#DigitalSkeptic: Social Media Enters Pay-for-Play Era

NEW YORK (TheStreet) -- Social media is entering its AM radio phase: If marketers want to get that post or tweet into heavy rotation, Twitter, Facebook and LinkedIn now expect to get paid to do it.

"If you really want to get reach, you have to pay to get the word out," said Aaron Magness, vice president for marketing at Betabrand, the San Francisco crowdfunded retail clothing firm. "All those people who invested in a million-plus fans and then are relying on that organic reach for results are not seeing a lot of return right now."

Before Web hipsters roll their eyes that Magness is some sort of Internet marketing luddite, know this: His 51-person Betabrand is as sophisticated and intelligent a digital marketing engine as I've heard about over the past several months.

First off, Betabrand's entire business is based on harnessing the power of crowds frictionlessly using the Web to weigh in on the design and making of clothes. Part Kickstarter and part Quirky, Betabrand has built a line of about 200 items and styles based on direct design submissions from its pretty darn large community. More than 19,200 users submitted photos, for example, to be used in various company imagery. And if investors bother to look at hit products such as the Gray Dress Pant Sweatpants, Silver Reversible Disco Hoodies or Chakra Shell Tops, they'll see that Betabrand knows how to mold the gesture of the unruly digital mob into a real product that moves the bottom line.

"My job is to be the most efficient on the next marketing dollar spent as possible," he explained.

Managing that marketing spend is surprisingly straightforward, Magness said. Ten percent of net sales goes to the designer. Betabrand funds the rest of a product's development and sale, with roughly 20% of revenue going into various marketing efforts.

The trick to profitability turns out to be about converting the generic interest in clothing such as yoga pants or sweatshirts into real sales. "We track every inbound click and spend a lot of time testing what really drives a customer to buy," he said.

And Magness makes a point of not panicking when the process generates unexpected results. "We unequivocally found that shots of the mid-part of the body are what sell our clothes," he said."We tongue-in-cheek call it Crotch Commerce. But it works."

Paying the Social Media Freight
So what is this cutting-edge marketer's take on the role of social media, such as Twitter and Facebook, in his new retail sales model? There's not much to get excited about when it comes to merely posting and tweeting.

"Not only us, but everyone I respect is agreeing that the organic reach for platforms like Facebook and Twitter is decreasing dramatically," he said.

Magness said nobody knows the figures exactly, but he estimates that content posted three years ago would probably reach about 16% of the community of likes and followers of a Facebook page or Twitter account. Last year that percentage of organic social reach would have fallen to 10%, and there's just a 6% social media reach these days.

"We basically plan on paying to promote every single post we put up on Facebook. And most posts in Twitter," he said.

"These platforms now clearly expect to be paid, just like radio or TV."

Just like radio or TV
As I checked around with other social media savvy marketers, Magness' pay-for-play argument checked out. Anthony Mowl, national marketing director for Communication Service for the Deaf, the Austin, Texas, nonprofit support organization that relies heavily on digital marketing to serve deaf and hard-of-hearing and larger Internet clients, confirmed the reach of unpaid, organic likes and follows is getting limited.

"I sometimes think that the only reason my organic reach is falling is because I'm paying more to advertise," Mowl said. And he felt cash-strained social media companies are making it clear that that they expect cash for social media action.

Late in March, for example, Victor Luckerson at Time.com got a Facebook spokesman to comment on its cutback of organic reach. "Like many mediums, if businesses want to make sure that people see their content, the best strategy is, and always has been, paid advertising," is the response Luckerson posted.

Magness and Mowl agree that pay-for-play social is in its infancy. "I don't think what I am seeing is going to be anywhere near the floor," Magness said. In fact, he believes that traditional unpaid social media actually suppresses the overall performance of content.

"Nobody is sure of the formula, as far as I know. But my experience is, if we post and we don't pay to promote it, that unacted-upon content suppresses my reach," he said. "No question, even the best content just sits there at the top of the hill waiting, unless I pay to get it rolling."

"These platforms are not nonprofits out there for the public good. They are expecting -- and getting -- their cut."

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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