If you haven’t read our report on How Corporations Should Spend on Social Business, start there. This data is a segment of the research panel over 140 global national corporations with over 1000 employees, which we deem enterprise class corporations.
[Predict the Future of Social Business by analyzing how the Advanced Corporations Spend Now]
We segment corporations into a variety of maturity phases to indicate how advanced they are, although there are more gradients we can apply, we’re focused on three major segments at this time ranging from novice, intermediate to advanced, we found that there’s a natural bell curve with the intermediate accounting for about half, and about a quarter that are novice as well as advanced. In the following data cut, we’ll explore how companies that self-identified as advanced are investing in social business.
Companies like Dell, Comcast, Wal-Mart, Adobe, HP, Microsoft, Wells Fargo, Ford, have characteristics of advanced corporations. What makes them advanced? They have formalized programs and charter, dedicated teams, line item budgets, and have likely been deploying for over 2.5 years. In my experience, a great deal of this market is likely to be the early adopter technology space (B2B first, followed by B2C) then retail/cpg, hospitality, and financial services.
Advanced Corporations Spend More of Staff, Boutiques, and Custom Efforts
These advanced companies (light blue) exhibit a few trends that the average companies (dark blue), don’t, in fact in all cases but traditional agencies they outspend. In fact, in total these advanced corporations are spending $1,857,000 per year. These advanced companies:
- Spend More on Staffing –But Underfund Training Them. These advanced corporations are spending 68% more on their staff to manage (headcount) than the average company. As a result, they have more feet on the ground to manage and respond to these programs. We know that social business is drastically impacted by the talent hired (a lot of soft costs) so no surprise these companies are outspending the average company on teams. With that said, $406k per year isn’t a large team (pending on location) but given that we’re only 2.5 years into social business, this is early. Sadly, these advanced companies spend very little on training and education, nor research and development. As a result, expect the social business team to be experimenting, self-learning, or relying on peers at other companies to glean knowledge.
- Rely Heavily on Boutique Social Media Agencies –Not Traditional Agencies. In customer-facing programs, we see a large spend on specialized boutique agencies who may focus on longer term engagements, rather than their counterparts the traditional campaign focused digital agencies. If you want to know more, read this analysis on boutique agencies overtaking traditional agencies and the many comments. Secondly, there’s an increased spend on advertising on social networks, although it’s assumed that traditional agencies are likely to absorb some of that spend to support campaign initiatives. In both cases, influencer programs remain about flat in spending, likely due to these advocacy programs being scalable and a limited number of influencers available in each market.
- Custom Tailor Their Efforts, Relying on Mainstay Community and Brand Monitoring. The social web is a fragmented disparate network of different data types, apis, and a myriad of fly-by-night startups. As a result, the corporations must constantly glue together these solutions to develop a common experience, which explains over $272,000 spending on custom work. Naturally, these may feed into the spending of the boutiques who will be leading this charge externally, coupled with internal web development and data teams. Secondly, the mainstay of social programs are community platforms with an annual average spend of about $200k and $150k spending on listening tools like brand monitoring. Expect that these tools will be cascaded to multiple business units, product sets, and spread across the enterprise, hence the larger spend. Not well understood or known by mainstream companies, SCRM remains a lower line item for average companies, but respectively balloons for advanced companies that are funneling customer social data into CRM databases to glean intelligence, reporting, and predictive analytics. The one year old Social Media Management System space has minute revenues, but expect six figure annual spending within years.
Expect spending to only increase over the coming years, as social business becomes a mainstay spending line item, but not just limited to marketing but every business unit. Yet over the next few years, I would expect the percentage on boutiques and custom efforts to decrease percentage wise as boutiques get swallowed by incumbents, and a suite of offerings emerges. On a related note, see how we also cut the data for “wealthy” corporations, those with over 10billion in revenues
Front and center industry analyst disclosures: Your trust is important to us, as such, we strive to disclose our client relationships, some which are listed in the following post, read Altimeter’s disclosures page.
Research Summary: Growth in Vendors and Market Demand –Yet Space Is Immature
Social Media Management Systems, like CMS systems for websites, these SMMS systems (see list of all vendors) help companies manage, maintain, and measure thousands of social media accounts, are the next growth market for the social business category. While saturation is at 58% of corporate buyers, the average deal size is a meager $22,000 but will expect to grow to six figure annual deals in coming quarters to meet market demand. This growing space has low barriers to entry, which result in a flood of clones, but expect only a handful to remain after a shakeout to serve enterprise-class buyers. Buyers and investors should focus on vendors that understand business –not just technology, offer services and reliable SLA, and deep integration with other social systems. In the future, this technology set will mature to grow into a data company that will extend it’s scope beyond simple Facebook and Twitter and impact how marketers approach the market, product innovation, and supply chain.
