How will a recession affect social media?

by James Duthie on October 15, 2008

Unless you’ve had your head up your backside for the last 6 months, you’d be well aware that the global economy is sliding towards a recession. D’oh! Troubled economic times are never fun for us marketers… as we are often at the top of the ‘dispensable’ resources list. Over the past few months there have been a sh*tload of recession related articles published, with search marketers particularly vocal in pondering the impact it may have on the industry. Yet at the same time, social media marketers have barely raised a whimper on the topic. So what is the likely verdict for social media during economic hardship…?

One of my favourite social media analysts Jeremiah Owyang raised the issue via his blog last week. But rather than give an overt opinion, Jeremiah simply asked for feedback on a number of questions. In particular, two were poignant:

  1. Will consumer usage of social media increase or decrease during recession?
  2. Will brands/marketers increase spending on an unproven marketing channel?

While I’m a little slow to respond to Jeremiah’s post, it’s better late than never right…? Here’s my thoughts:

Social media usage

Jeremiah’s first question is particularly interesting. In times of economic turmoil, consumer habits typically change. Spending habits become more conservative and greater consideration is given to each purchase as disposable income declines. However, is there any reason to expect social media usage to also decline during a recession. I doubt it… why would it when social media is free.

Internet access is now widely considered an essential requirement of modern living. I doubt very many people would consider taking themselves offline in order to save a few pennies. Indeed, if anything, it’s likely that people will spend more time online as they look for cost effective forms of entertainment. Social media could in fact experience an increase in usage for a number of reasons:

  • People may choose to connect with friends and colleagues via social networks and IM rather than meet in person to save on entertainment and travel costs.
  • People may dedicate more time to consolidating professional networks via LinkedIn due to concerns/ paranoia about job security.
  • As unemployment increases, people may turn to the Internet for income opportunities, with social media providing a free source of promotion & traffic.
  • With more free time, people may look to become active contributors/publishers via blogs and other social media tools.

So given that social media usage isn’t likely to decline, is it reasonable to expect corporate social media budgets to maintain a status quo? Not bloody likely. In fact, social media is likely to be the first place marketing managers look when slashing their budgets…

Corporate spending on social media

Jeremiah’s second question asked whether brands were likely to abort their social media initiatives in the face of diminishing marketing budgets. In short, the answer is… you betcha! While social media has risen to capture the attention of millions of users worldwide, few businesses have been able to translate that into corporate success. Hell… Facebook hasn’t even got a viable revenue model. So is it any surprise that the brick and mortar companies of the world haven’t figured out how to leverage social media as yet.

There is little doubt that social media is yet to comprehensively prove itself as a channel that can deliver a tangible ROI. Which means it is directly in the firing line when marketing budgets get slashed. While many companies have tested the waters over the past few years, there aren’t a lot of documented success stories to provide marketers with the confidence they need to continue to invest in social media. Indeed, many of the benefits of social media participation are fuzzy intangibles that are hard to link to ROI, such as:

  • An enhanced understanding of customer needs
  • The establishment of deeper customer relationships and increased loyalty
  • The creation of a community of customer advocates
  • Positive word of mouth and referrals
  • Opening new channels of customer communication

Other benefits are more tangible, but still have negative connotations during recession:

  • Traffic surges from Digg & StumbleUpon look great but rarely lead to increased product sales.
  • Great social content attracts inbound links, but this longer term SEO strategy may be abandoned to focus on short-term acquisition campaigns.

With adversity comes opportunity

It’s probably clear by now that I don’t hold a lot of hope for corporate social media budgets. Quite simply, social media is an easy target. In fact, if I was in charge of a marketing budget at the moment I suspect I’d cut back on social media and invest in paid search, SEO & email. But I work for a digital agency, so my only budgetary concern whether any of our client will slash their online budget… yikes!

But with adversity comes opportunity. Despite the economic realities, there are a myriad of business related applications for organisations savvy enough to recognise them. Some opportunities that come to mind include:

  • Cutting back on market research budgets by using social media to gather free (and unbiased) customer insights & intelligence
  • Creating a customer facing blog to reduce reliance on other costly forms of communication (postal mail & telephone)
  • Using social networks such as LinkedIn & Facebook for employee recruitment purposes
  • Creating instructional/educational product demo videos and posting them to YouTube to reduce reliance on customer support staff.

There must be a million more… So while big businesses cut marketing budgets in the quest for ROI, smaller organisations are likely to continue to experiment and innovate within social media. Because while it may well be unproven… it’s also free. And that’s worth a lot too. Just ask Google, YouTube & Facebook. They never started with big marketing budgets…

Or for a truly inspirational story on how the really small business can benefit, check out Mark Hayward’s case study on social media for small businesses.

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{ 7 comments… read them below or add one }

Gene October 15, 2008 at 11:25 am

Answers to questions 1 & 2

1. yes> looking for more free traffic.

2. no> Advertisers have cut spending in proven media channels.

Louisa October 16, 2008 at 2:31 am

I agree with what you are saying here, usage of social media sites is likely to increase whilst budget and advertiser focus on them is like to be reduced during tough times.

One of the beauty of social media sites for advertisers through is that whilst they might not be able to afford big budget advertising and promotions at this time, social media is one online tactic that still allows them to monitor and engage at a more personal level for FREE!

In Australia I think marketers have a long way to go in leveraging social media, a toe in the water would be a great start and I hope they don’t use the economy as an excuse as to why they don’t take this step…


lucio October 16, 2008 at 6:17 am

customers are already jumpy, adn i’d say thats not the best time to ignore your marketplace.

Don’t give them any reason to mistrust our doubt a brand – what better time to re affirm brands/values?

my 2 cents

James Duthie October 16, 2008 at 10:20 am

@ Gene – Yup. I think we’re definitely on the same page.

@ Louisa – Thanks for dropping by and your considered input – it’s always welcome. I agree that the cost of social media (aka nothing) will appeal to many. The real questions are:

1. Will there be sufficient internal resources with time to invest in SM (at the expense of proven marketing channels)?
2. Will organisations persist with social media once they realise results come in the medium/long term (not the short term)

Let’s hope so.

@ Lucio – Similar feedback as to what I gave to Louisa. It will take a brave marketing manager to persist with social media. But the innovators often end up ahead…

laurent October 17, 2008 at 12:27 am

I agree wholeheartedly with the opportunity: ‘Cutting back on market research budgets by using social media to gather free (and unbiased) customer insights & intelligence’ –
Lately, I was contacted to participate to a survey by the provider of a product I use regularly. They were offering 125$ in exchange of my responses. I said yes and a day after received a ‘sorry, we’ve gotten enough responses, thanks for….’; I was unhappy. First and foremost, they made me feel valuable by contacting me for my opinions. Also, I was hoping to earn a bit of money. I ended up frustrated and pissed at them. Also I imagine they spent x*125$…which can be a fairly big number if x is big.
I monitor ~800s blogs in my field and doing it, I fully realize the potential there’s for doing ‘free’ market research by using social media. This company could have found x00s blogs in their market (accounting) and save x125$.

James Duthie October 23, 2008 at 2:57 am

Thanks for dropping by again Laurent. It’s too bad you couldn’t pick up that easy $125. I suspect as marketing budgets really begin to tighten over the next 6 months, more and more savvy marketers will wise up to the potential of social media as a source of unbiased customer opinions & insight.

Online Marketing November 17, 2011 at 5:29 am

Social Media always proves to be handy whether its recession or a boom time…

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