I'll use social media to grow - at almost no cost!

I cannot tell you how many times I have heard this phrase - or something like it. Any my response is:

No... you won't

I am a direct person. I could politely say something like "History would suggest otherwise." or "I've heard of that but never seen it.", but the truth is, social media alone cannot grow your company and it is distinctly not free - or at almost no cost.

How much then?

I love it that I learn from the companies I help grow. So naturally, during a call with one of those companies going over their financials, when I encountered a social media budget at 50% of total expenses, I asked...

The numbers derive, ultimately, from the need to acquire and retain customers. Customers, by definition, are people that pay me. And according to a VC I met long ago, people that pay me again and again. So the analysis starts there.

If I need 100 more new customers each month than I had the previous month, I need to increase my outreach each month commensurate with that increase in new customers. How much more of what do I need to generate each additional new customer?

Obviously, if it takes 2 minutes, that's $3/customer and if 1 in 100 ends up buying, it's $30/customer. The whole mechanism scales linearly unless and until I saturate the market and it becomes harder to acquire those new customers. And of course there is the low hanging fruit that might allow me to gain the easier to acquire customers first at a lower cost per customer. And I need to add sales people which requires finding, hiring, and training them, etc.

How does social media change this?

It doesn't! The fact that I use social media to acquire customers may make communications more efficient, as it often does, but even so-called "viral" methods do not really change this equation. So how do we lower the cost or increase the volume to scale?

Get the right information in front of more of the right people under the right circumstances to move more of them over the action threshold for less money!

Just as there are better and worse placements for print advertisements, there are people who are more trusted among more members of specific audiences in the different venues in the social media world. And how do you get in front of the eyes of the people they trust?

How much does it cost and how does it work?

Paid media pricing differs on a case by case basis. Unless you know the particulars of your specific field, you cannot get realistic estimates. One of our portfolio companies, MagnaBid, estimates that to increase customers in one of the two sides of one segment of its market costs under $16/customer in volume. The volume required is on the order of 30,000/mo at some specific point in the growth curve, and that means that the social media budget is $480K/mo. Not free media! As one of my clients, (Ben who runs MagnaBid) pays me (indirectly) for this market presence, but he didn't know I was going to include him here, so it's not really paid media in the same sense as directly generating sales to scale his company. Rather this is paid media for marketing. Except again, Ben didn't know he would appear here.

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Become a client and get to more audience for less money!!

Earned media is different - sort of. One of my angel/advisory board members (at least until he reads this) is Brian Wang. Brian has a social media presence that gets 1M readers per month in the emerging technology space. He earns his living by getting paid to write on various subjects and perhaps in some cases on a per click basis for advertisements associated with his presence. He hasn't paid me for this mention, and thus he has earned it. But he did so by spending an hour or so on a call with me and more time reviewing this before release. So the cost he paid was in time and effort. If he calculated all of it, he might find I am more expensive as earned media than he is as paid media. But he didn't do this for the media. Me and my perhaps 10,000 readers pale by comparison to his million monthly readers.

This article is of course earned media - sort of
I write the articles and distribute them (earn)
and hope that someone with larger audience points folks to them.

In either case, you will need something else... an expert in how to apply these methods to your circumstances, what they cost in your specific area, how to go to market that way, etc. Of course we work with our angel/advisors like Adam Gordon to help companies build the basis for their media by creating brands and ...

Here's what Adam said about it (edited):

My real point

We are just getting started in this arena, and I don't want to belabor it, but my point is that "free ain't free". You have to earn it, and there is a cost associated with use of social media to grow your company. As your company scales, the costs scale, and you need to get it clear in your plans and budgeting in order to be convincing to a reasonably knowledgeable investor or anyone else.

And now for my earned media not paid per click advertisement!

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In summary

Our companies make money the old fashioned way - they earn it!

I, on the other hand, make my money the new fashioned way. I help other folks earn it!

Copyright(c) Fred Cohen, 2019 - All Rights Reserved