Once touted as The Next Big Thing, social media platforms are beginning to show decline across the board. Falling stock prices and lower engagement numbers are making social media marketers wonder whether they bet on the wrong horse.
While social media marketing has benefitted some companies that were quick to jump on the blogging and sharing bandwagon early on, the results are less reliable for later adopters. Not only are marketers frustrated with social media’s lackluster results, but investors are as well. De-valuations of the stock of several major social media companies beg the question, “Is the social media party over?”
Here are three signs that social media could very well be on the decline:
Plummeting Stock Prices
The “social media is dead” headlines have been floating around for years, but they never gained as much traction as they did during this year’s Facebook IPO debacle. The social media giant was originally valued at $100 billion before its IPO in May. It now hovers around $50 billion, with stock prices at about 38 percent lower than they were after the first trading day’s close.
And Facebook isn’t the only struggling company. The social local coupon site Groupon is now down 71 percent from its first day close. Social game creator Zynga is down 67 percent. Social restaurant review company Yelp dipped 21 percent in May, but has recovered slightly.
In part, the plummeting stock prices are a result of supersized expectations from these IPOs, but a lack of leadership and experience is also partly to blame. Several established investors and industry experts say the problems with Facebook and its cohorts are due to focusing on the wrong thing(s). According to the experts, social start-ups and angel investors are focused on getting in, making it big and getting out.
This lack of leadership and business experience can lead a new social company to make the wrong decisions, which can in turn affect profits and stock prices. In contrast, Amazon.com has been able to maintain a relatively steady stock price since its IPO in 1997. Amazon, in particular, has reinvested profits in warehouses, computers and key staff in order to build. Without a long-term view on growth and strong leadership, social companies will likely continue to experience sinking stock prices.
Lack of Real Engagement
Social media is touted as more holistic and cost-effective than other forms of marketing, but there are emerging trends that show that engagement is down. According to a recent Comscore report, 31 percent of Facebook ads are never seen. This number may be going down even further due to the increase in mobile use. Ad engagement rates, as reported by Blog Herald, grew by 41 percent while engagement rates fell 8 percent; in short, marketers and advertisers have to pay more for less effective results.
The declining engagement means that fewer advertisers will be spending money on the platforms, which can end up hurting their stock prices even more.
Increasing Challenges to Being Read and Shared
Why are engagement levels falling? We’ve simply reached a place where consumers are inundated with so much information that it’s taking more and more effort to get found. While early adopters of blogs and social media were able to get the likes, clicks and sales they were looking for, it’s become a much more crowded and noisy market.
In order to be read, you have to address search engine optimization, what type of updates will tweet well, whether your headline will be catchy and clickable enough, which community the content will be published to and which type of readers will be most likely to share your content. And that’s just for starters. It’s a lot to consider, especially when the payoff just isn’t there.
All the signs for social media decline are there – so what’s the solution? Time will tell, but it appears that targeted, direct response “old school” advertising may, in a great number of instances, be the best option. Direct response advertising has been proven to deliver a clear marketing message, allowing marketers to track consumer’s actions, reach targeted buyers efficiently and yield a measurable ROI.