The Cost of ‘Social’ to Media Companies
There have been a couple public data points (1, 2) recently highlighting the costs some media companies are incurring building their own social media / digital content platforms.
These disclosure have generated blogosphere reactions from disbelief to ridicule, but there hasn’t been a flood of media companies bragging about their own lower cost, better ROI approach. The reason is: these cases are not isolated ones; they’re not the only media companies experiencing this dilemma.
OK, yes, the absolute number of dollars spent varies widely by company, but based off our customer discussions we’re finding that the average company is spending 75-125% of their online, digital revenue on building and maintaining the technology platform to support the revenue.
That’s not a very scalable business model.
But wait, you say, there are 100s of white-label social networking vendors/platforms and destinations out there. How can media companies possibly be spending this kind of money for something that should be easy to get?
Well, on the surface social is pretty easy. There’s open source code, or even some point solution providers that let you start up a site on a credit card. But when you look at delivering a social entertainment experience that’s built around high-quality, produced content, and delivered in a experience that is tuned to your unique audience, you start running into some costs – especially when you look at the Total Cost of Ownership (TCO) and not just the introductory or generic social features you may want to embed in your experience.
When you start looking at TCO, media companies realize they have to budget for:
- Software licenses
- Some customization, integration or home-grown app development you want to round out the perfect audience experience because those off-the-shelf apps weren’t exactly what you’re looking for
- Usually some system integration so your new platform can tie into all the previous stuff you’ve built
- Staff (both technical and editorial) to build and maintain the platform and site
- Site design and experience development
- Infrastructure (servers, storage, bandwidth)
And that’s all before you account for the cost of PRODUCING the actual content to go onto that platform.
Now, why haven’t we been talking about these things all along. Well, one reason is that it kind of crept up on the media industry. There weren’t great platforms available, media companies felt they had to own the infrastructure as a competitive differentiation, and the total costs of a DIY platform were distributed and siloed in various budgets/organizations like IT, marketing or even in the content brands.
Speaking from personal experience, media companies now realize ALL of the costs associated with maintaining the platforms they’ve built and are looking for ways to change the economics – either by radically reducing their expenses, increasing the revenue in, or by getting out of the technology-development business by moving to one of the new(er) social entertainment platforms.
To forestall the potential flame war, I’m not suggesting the Cisco or the Cisco Eos platform is the cure-all for this cost issue. What I am suggesting is that media companies are spending significant sums on building tech platforms that don’t necessarily align with their core business of creating great stories and engaging audiences.
The conversation will continue.
Posted by Scott Brown at 11:43AM PST
Reputation Consulting Oct 18, 2009
I think many companies are having trouble trying to figure out the ROI of social media because there are way too many factors both direct and indirect. Either way even if you can’t track it you still need to do it as ignoring social media today pretty much eliminates your voice from all conversations.