If you had just landed from the Planet Zog you could be forgiven for thinking that all anyone did here on Earth was to update their Facebook status and Tweet each other. You cannot move for people talking about it, suggesting “everyone should do it” and without bumping into someone “Facebooking” as they walk down the road, not looking where they are going but busy “chatting” on their mobile phone. You can find all sorts of “social media gurus” and experts telling you that you MUST do social media.

But why?

Businesses who are “sold” on the idea that Twitter or Facebook can help with customer service for instance may well see the logic of the argument, but in order to invest in using such technologies they also need to see a return on their staff time investment in social media. And few businesses are seeing any kind of return on Tweeting or taking part in LinkedIn.

The case histories of success are full of consumer facing examples, like Starbucks and Dell. But the millions that Dell is reported to have sold via Twitter alone is a mere rounding error in their accounts. The company doesn’t even notice it – they get more money in one hour through their normal sales channels than they did in two years of using Twitter. Blink and they missed it.

So even though “earning millions on Twitter” sounds great, in reality it is a tiny percentage of the income of businesses which have achieved this. Translate that into companies which do not earn even one million a year (most businesses) and you can see why most people are earning diddly-squat, if anything at all from social media.

Now, new research from Forrester confirms this. Their analysis of of 77,000 online transactions across a variety of sites shows that social media activity was responsible for less than 1% of them. In other words 99% of all online purchases do not arise from social media activity.

The study went on to discover that most purchases come from two sources – direct visitors (people who type in your web address, or who have bookmarked you) and via email marketing. Indeed, people “knowing” of a business in advance brought in almost four times as much purchases as search traffic.

In other words, most online buying takes place from people who you have a business relationship with OUTSIDE the web. They have engaged with those businesses in the “real world”, they have met you, they have been subscribing to your email list for ages. Essentially, most online buying is as a result of good old-fashioned business relationships.

What is key to the findings of this study is the importance of people “knowing” about your website in advance. The direct route is the one leading to most purchases, which means your website needs to be known by people first. Search is much less important and social even less so, in terms of sales.

But…and it is a big but…the study is focused on transactions. It links buying to web activity and finds that social media is insignificant in triggering a purchase.

However, ask a different question. Consider the impact of reputation and trust on purchasing decisions. Then you will be likely to find that social media become crucial.

And that means one thing – businesses engaging in social media have to come up with a different concept to ROI. There are going to be no directly measurable financial returns for most companies. But there will be significant value, which you can’t really measure, in terms of reputation which influence those purchasing decisions.

Which means you can forget social media if you want to make money online, but you need it if you want to make money online in the long-term as a result of building trust in your business.

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