In an interview with Harvard Business School’s online publication Working Knowledge, HBS professor Sunil Gupta discusses why companies shouldn’t buy advertising on social networking sites:

“The click-through rate of ads on social networking sites is extremely low . . . because people don’t go to these sites to seek information about specific products.” They’re there to look at photos and communicate with friends. So, rather than looking to older advertising-based models of reaching people, like static ads, companies should try viral campaigns that focus on active things, like contests and giveaways.

Say, for example, Dell wants to promote a new laptop on Facebook. Dell can pay to advertise and accept that most people won’t notice the ad. Or, they can give away free laptops to several fans on Facebook. The cost of the computers is probably less than the cost of advertising, and the giveaway is much more effective at getting people talking about the brand within the network.

The lesson: Use the cash you would’ve spent advertising your product at customers and put the money towards something that directly benefits them.

The wine company, Carlo Rossi, is holding a contest with a $10,000 grand prize. Information about the contest can be found on the company’s Facebook page. To win, people have to read a little bit about the company’s “legendary” founder. They have to answer a few quick questions, like what’s their favorite sport or TV show. Then, contest entrants have to write a one hundred word essay about why they should be chosen to lead “the Carlo Rossi Posse.”

The contest lets people interact with the brand, generates entertaining content, and gathers information about what the company’s customers like. The approach is more valuable to both Carlo Rossi and its fans, and is more cost-effective.   

(photo via Wired)

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In his TED talk, “How Social Media Can Make History,” author and technology expert Clay Shirky explains: “Tools don’t get socially interesting until they get technologically boring. It isn’t when the shiny new tools show up that their uses start permeating society. It’s when everybody is able to take them for granted.”

Shirky’s comment reminds us of two technology mistakes companies make:

1. They focus on attention-grabbing technology when they should focus on people. Serving people is technology’s purpose, and it should act as a facilitator rather than a star attraction.
2. They ignore emerging technology and stand pat with older technological solutions that once worked, but no longer do. Technological ignorance puts them behind the curve when these “shiny new tools” become socially adopted and engrained.

Shirky closes his presentation with a reality check and a call to action:

“Media is less and less often about crafting a single message to be consumed by individuals. It is more and more often a way of creating an environment for convening and supporting groups. . . And the choice we face, I mean anybody who has a message they want to have heard anywhere in the world, isn’t whether or not that is the media environment we want to operate in. That’s the media environment we’ve got. The question we all face now is, ‘How can we make the best use of this media? Even though it means changing the way we’ve always done it.’”

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