[Although the nascent Social Media Management System space is only one year old, 58% of corporations have adopted at least one of these 28 vendors]
Altimeter is conducting a formal research report on the SMMS topic (see research agenda for 2011), However, I wanted to give a year end state, after coining this category 12 months ago and listing out vendors, read the List of Social Media Management Systems
Above Graphic: Market Saturation and Average Deal Size of the Social Media Management Systems (SMMS) by Corporate Buyers in 2010-2011
Year One in Review: New Entrants, Acquisitions, and Growing Deal Sizes.
Just a year ago, we saw the rise of the new category Social Media Management Systems, (I must give credit to Cisco’s Social Strategist LaSandra Brill for giving me the kick to start it). To understand the macro trends of this industry, read with the Social Business Stack, which shows SMMS as only a component of the overall purchase set for corporations. Here’s a breakdown of what’s occurred in the past 12 months:
SMMS By the Numbers:
- Growth rates rose 11% from corporate buyers. In 2010, adoption of SMMS systems by corporate buyers was already at the 52% and in 2011 buyers indicated they will be at the 58% adoption rate.
- Deal sizes grew 57% in last year. While there was significant relative increase in deal sizes the overall average annual deal size per corporate was $14,000 in 2010 and rose to $22,000 in 2011 according to our research of 140 corporate buyers.
- Large corporations spend $68,000 per year. For corporations with over $10 billion in revenues, the deal sizes ballooned to $68,000 per year on average, demonstrating that the larger corporations need these tools in order to manage their hundreds of accounts. (more data here)
- 65% Increase in vendors in last 12 months and growing. When I started this list, there was 15 vendors after launching the list after the first week. Today, the list has grown to 23 vendors (and I’m continuing to add vendors, with a market growth rate of 65% increase in new entrants, this will only continue this year.
- Growth markets in consumer facing and large corporations. While I noticed that Telecom and Tech were early adopters, I’m seeing growth opportunities in Retail, Hospitality, Restaurants, Consumer Tech, CPG, and all Regulated Industries.
- Consolidation: at least three acquisitions. CoTweet was recently acquired about a year ago by marketing platform ExactTarget, months later Objective Marketer was acquired by Email Vision, and just in this past Feb Constant Contact acquired SCRM company Bantam Live which has some SMMS features, all which are email/direct marketing solutions. Among all these acquisitions, we’re seeing these tools tie into greater marketing platforms for additional value.
- Some early forerunners –but don’t expect a clear winner. I’ll do more detailed analysis on these vendors later, but right now I’m hearing from buyers the following vendors: CoTweet, Hootsuite, Sprinklr, Spredfast and newer entrant Expion. Interestingly, former Community Platform vendor with enterprise experience Awareness Inc has double downed on this market and shifted away the saturated community platform market by launching Hub.
- Early vertical focuses have emerged and partnerships. We’ve already started to see verticals appear, such as GOSO for the Automotive dealer space, and expect this to continue in specific markets like hospitality, restaurants, travel, CPG, and Retail. Another new entrant was an entry by initially a consumer tool Seesmic, who received funding by Salesforce –the first enterprise vendor now with integration with social aggregation tool Chatter, and now Yammer. There was only misfire, as KeenKong changed their product strategy and never launched in this market.
Market Demand: Six Forces Spur On This New Category
There are a handful of forces that are increasing the demand for this year old category, among them (but not limited to) include:
1) Corporations Struggle to Manage Hundreds and Thousands of Accounts
The target market is hospitality, retail, and CPGs. Each of these corporations has dozens to hundreds of unique brands, and then regional rollouts. For example, some hotels could have up to 15 brands, and each having 4,000 hotel locations (half being distributed franchises), each with 10 social media accounts (there’s more to the social web that Facebook and Twitter, across a variety of languages. Furthermore, there’s high turnover in the localizes marketing and sales manager, who also lacks a background in online communications.
