Local Businesses and Social Media

Recently, I’ve heard or seen several people discussing social media management startups that primarily focus on local companies. While I think this could be an interesting idea in theory, I keep coming back to this one thought:

Local business owners don’t set out trying to run a Fortune 500 company. There’s a reason why they remain the size that they are.

This is not bad; it’s just a reality. (My next post will be about starting with the ends in mind.) Here’s the deal: If someone wants to engage people through social media that much, the small business owner would have done it already. The barrier to entry for Facebook, Twitter, and other social media tools is essentially nothing. This is far from the complexity of implementing Hyperion or PeopleSoft (Shameless pitch: read Ed Cody’s book if you are looking to understand Hyperion). During a recent conversation with Doug Davidoff, we discussed whether social media has become an echo chamber with a small group of people speaking to each other, where every individual is convinced that his or her contribution makes a difference. To date, no companies I have found have made large sums of money through social media. A few people cite the example of Comcast; however, I see their use of Twitter as an additional support medium, not a true monetization strategy that adds new revenue. If local businesses (who have little cash to begin with) saw this as an issue, of which I am not convinced, there are tons of free tools like HootSuite, TweeteDeck, Addictomatic, among others, that provide social network management for free. Once I see someone really making money (besides VC’s making management fees) from local and social media, I might feel differently. Right now, however, it is a difficult hill—for any startup (funded or not)—to climb. Note: Here’s one additional rule. Never build your company to be dependent on an external platform (e.g. Twitter or Google’s App Engine). It is a very dangerous game to play. If you want to read about Google App Engine Failure, click to read more.