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SMMS industry growth strategies
 

SMMS industry growth strategies

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    SMMS industry growth strategies SMMS industry growth strategies Presentation Transcript

    • 1Growth Strategies for Suppliers ofSocial Media Management SystemsBrendan BridgfordLondon Business School MBA 2012February 29, 2012@brendanb4d
    • Executive Summary • 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 @brendanb4d 2
    • There are at least 40 SMMS companies in existence. Most are smalland privately held • 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? *"A Strategy for Managing Social Media Proliferation,“ Altimeter Group, January 2012 http://www.slideshare.net/jeremiah_owyang/smms-report-010412finaldraft @brendanb4d 3
    • This report is based on 15 interviews with: Founders Social Agency Brand Heads of of SMMS Media Executives Managers Digital companies ExpertsInterviews were conducted by phone or in person during the fall of2011.This report was also informed by insights provided by the SMMSbuyer’s guides listed in the appendix. @brendanb4d 4
    • SEGMENTING THE SMMS MARKET @brendanb4d 5
    • Social Media Management Systems provide two key benefits 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 @brendanb4d 6
    • We can segment the SMMS market according to buyer needs Effectiveness Needs Low High Efficiency Needs High Low @brendanb4d 7
    • Effectiveness Needs Low High • More complicated metrics• Simple engagement measures • CRM & customer insights• Low perceived value in • Response measurement consumer insights • Influencer identification • Industry-specific needs @brendanb4d 8
    • • Many social media accounts,Efficiency Needs High multiple platforms • Complex coordination needs • Few social media accounts Low • Simple coordination needs @brendanb4d 9
    • We can segment the SMMS market along these dimensions Effectiveness Needs Low High Efficiency Needs Content High Brands Distributors App Low Antisocials Developers @brendanb4d 10
    • We can segment the SMMS market according to buyer needs Content Distributors Brands Typically largeUse social media mainly to consumer product distribute content. They companies with deepdon’t need metrics beyond pockets, complex a retweet or Like count. coordination problems, Content and high expectations of Brands Distributors social media. App Antisocials Developers Antisocials Don’t need App Developers Build apps an SMMS tool right now or games on top of social – either they don’t use media platforms like social media or they are Facebook. Mainly satisfied with the native concerned about user interfaces. acquisition and retention. @brendanb4d 11
    • BrandsTHE BRANDS SEGMENT @brendanb4d 12
    • The Brands Segment • 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) @brendanb4d 13
    • How to sell software when the customer needs a solution? • 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 @brendanb4d 14
    • Content DistributorsCONTENT DISTRIBUTORS @brendanb4d 15
    • 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 @brendanb4d 16
    • Technology-savvy buyers make for a more straightforward sale • 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 @brendanb4d 17
    • Content Distributors • 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? *Naturally there are some exceptions to this. TripAdvisor for example uses Twitter in a way similar to some large brands. @brendanb4d 18
    • App DevelopersAPP DEVELOPERS SEGMENT @brendanb4d 19
    • 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 *See Dumas, “Switch from Consoles to Social Games”: http://goo.gl/vJ7fS @brendanb4d 20
    • WHAT’S COMING @brendanb4d 21
    • A coming industry consolidation? • 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? @brendanb4d 22
    • 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. 23
    • “Focus is scary” – Clayton M. Christensen* • 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 * From The Innovator’s Solution @brendanb4d 24
    • SMMS Buyer’s Guides "A Strategy for Managing Social Media Proliferation,“ Altimeter Group, January 2012 http://www.slideshare.net/jeremiah_owyang/smms-report-010412finaldraft "Social Media Management Systems Buyers Guide 2011," Econsultancy, October 2011 http://econsultancy.com/uk/reports/social-media-management-systems-buyers-guide "Social Media Buyers Guide," IAB, February 2010 http://www.iab.net/media/file/IAB_SocialMedia_Booklet.pdf "Socia Media Buyers Guide," William Gaultier and Chris Heuer AdHocnium, April 2009 http://www.slideshare.net/socialmedia/social-media-buyers-guide-previewOther References Pierre Dumas, “Switch from Consoles to Social Games”: http://goo.gl/vJ7fS @brendanb4d 25