2) Kenneth Cole and Chrysler Debacles Prove Need for Parental Controls
In the last few months, we’ve seen some severe examples of mis uses of corporate social accounts which could have been prevented by having a process and toolset to support (see the long list of “punkings“). In particular, Kenneth Cole’s ill-fated tweet tying the Egypt situation with spring sales was met with a riotous reaction, and last week’s Chrysler’s F-Bomb tweet resulted in firing of an entire agency. As a result, expect that many regulated companies will demand compliance regulations with social media, and be mandated to invest in SMMS systems to preview, flag, an process content before it’s published. Of course, this brings forth a few challenges such as less real-time approach, and a more sanitized corporate approach to discussions that will ultimately decrease credibility as authenticity may waver.
3) Expect Regulatory Industries to Require This Safeguard System
Similar to the mess-ups listed above by Kenneth Cole and Chrysler will cause regulatory industries to give pause on how employees will use these technologies. As a result, expect healthcare, pharma, insurance, auto, finance and beyond to start looking at using these tools for all employees and even corporate accounts. Expect a keyword filtering system and workflow to be put in place to monitor then recommend a course-of-action to correct deviant tweets and Facebook messages. The downside? The rapid pace of the real world conversation will be slowed for many, but expect seasoned veterans to unleash the SMMS shackles for open conversations.
4) Direct/Email Marketers Want a Piece of Social Marketing to Blast in New Channels
This toolset is an attractive addition to existing direct marketing platforms like email marketing suites that are used to publish thousands of emails to customers on a daily basis. Direct marketers, who want to get on the social bandwagon are finding religion and are now blasting content on social channels to networks comprised of news, deals, and offerings with mixed engagement and interaction.
5) Agencies Know SMMS Provides Client Lock-in and Recurring Revenues
The social media service industry knows they must be value added beyond strategy and community management. They are seeking recurring revenues for accounts on a monthly basis in order to glean the hundreds of thousands per client, see data to learn more. By using SMMS systems, often coupled with brand monitoring and reporting services, they are now able to be full-service to listen, engage, and measure how companies are interacting with their customers on social channels. By partnering with SMMS systems some are white labeling the service, and using this in front of clients as a value added software, suggesting a perceived lock in with data and reporting –giving agencies the opportunity to become the Social Media Agency of Record (SMAoR).
6) A Complementary Toolset for Social Platforms, Social Commerce, Brand Monitoring Vendors, Marketing Automation
First, understand how SMMS fits into the overall Social Business stack. You’ll notice it’s a sister technology to the technology “aggregation” displayed to the left of it. You’ll also notice that it’s below brand monitoring firms, and sits on top of Social Platform technologies. To the left of it you’ll find it is part of the data story in infrastructure and to the right of it services. Other places to watch for acquisitions will be social commerce platforms, as well as marketing automation platforms as they must spread into this space at a rapid pace to glean the revenues.
Predictions: Vendors Move-out-of-Garage to Meet Buyer Needs
These companies are young and early, and lack maturity like the established community platform space, here’s a few closing thoughts:
- This One-Year Old Space Shows Parallels to the 5 Year Old Community Platform Space Similar to how in 2007, how we saw trends for the Community Platform market, labeled it, and went on to research the space, I’m seeing similar trends (entrepreneur styles, deal sizes, market saturation) in this early SMMS market, just one year in.
- Vendors startup mentality clash with real buyers needs. Many of these garage startups lack understanding of corporate buyers. Not uncommon to seed, angel, and A round vendors, a majority of these vendors lack corporate buyer perspective. To learn more about the buyers of SMMS read the report about the Career Path of the Corporate Social Strategist.
- Vendors will finally offer and enterprise class service level agreements. Mainly focused on platform development, and also being discouraged by investors to add services to the mix, most of these vendors lack the staff to serve a corporate buyer who needs a high degree of hand holding in social business. Better yet, read Petra Neiger, one of Cisco’s Corporate Social Strategists perspective on what’s needed for buyers.
- Analytics and reporting to be a core focus on 2011-2012. These early platforms are focused on management of the social channels, and most do not have strong analytics and reporting technologies. Furthermore, they are often not connected to other reporting systems, and are data silos.
- Expect corporate adoption to reach 90% within three years . Expect market saturation to hit 90% range in three years, and average deal sizes to exceed $100k per year on average corporation –just as the Community Platform space have experienced over the past five years. Vendors that can align their product roadmap to the SMMS maturity roadmap stand to be one of the standing contenders.
- Deal sizes will reach six figures on average. I saw this trend before with the $25-50k deal sizes with community platforms about 5 years ago and have watched them balloon to $200k-300k for advanced and larger corporations on an annual basis. I expect similar patterns to emerge here as new functionality is offered and as the SMMS connects to other systems for lock in. Right now the average SMMS deal size is a mere $22k, yet as we segment out corporations with high revenues (over 10 billion, annually) they are already clinching $68,000 deal sizes –remember it’s only year one. Read more about how corporations should spend on social business.
