Entrepreneurs Question Value of Social Media

 In Business, Competition, Marketing, Networking, Relationships, Sales, Small Business, Social Media, Technology

Marketing via Facebook, Twitter Yields Results for Some, Others Say It’s Overrated; ‘Hype Right Now Exceeds the Reality’


Last year, Jackie Siddall described in a blog post how a message she received on Twitter prompted her to buy a folding kayak for around $1,900.

The vessel was one of about just 600 sold in 2009 by Folbot Inc., a small retailer in Charleston, S.C. “You can’t buy that exposure,” says the firm’s co-owner, David AvRutick, who claims the incident speaks to the value of using marketing with social media.

But Mr. AvRutick’s experience may be the exception, rather than the norm. In its short lifetime, social media—services like Facebook and Twitter—have become popular marketing tools for small firms due to the low cost and easy-to-use format. Some entrepreneurs say they’re highly effective, but new evidence suggests otherwise.

“The hype right now exceeds the reality,” says Larry Chiagouris, professor of marketing at Pace University’s Lubin School of Business.

Last year, social-media adoption by businesses with fewer than 100 employees doubled to 24% from 12%, says a survey released in January of 2,000 U.S. entrepreneurs from the University of Maryland’s Smith School of Business and Network Solutions LLC, a Web-services provider in Herndon, Va.

Meanwhile, a separate survey of 500 U.S. small-business owners from the same sponsors found that just 22% made a profit last year from promoting their firms on social media, while 53% said they broke even. What’s more, 19% said they actually lost money due to their social-media initiatives.

“It could harm you if you end up inadvertently saying something stupid, offensive or even grammatically incorrect,” says Mr. Chiagouris.

A business owner’s time and energy spent on social-media marketing—Folbot’s Mr. AvRutick says he dedicates about an hour a day—could also go to waste. Fifty percent of the latter survey’s respondents say it requires more effort than expected.

To gain positive results, entrepreneurs need to regularly interact with consumers through these sites and not simply create static profiles, says Jacob Morgan, co-owner of Chess Media Group Corp., a consulting firm in San Francisco that specializes in social media.

Some small businesses opt to hire outside firms to handle their social-media marketing or advise them on the best ways to use it, but such services can cost hundreds of dollars a month.

For Chris Lindland, owner of Cordarounds.com, an online clothing retailer in San Francisco, converting consumers into customers using social media has required a “patient investment.”

“My business has been visited millions of times, but I haven’t made millions of sales,” says Mr. Lindland, whose four-person staff spends up to 90 minutes a day managing Cordarounds’s accounts on Twitter and Facebook. “People have told me they finally got around to buying from my business after reading about it on social media two years ago.”

Some entrepreneurs say they’ve found early indicators that their social-media efforts are paying off.

“The people coming from social media have been buying,” says Stephen Bailey, who oversees social-media and other marketing initiatives for John Fluevog Boots & Shoes Ltd., a footwear and accessories retailer in Vancouver with about 100 employees.

As evidence, Mr. Bailey points to a 40% increase in online sales in 2009—the first full year the company engaged consistently in social-media marketing—compared with 2008 when it was just getting started. He says he can draw a correlation between those figures and social media by looking at traffic to the company’s Web site from Twitter using Hootsuite, a free Twitter-management service from Invoke Media Inc. Other free services that track Web traffic from social-media sites include Google Analytics, CoTweet and Lodgy.

“The second we started using social media, it became one of the biggest drivers of traffic outside of search engines,” says Mr. Bailey, adding that his research shows these visitors spend as much time on Fluevog.com as those who come from other online destinations. The company doesn’t invest in paid advertising on social media, he adds.

Other business owners are soliciting customer feedback and monitoring what’s being said about their firms to determine the impact of sites like Facebook and Twitter on consumers’ buying decisions.

Mr. AvRutick says he regularly searches Twitter for tweets that mention kayaking and then sends messages to the people who wrote them. He connected with Ms. Siddall, the blogger who credited Twitter for exposing her to Folbot, after she posted a tweet that mentioned she wanted a kayak.

Ms. Siddall, a 37-year-old senior designer for Idea Couture Inc., a creative-marketing agency in Toronto, says she was unaware that folding kayaks even existed until she heard from Mr. AvRutick. She spent the next few months researching different brands, which included perusing a networking forum on Folbot’s Web site about kayaking.

Ms. Siddall says she later asked Mr. AvRutick via Twitter if he would send her some photos of her folding kayak being made, and he provided about 20. After it arrived, she says she decided to write a blog post about the whole experience.

“I didn’t find the same level of information or communication online from the other brands,” she says.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

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