1. 1
Growth Strategies for Suppliers of
Social Media Management Systems
Brendan Bridgford
London Business School MBA 2012
February 29, 2012
@brendanb4d
2. 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
3. There are at least 40 SMMS companies in existence. Most are small
and 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
4. This report is based on 15 interviews with:
Founders Social
Agency Brand Heads of
of SMMS Media
Executives Managers Digital
companies Experts
Interviews were conducted by phone or in person during the fall of
2011.
This report was also informed by insights provided by the SMMS
buyer’s guides listed in the appendix.
@brendanb4d 4
6. 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
7. We can segment the SMMS market according to buyer needs
Effectiveness Needs
Low High
Efficiency Needs
High
Low
@brendanb4d 7
8. 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
9. • Many social media accounts,
Efficiency Needs
High multiple platforms
• Complex coordination needs
• Few social media accounts
Low • Simple coordination needs
@brendanb4d
9
10. 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
11. We can segment the SMMS market according to buyer needs
Content Distributors Brands Typically large
Use social media mainly to consumer product
distribute content. They companies with deep
don’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
13. 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
14. 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
16. 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
17. 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
18. 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
20. 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
22. 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
23. 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
24. “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
25. 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 Buyer's Guide 2011," Econsultancy, October 2011
http://econsultancy.com/uk/reports/social-media-management-systems-buyers-guide
"Social Media Buyer's Guide," IAB, February 2010
http://www.iab.net/media/file/IAB_SocialMedia_Booklet.pdf
"Socia Media Buyer's Guide," William Gaultier and Chris Heuer AdHocnium, April 2009
http://www.slideshare.net/socialmedia/social-media-buyers-guide-preview
Other References
Pierre Dumas, “Switch from Consoles to Social Games”: http://goo.gl/vJ7fS
@brendanb4d 25
