It seems like the big questions following the announcement from Google that it will shut down the Wildfire social marketing platform are, "Where does this leave the market?" "Is this symptomatic of a wider problem in social marketing?" "Or is this a reflection of the pace of change?"
While a focus on community management alone has caused some companies to struggle to justify ROI for social activities, there is a growing set of data for how other companies have succeeded in demonstrating return.
Companies such as Rakuten, the third-largest e-commerce company in the world, have shown that if you balance community management with social campaigns to drive revenue, social media can actually become the most cost-efficient channel you have for creating revenue growth
Rakuten has shown that you get 30% more revenue from customers acquired from social campaigns than pay-per-click. So it is clear that Google is not winding down Wildfire because of any underlying problems in the performance or promise of social marketing done well.
I believe the answer really lies in the pace of change in the social marketing industry. It is no secret that larger companies in the tech industry do not innovate as fast as smaller companies. This is not contentious; it is just fact. It is extremely hard to turn a large ship quickly. The largest tech companies – Google, Microsoft, IBM, Salesforce, Oracle, and Adobe – actually make significant money from this dynamic. Smaller companies innovate, with significant numbers of them failing early, while a small majority succeed and grow, and with their nearest competitors, form a new market.
Typically the large tech companies then acquire the largest players in the new market when the business models and the new market is stable enough to be attractive. They can expect years of future revenue from these purchases without the risky business of early market innovation. Think of email marketing. This industry has been around for a long time, and it’s only in the last year that ExactTarget, Responsys, Eloqua, Neolane, and others have been acquired by Salesforce.com, Oracle, and Adobe, respectively.
So what happened with the social marketing industry? There was an unusual amount of early hype in this sector, and this led to the largest companies such as Google, Oracle, Adobe, and Salesforce, among others, to buy companies in a new market at a far earlier stage than they normally would. These acquisitions – Wildfire, Buddy Media, Vitrue, and Context Optional -- were all small companies at the time, with very young business models, innovating across social platforms that themselves were innovating and changing quickly.
These were not stable businesses that could promise years of future revenue without significant innovation or business model adaption. I think you can look at the Google announcement as a recognition that it is difficult to both integrate and innovate at the same time.
As I’ve already said, a big ship just can’t turn quickly. I’ll predict that Google’s announcement won’t be the only one among the large tech companies, with a number of the early acquisitions already effectively sidelined within the broader, more established business lines these huge companies operate.Richard Jones is the chief executive of social marketing company EngageScience