Strategy - Is Social Media worth Billions or Just Another Bubble?

On Friday, 17 August 2012, Facebook shares hit a low in the area of $19 which is about half of the IPO price. Since the Facebook IPO, millions of words have been written about social media and the economic value of this channel.  

Rita McGrath is a professor at Columbia Business School who studies innovation, corporate venturing, and entrepreneurship.  While she sees the role of social media as profoundly changing the business landscape she observes that pertinent questions need to be answered about how value will be derived.

"The algorithm we don't yet have is the one that translates time spent on a site into economic returns for the company hosting the experience. Unlike a membership or subscription organization, Facebook and its kin depend on users either buying from advertisers or spending money on other activities, like games, to generate income. The fact is that these dependencies are based largely on untested assumptions about user behavior — specifically, whether user behavior will eventually become buyer behavior."

Rita has also been writing about the need for companies to create a complete 'consumption chain" in order for their products and services to be successful. What she means by consumption chain is the total set of activities a customer goes through in order to have their needs met or a job completed. 

Take a look at Rita's blog

Answer the pertinent questions she raises about value as you think of your social comm strategy. Move away from hype into the reality of a good social comm strategy and reveal the greatest illumination you received.