Subtract (Social Media) = More Sales, More Profit?

It would seem counter-intuitive to think that your revenue and profit could go UP by subtracting social media from your mix of business activities. Certainly those who suggest that social media is an essential part of all businesses would disagree, sight unseen. But they would be wrong.

Your mileage may vary, of course, but we are seeing an increase in revenue and profit as we wind down our social media activities. Since early 2010 we've planned to eliminate our personalized use of social media as a business endeavor, but set a date of Jan. 2011 to do so. We did that for two reasons. First, I'm writing a book on business and social media and I need to stay connected to what's going on until at least then, when, hopefully, the manuscript will be complete. Second, I wanted to give social media enough time to allow me to prove, one way or the other, that it could be beneficial.

Early Bird Action

That was the plan. It didn't take into account my total "fedupness" with the lack of quality content relative to the junk. Twitter is a waste of time, and it's worse because those that participate really DO believe they are having indepth discussions. Nuh-Uh. Read a few chat transcripts isolated from the fervor, to get a taste of how superficial the conversations are, and how the 140 character limits make even the smartest people sound stupid and lacking depth.

LinkedIn looked good, until I realized it just looked better. The discussion threads in groups that gain the most comments are the most trivial. Weighty topics, sometimes work out but again, the signal/noise ratio is bad.

Facebook...well, it's Facebook. Who really expects intellectual stimulation there?

So, about two weeks ago, I realized the whole thing wasn't fun anymore. If it ain't fun it better have a strong and obviously measurable effect on business. It hasn't had that. So, as much to save sanity as anything else, I cut back my personal involvement/dialogue and discussions to zero. My bet is nobody really noticed, which I believe is a comment on the falsity of many "relationships" via social media.

Early Indicators

So, it's early of course, and any results are anecdotal and correlational. Whatever the outcome, it would be hard, if not impossible, to demonstrate positive business effects would be caused by subtracting social media.

However, since we've done the cut, our revenue and profits are up, relative to the month of September. We've simply had more sales from more diverse customers than we had before. How coudl that be?

I'll let you think about this for a bit, and suggest some reasons, but I have some pretty good guesses as to why this would happen, and why it's likely it will happen to others who run businesses under similar conditions -- that being a small, microbusiness where most activity is done by one, or just a very few people, and where the business works in a niche, and doesn't cater to the mass market.

Stay tuned. Next part will address what I think is the critical factor operating here, which is opportunity costs of social media.

Above, I indicated it looked like our revenues had improved around the same time that we cut back almost completely on our social media involvement and participation. We know have a little more time under our "new regime", so how have things been going since we stopped almost all personal involvement on social media platforms, including both reading and replying?

September as, in essence, the last month of our intense social media activity, while October, 2010 was the first social media free month. Our revenues, from September to October increased by about 35%, month to month, which also means our profits increased in similar proportions. Can we say this is a result of not participating in social media? In a way, yes, and in a way, no.

It's All About Opportunity Costs

Everything you do in business has what's called an "opportunity cost". That refers to the cost of NOT doing something else as a result of doing what you did, if you can follow that. For example, active participation on social media takes time. That time could otherwise be used to do other things that might produce revenues and profits, but those things don't get done because of the allocation of time to social media.

I've long believed that the major problems with social media have to do with a) an extremely low probability that involvement will be profitable for most businesses and b) the opportunity costs -- the things that would be better done in comparison to social media.

Obviously, unless you do something terribly bad on social media, participation isn't likely to cause lower revenues, BUT if you are NOT doing other important business things that would be more profitable, that's where the hidden cost comes in.

If all you can think of to do to increase the revenues and profits of your business is to use social media, your problems are way more serious than you think.

Opportunity Costs Differ From Business To Business

It's clear to me that our business revenues improved, at least in part because we did other, MORE EFFECTIVE things to drive revenue, relative to social media. By taking the time spent (let's say about ten hours a week) and allocating it to other marketing and promotional efforts, we gained.

Will that apply to you? Only you can tell. If you lack creative or alternative marketing,  and communication approaches; if you have no idea what else to do with your time, then stopping the use of social media won't help, because you won't re-allocate your time better regardless. If you are a huge business and using only tiny resources for social media, there may not be social media opportunity costs.

However, if you are a small business, where time is your most scarce resource, then you need to look closely at whether other kinds of strategies will be better. And, of course, it will depend on the nature of your business.

Here are some important points to consider:

For some people, the time spent on social media doesn't seem like work, so the magnitude of the time spent goes unnoticed. Start logging how much time you spend on social media, and you may be surprised just how much time you've been allocating to it.

Of course, opportunity costs can be out-weighed by increased profits from the use of social media, but don't take those profits for granted. You need to measure them, if not precisely, at least generally. If you cannot find any evidence of sales resulting from social media activity, you are probably wasting your time. Don't rationalize this by saying: "Well, it's the long term that counts", or something equally silly.

Keep in mind that even if you are seeing sales through social media, that you may be cannibalizing sales from other marketing channels. For example, the famous Dell story, on the surface, suggests that social media accounted for over six million in sales. Sounds good until you realize that those sales probably would have occurred anyway, if Dell had offered similar discounts in other channels.

Here's a thought. Does your involvement in social media detract from your focus on what's made your business a success?