How Can You Profit From Social Media?

A new book by IMD Professor Mikołaj Jan Piskorski, sheds light on the opportunities and pitfalls of Facebook, Twitter, LinkedIn and more for businesses

In 2003 as a young professor at Stanford University, Misiek Piskorski, now IMD professor of Strategy and Innovation, met with two men named Reid Hoffmann and Konstantin Guericke who wanted to pick his brain about his area of study: social networks. The men were working on a new website that would allow people to display their professional affiliation and work experience online and interact with others. Misiek was polite but told the men he thought their idea would not work because offline business networking already worked well, so there would be little need for their service. Later that day it dawned on him that there still are many opportunities to improve on offline networking, so online social networks will fulfil a big unmet need in the offline world!

Indeed, 11 years later, that website, LinkedIn, is valued at USD$25 billion and Misiek has just published a new insightful book “A Social Strategy: How We Profit from Social Media.”

Based on a decade of research and proprietary data from social media sites, “A Social Strategy” introduces a new way of thinking about why people interact online, why some online social platforms are more successful than others, and most importantly, what firms can do to profit from social media.

In 2003, Piskorski, now IMD professor of Strategy and Innovation, met two men who were working on a new website that would allow people to display their professional affiliation and work experience online and interact with others. Misiek told the men he thought their idea would not work because offline business networking already worked well. 11 years later, that website, LinkedIn, is valued at USD$25 billion.

To answer the first two questions Misiek looks at major online social platforms, such as Facebook, Twitter, LinkedIn, Friendster, and MySpace, and uses large proprietary datasets from these platforms to give readers a look “under to hood” to see how people behave on social platforms — (hint: Misiek says the majority of activity on Facebook for example consists of users stalking one another and not posting information as many would believe).

Next, Misiek examines how businesses can leverage social platforms for competitive advantage. His research shows that firms that focused on acquiring followers and broadcasting promotional messages to social platform users have failed to turn higher profit. Instead, firms that focused on facilitating interactions between social platform users financially benefitted from their social media presence. His analysis of Internet start-ups such as Yelp and Zynga, and large established firms, like American Express or Nike, supports this view, and offers many lessons for enterprises seeking to profit from social media.

Firms that focused on acquiring followers and broadcasting promotional messages to social platform users have failed to turn higher profit. Instead, firms that focused on facilitating interactions between social platform users financially benefited from their social media presence

You might want to read this book to understand social strategies in the Western Hemisphere before you reach for the follow-up book that Misiek is completing on the Chinese Internet. That book should be out in the middle of 2015, so stay tuned!

Cover image courtesy blog.wco.com