Written by Raj Kadam
One year ago Scout Labs was acquired by Lithium Technologies for $22.5 million, after raising just over $10 million in funding. Almost exactly one year later, this March, Radian6 was acquired by Salesforce.com for a whopping $326 million. Both companies were gobbled up by new-school CRM players who understand that more “monitoring” inputs fuel more relationships and more management.
Unfortunately, the growth in this market isn’t going to come from more advanced monitoring or “listening” technologies. Social media monitoring is commoditized, and has been for a while. Let’s all just admit that. It’s a box to check.
Of course some people do it better than others, but for the sake of this discussion, monitoring is monitoring – it’s just a bunch of keyword matches against multiple searches, across both traditional and new media. Running analytics on that data isn’t all that complicated either. The pretty charts and graphs piece is also commoditized - visualization and fancy reports are fun, and effective, but not hard to do.
Even scaling isn’t as much of a problem as it used to be when the market was nascent. Non-relational databases and the arrival of SLA (systems-level architecture)-grade cloud infrastructure have made life a lot easier. At Viralheat we have scaled to crunch billions of brand mentions a day for only tens of thousands of dollars per month in hard costs.
So why the heck would Salesforce spend $326 million on Radian6? Where is the leverage? The answer is that they bought the foundation and intend to build towards the real prize. Marc Benioff knows as well as anyone – what Radian6 and other competitors have today is merely a prerequisite for more advanced capabilities.
There are three big opportunities - and here's where the real money will be spent.
Imagine that you’re accurately gathering mentions in a timely fashion. You can run high-level reports. They make your CEO smile. You’re cool, and appreciated. The problem is that mere monitoring and reporting sits pretty darn far away from the exchange of dollars and cents. That’s not a bad thing. As the Web has exploded into so many new media types, just having a basic lay of the land is a major upgrade in resolution and confidence. Decisions get better, unquestionably. Anecdotal arguments become empirical ones.
But the Holy Grail for marketers always has been, and always will be, cause-and-effect. The next wave in social analytics will be all about what we can actually do with our haystacks of mentions. And there are three areas of focus that any entrepreneur or technologist or investor should take to heart:
- Influence: Players like Klout and PeerIndex provide sophisticated scores of influence. What is the FICO score of the social web? Sorting and prioritizing mentions by influence gives me, in return, more influence (over behavior, over conversation). Influence is fluid, but it is one of the best ways to understand how to react and respond when volume is overwhelming.
- Sentiment: Sentiment grades tone and attitude regardless of influence. An especially good or bad sentiment can be impactful regardless of who is behind it. If anything, treating everyone with respect and responsiveness is how you build great brands. I can tell you from experience that sentiment is really hard to do right. A lot of people love to throw this term around. But there is opportunity here because there is a huge delta between the good and the great players in sentiment.
- Intent: This is perhaps the most sophisticated of the three, because it combines technical competences involved in both influence and sentiment. Intent is about understanding how close someone is to a decision, based on content. It’s also a future-looking vector – it’s about understanding what is going to happen, instead of what just happened.
Scout Labs, I would argue, was acquired at a time when most of the market was focused on monitoring the past. And the purchase price reflected as much.
Fast forward to 2011, and Salesforce paid a premium for Radian 6; but it wasn’t because they wanted to show Salesforce.com customers how much Twitter buzz they received last month. That is most certainly not a $326 million-dollar business. The innovations that will drive this market forward are all about the future.
It’s going to be all about marketers who want to look into a crystal ball. Predictive analytics that run on top of social media will rule the day. We need to give customers a way to predict, within a very small margin of error, what’s going to happen next.
- How can we tell when someone is on the cusp of a purchasing decision?
- What if the leads you capture from Twitter are not just a bunch of keyword matches, but instead, are narrowed down to a set of real human beings who are about to buy a type of product that you happen to sell?
- What if the haystack was already pre-sorted for influence, sentimen, and intent, and handed over to the sales department?
Marketers desperately want to see around the next corner like this. And this marketing paradigm is precisely why the CMO position is notorious for being a revolving door of executive gigs – too many are flying blind, and it’s easy to stumble if your job is essentially an elaborate A/B test. What if we could fix that?
The monitoring market has gotten lots of flack over the years, because of crowdedness, and decent, but never jaw-dropping exits. It’s true, monitoring will really never have big exits.
But this market is going to undergo a dramatic transformation in the next 12 months. The company that can fully deliver on the promise of predictive analytics for marketers is going to make the $326 million Radian6 acquisition look like a used Ford Focus sitting next to a brand-new Bentley. The market opportunity is that big – and businesses are beyond desperate to turn their social media investments into tangible revenue figures.
We got started by converting simple monitoring to meaningful analytics; and we’ve become more sophisticated over the years with better analytics, more and more integrations and better reporting tools to show what all those mentions really mean to businesses. But we’re no longer concerned with dominating the mentions or analytics games – we’ve been there, and everyone’s accomplished that. If startups keep focusing their efforts there, they will be gone in a year’s time.
To date there has never been enough insight to prompt action. Inferencing rules the day, as does gut instinct, careful iteration, and hopeful finger-crossing.
The next frontier is future-tense intelligence and analytics. And we’re already making great progress on these technologies.
Predicting what’s coming around the next corner is the Holy Grail for today’s marketing department, and the prize will go to the monitoring company that first cracks the nut on understanding intent, effectively blurring the line between marketing and sales, and making this space worthy of everything that’s been invested in it.
Raj Kadam is the CEO and Co-Founder of Viralheat, a company that provides social media intelligence and analytics.
