Social Networking Is for Social Businesses

NEW YORK (TheStreet) -- Social networking has been great for the strip mall near my house.

The pizza joint got great reviews on Yelp. The doughtnut shop was brought into being by Kickstarter. The beer store runs deals on Scoutmob. My daughter found the hair studio on Facebook ( FB). Business is great and people are wonderful.

But for General Motors ( GM), most social networking is a waste of time. Sure, it will get publicity for launching its new Silverado on Facebook Thursday, as the AutoBlog reports. But beyond public relations, GM needs to compare the cost-per-thousand of advertising anywhere and go with what's cheap.

Thus we have Dana's rule of social networking: The value of social networking is inversely proportional to the size of your business.

Social networks are the greatest thing since sliced cheese for a small business. Here's a chance, for just the cost of your time, to prospect among your neighbors, to find the enthusiasts among them for what you offer, and to get them on your e-mail list so regulars get your best deal. It's cheaper than a Web site. Any business that's so lazy as to miss this opportunity deserves to go out of business.

Now is the time to act, while Facebook ( FB) and Google ( GOOG) Plus are still at each others' throats, while Microsoft ( MSFT) Socl still thinks it's in the game.

Get your logo out there, join communities that serve your customers, and spend an hour each evening communicating with your neighbors. Build goodwill with prospects then get them on your e-mail list when they come in and buy. Use that list to give your best customers your best deals, then just wash, rinse, repeat. If you're providing value for money, you'll do great.

For a company that can't know its customers by name, for a company selling perfume or cereal or hammers or electronics, you already have scaled systems for customer relationship management. You already have e-mail. Make sure you show a human face to everyone who contacts you, as I wrote at SmartPlanet in 2010. That should be the extent of your social strategy, being sociable.

If you align with one network, buying into Facebook's marketing developers program, described by Rachel King for ZDNet, you're making a big mistake.

Social media marketing is just not worthwhile for a scaled business. Todd Wasserman at Mashable is right : the hype over social marketing was "itself a form of marketing for self-conferred experts looking to make a buck." IBM ( IBM)IBM (IBM) has a study out on this which found all the social networks combined contributed just 0.34% to Black Friday sales, and Twitter contributed absolutely nothing.

Social networking reminds me of open source, a beat I joined in 2005 when its hype was reaching a peak. What we found was that the benefits of open source were real but they mainly went to consumers of open source products, in proportion to how much they committed to helping the code base. There were no open source billionaires, which doesn't mean open source was worthless. It's just that the value went somewhere other than into a CEO's pockets.

The same will prove true with social networking. Its benefits will mainly accrue to savvy small businessmen and women who spend the time to work on their business, not just in their business, turning suspects into prospects, prospects into customers, and customers into regulars.

Social is small business' friend, not Madison Avenue's.

At the time of publication, the author was long GOOG, IBM and MSFT.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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