Recession 2.0
2008-12-12 08:46
Alistair Fairweather
The global economy is a steely-eyed beast. Sane humans never consume their own young, but when recession stalks it's often the newest industries that get dismembered to ensure the rest last through the long winter.
Just look at the last downturn in 2001, when the flavour of the month was the internet itself (also known as the dotcom boom). When the party ended the entire industry shrank by over 80%, and many people wrote the entire new medium off as a "fad" and a "joke".
This time round it's a child of the internet (now a vigorous teenager itself) that is most at risk. The child is so new that we haven't even settled on a name yet: some call it Web 2.0, some Social Media, or more grandly The Social Web.
You know it best as incarnations like Blogger, Facebook and Flickr. They all have one thing in common - the users make the content. This simple idea has propelled sites like MySpace, YouTube and Facebook into the ranks of the top 10 sites in the world.
Will it work?
Alas, the money men aren't impressed. In November Epsilon, a market research outfit, asked the marketing bosses of 180 top brands whether they were planning on incorporating social media into their strategies. Over half of them said "no".
You can't blame them. Nike spent millions on a heavily branded Facebook application aimed at the lucrative basketball market called "The Ballers Network". Six months later they have fewer than 4 000 users - worldwide. Other big players like Ford, Microsoft and FedEx have had similarly humbling forays into social media.
To make matters worse, old fashioned advertising on social media products doesn't work very well either. People are half (some say even a quarter) as likely to click on an advert in a social media site as they are on a traditional news site. In fact the only place that adverts really make money is on search results - just ask the billionaires at Google.
And the cracks are already showing. The last few weeks have seen some of the brightest hopes fail: Flip, a teen social network, and Pownce, a mobile micro-blogging platform, have both closed their doors. More are sure to follow as venture capital money dries up, and advertising spend shrinks.
The end?
So is this the end of a new industry? Hardly. For every high profile failure, there have been a thousand successes at every level from corporate to grass roots. When GAP partnered with social media developers RockYou, they reached seven million people in just over a month at a tenth of the cost of a traditional campaign.
Success rests on one simple concept: understanding the medium. The dotcom boom turned into a bust because people assumed the Internet would simply change the way business worked. The reality was much more subtle, and took a decade to bear fruit.
The same applies to social media - it's going to take time and effort to find out what works and what doesn't. Already some obvious trends are emerging: integrating with naturally social "objects" like events tends to yield better results than simply slapping up banners. Users clearly favour simplicity and usefulness over flashy visuals, feature overload and hype.
Recessions are a necessary part of the cycle - like breathing out. They are often very good for the economy in the long run, because they cut the fat out of businesses and force them to focus on what's really important. Let's just hope that in all this trimming we don't cut the heart out of our next revolution.
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