- Market will reach over 100 vendors. Just like the crowded brand monitoring space (150 vendors) and community platform space (125+) vendors expect this category go balloon due to low barriers to entry, VC funding, and commodity technologies. In the long run, only a half of dozen will matter to the enterprise, as market consolidation will occur. Expect the 90+ that don’t become first of mind to corporate buyers to head into specific market verticals and SMB focus.
Well that’s my perspective after watching this space for the last 12 months, while I’ll continue to give updates, expect another wrap-up next March in 2012.
Update: This is cross-posted on RWW
How do the biggest and most successful corporations spend on social business? We aimed to find out.
These “wealthy” (which deemed by annual revenues) corporations spend comparatively more on customer facing social business efforts than most other corporations, yet the overall subtotal of spending is significantly small. First, recognize that social business has only been formalized in programs for about two and a half years (data), and most companies are intermediate but not advanced. The following data is of companies with over $10 billion dollars in revenues per year, and their expected spend as reported by the Corporate Social Strategist. This data is a cut from our recent reports on Social Business Spending, and clients can receive additional data from us as needed.
What You Should Know:
- Across nearly all efforts, the wealthy (deemed by revenues) spend over double than the average corporation in social business. This is in alignment with Altimeter’s Engagement DB study which shows a strong correlation (not causation) between how corporations are engaged with their customers and the size of company.
- These corporations spend significantly more on internal staff to manage, more than any other program, which is in line with this labor intensive program to get internal teams organized as well as to manage communities, blogs, advocacy programs. Sadly, the training and education programs to train this staff and line of business is incredibly low, under $70,000.
- Secondly, there’s a significant spend on advertising, which is often deemed a scalable marketing effort as you can just ‘throw dollars’ at it and hope to get a conversion return –without having to engage with customers in costly dialog.
- These wealthy corporations are spending slightly more on traditional agencies, yet social media boutiques are still grabbing a lion’s share over $221k per year and growing. To learn more how boutiques are evolving over traditional, read this data.
- In the software category, there’s continued spend on recurring SaaS providers like Brand Monitoring, Community Platforms (both nearly achieving 300k annual spending), and then programs to integrate and customize this content.
Average Spending on Social Business Companies by Companies with Over $10 Billion in Revenue:
Related Open Research
If this data was helpful, see our other research reports and data releases tied to this data
Like all other Investing, Invest in Social Business based on Market Research. Just as you would invest in your personal finances based on your family size, age, and market conditions you should be spending in social business with the same industry knowledge. With limited budgets, the corporate Social Strategist (read report) faces a spending dilemma. In 2010, the average annual social business budget at enterprise-class corporations was a mere $833,000. Now, Altimeter Group is publishing spending and deal size averages based on social business maturity for corporations to finally benchmark and cross-check their own spending efforts.
[Confused on How to Spend Tight Budgets, Social Business Buyers must use this Investment Roadmap Based on how Novice, Intermediate, and Advanced Corporations Spend]
Follow These Three Steps:
- Take the Quiz: Identify how mature your company is in social business (it’s in the full report, or see the single pager)
- Adjust investments: Cross match how others are spending in your same maturity level, as well as the next phase in maturity for your program forecast.
- Share report widely with vendors, agencies, and internal staff.
Buyers: Arm Yourself Before Purchasing Agency Services and Vendor Software
Use this data to both fuel your own internal budgets, but also bring this guide in all your agency and vendor introductory meetings, so they know you are in the know how spending is happening based on maturity. Send this report to your agency partners, software vendors, and consulting teams so they can understand the trends in spending and ensure that they will support your mission based on your existing maturity.
Open Research: Use It, Spread it Widely
The more you spread it, the easier it is for me to produce more reports. This research was 100% funded by Altimeter Group, and we are releasing it under Creative Commons so you can use it in your planning, presentations, and blog posts. You can download the report directly from Slideshare, and use the images provided below for your slides. I’ve embedded sharing buttons on the upper right side of this post, for your convenience. Lastly, I’d like to recognize Altimeter’s research team, Charlene Li, Christine Tran, and Andrew Jones for their assistance on this research report.
Key Graphics from the Report:
Quiz: How Mature is Your Corporation in Social Business?:
I’ll cross post to those that add to the discussion, and will be active in the discussion in the comments below.