social media marketing. Fewer things are so lavishly spent on, yet so poorly measured.
Here are a few predictions for 2011 related to where the smart money and dumb money will go. Special thanks to a number of high-volume retail experts for their insights, including Ryan Holiday, director of marketing at American Apparel.
Read on for our predictions and let us know in the comments what you think social media marketing will look like in the year to come.
1. YouTube Beats Yahoo — Video Will ConvertYouTube is the second largest search engine in the English-speaking world.
That’s right: YouTube is bigger than Yahoo. Zappos, as one example, added simple videos of people holding shoes and moving them around to its sales pages and increased conversion rate from 6% to 30%. When I look at the traffic sources for my book trailer on YouTube, the biggest referrer isn’t my own blog. It’s The Huffington Post. I customized the video and text content to a niche (but sizeable) outlet that didn’t exist two years ago: Huffington Post Books.
With proper targeting and syndication, this 50 second video almost immediately propelled my book from an Amazon rank of approximately number 150 to 30, now stabilizing at number four in all books. We used RankForest to track this sudden change.
The 50-second length was deliberate and was also later edited to 30 seconds for in-video advertising on YouTube.
At least 30% off all the video views (more than 6.3 million) on my main YouTube channel come from search or organic referrals. By putting up videos, particularly on YouTube, you open up a whole channel for sharing and connecting to the biggest word-of-mouth platform in the English language.
2. The Full Resurrection of E-mailGroupon has an e-mail list of at least 15 million strong in the U.S. (the company says it’s 30+ million if you include international), which goes to show that a true permission asset can be worth nearly $6 billion on the bidding table.
E-mail addresses are a safer long-term investment than social media features. Think about all the money companies spent advertising their MySpace pages in 2007. Even on Facebook, your direct messages to fans are relegated to a second tier inbox no one reads. This is something you don’t have to worry about happening in e-mail marketing. Among 20- to 35-year olds, at least, their physical addresses change more frequently than their e-mail addresses.
The smarter marketers will budget “social media” acquisitions based on lifetime value (or a set duration, like 6 months’ retail purchases) of e-mail addresses.
One major retailer did the math and learned that an e-mail subscriber is worth roughly $20 a year in annual online revenue. Knowing this number allowed the retailer to:
- Calculate the value of the real estate it gives the e-mail signup box at the register in stores. It turns out to be one of the most lucrative converters in an already competitive area.
- Easily say “Yes” or “No” to requests to participate in contests/sweepstakes by judging return on new e-mails acquired.
- Calculate what the company can spend to build its list.
There are companies like Opt-Intelligence that can be paid a CPA (cost per action) for what are called “co-regs.” Co-reg example: If you’re signing up for an account at NYTimes.com, and it says “Get 4 issues of Golf Magazine FREE!” someone paid for that because they knew it will make money based on lifetime value.
After the above-mentioned retailer quantified what an e-mail subscriber was worth, the company was able to double its subscriber base in less than eight months. The majority of that growth came not through spending money upfront, but from the redirection of already existing resources in ways that weren’t possible before calculating that number. Let’s say that added 500,000 e-mail addresses, each worth $20 in 2011; that means an additional $10 million in revenue with no significant capital outlay.
Aaron Ray uses the same tactics for the “free agent bands” (major acts who’ve left a label) at The Collective. He figures out how many tickets you sell through your fan club, how many downloads come from your e-mail list, and how much traffic you can drive through Facebook and Twitter (). It’s critical for two reasons: 1) For accurate revenue/sales/attendance predictions, and 2) As ROI metrics to justify investments for growth.
This also allows loss-leader campaigns. Even if the math on a Groupon deal is razor thin, a smart retailer (online or offline) can acquire e-mails through a special form they set up and add an extra $20+ per transaction, per our hypothetical example.
Many companies can afford to give product away for “free” if they have the right metrics. Most companies don’t, which leads us to number three.
3. Large Companies Will Waste Money on Vanity Metrics
There’s a difference between “actionable” and “vanity” metrics. Just because your competitors are on Foursquare doesn’t mean that you should be. Could it make sense? Sure, but you should run the numbers — the right numbers. Impressions, page views, and undefined terms like “engagement” are at best gameable and at worst meaningless. Some social media consultancies define their success metrics well (including, in rare cases, “engagement”), but beware the services that don’t. Remember that those who got rich in the gold rush weren’t panning for gold; they were selling pick axes. Apple isn’t chasing Facebook updates, and Steve Jobs isn’t worried about getting blog posts up before noon. Apple’s doing just fine, as are many companies quietly focusing on the tools they know best.
“Actionable” need not be expensive. The conversion from SlideShare to purchase from my WordPress blog, both of which were free, helped me to sell more than 4,000 books on Amazon in less than 12 hours. If you’re spending more than $5,000 per month for insight, make sure you’re getting actionable data that you can at least correlate to sales.
Much of social media is trackable, despite the noise. Don’t get tricked with new lingo or you’ll end up with an embarrassing motto straight from here.4.
Ads & Conversation Will Impact Different Conversion Rates
He laughed and responded with “Dude, that’s not for end users. That’s to get the attention of the bankers driving from SFO to downtown.”
Remember, you can have multiple audiences for your ads. At American Apparel, many of its best known ads ran in obscure publications or in short bursts on niche websites. Millions of people know about them, however, because blogs thought they were so interesting that they wrote articles about them.
In that case, the press was the audience and the public only indirectly so. The public was a later side effect, but not the first target. One good test of whether your advertising can become a conversation: Would people notice if your ads stopped running? Clickthrough rate is not going to answer that question.
This is why advertisers should start monitoring chatter about their content and come up with ways to track and value that. You also need be able to think big picture so you can know that sometimes negative chatter is still a good thing (it means people get emotional about what you do).
Does this violate the actionable metric rule in my third point? Not at all. It’s another feedback loop and easily measurable, whether in press mentions (including blogs) specific to an ad, or even product development impact.
For developing product, Amazon is well known for “working backward” from internal press-release response. That is, it starts with the reaction or response from its intended audience and designs its advertising messages — or products — backward from there. Google also used this approach by launching Google News without chronological or geographic filtering, only afterward responding to requests and implementing the chronological feature. There was a ton of debate and fighting internally for both features, and they let the market decide.
“Listening” isn’t enough. Tracking the number of Twitter mentions tells you nothing. The bigger question is: What are we trying to build or accomplish, and how will we digest and use this data?
If you nail that, you can nail your competition to the wall. They’ll be too busy chasing the latest shiny web service.
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