Study: Why Most Online Communities Fail

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According to a new study by Deloitte consultant Ed Moran of more than 100 businesses with online communities, most of those communities fail to live up to expectations. As the Wall Street Journal reports online communities are currently a hot investment for businesses who hope that creating a community site around their business will help customers feel more connected to their brand. That’s probably true, but most of these sites are failing to attract visitors, and the reason, according to Moran, is that businesses are focusing on the value the community can bring rather than investing in the actual community.

Moran’s study revealed that even though 60% 6% of businesses put over $1 million into branded online community building efforts, 35% have less than 100 members, while less than a quarter have more than 1,000. Moran outlined three reasons he thinks that that majority of online communities are failing to gain traction with customers.

  • Businesses are being enticed by fancy technology. Mesmerized by bells and whistles, many business are foolishly blowing their entire budgets on technology. Moran’s advice is to reach out to community members and let them do your R&D for you, rather than blowing it on fancy tech you may not really need. If the goal of a community associated with a brand is to get people to evangelize your products or services, put money and time into reaching out them rather than developing a fancy site.
  • Lack of proper management. The Deloitte study found that 30% of online communities have just part-time employees in charge, and most have just a single PR person running the show. Advice: hire a social community manager with experience running and building an online community. Managed communities are a lot less likely to grow organically the way general mainstream social networks do, so you need someone who knows how to build one in charge. My former colleague Marshall Kirkpatrick wrote a great post earlier this week about the merits of online community managers.
  • The wrong measurement metrics. Moran noticed that most businesses are measuring the success of their communities in the wrong way. Though their stated goals are usually to create viral, word-of-mouth marketing and increase brand loyalty, the metric they use to gauge success is unique visitors. If all you’re after is growing visits to the site, then you’re missing the point. You’re not trying to compete with mainstream social networks, so you don’t need to chase eyeballs. Rather you need to build interaction and create a level of comfort among your most loyal users so they will evangelize your products for you. The best way to measure this might be by looking at things like blog mentions and Twitter tweets.

A fourth reason why many branded online communities fail that Moran didn’t mention is noise, lots of it. We live in an age where information overload is a real problem for many people, and signing up for yet another social network site, especially one focused on a single brand, may not be attractive. This is out of your control, but it is another reason why unique visitors is a lousy metric for this type of project, and why hiring someone who knows how to best reach out to and grow your core use base (i.e., “true fans”) is imperative.

It’s also a reason that creating a branded social network should not be the only part of a company’s social media strategy. Companies should also have a presence on mainstream networks like Facebook, MySpace, etc. Let your die-hard fans come to you in the environment their most comfortable with.

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  • Anonymous

    I think that online communities that do not mimic offline, geographically-bounded networks are greatly disadvantaged. Building an online community from scratch based entirely on brand loyalty seems to be an arduous task. It may be much more effective to spread your brand in one of the many existing social networks. Just my two cents…

  • Matt Rhodes

    An interesting article and an interesting report. At FreshNetworks we build online communities for brands and have seen and been involved in a fair number of successful online communities (as well as seeing those that fail).

    The reasons for failure seem to be simple to me and it would be interesting to see if the Deloitte report has data to back this up. Successful communities are built on solid strategies. They have a core business aim that links to an internal strategy. The communities are set-up specifically with this strategy in mind and are professionally managed. This is a critical role that needs experience. If you get it right the results are outstanding; if you get it wrong disappointing.

    I wrote more about this on our blog if anybody is interested:

    http://blog.freshnetworks.com/2008/07/do-branded-online-communities-fail/

    Matt Rhodes
    www.freshnetworks.com
    blog.freshnetworks.com

  • http://www.antaramedia.com antaramedia-com

    It’s a simple and important fact that online communities thrive simply because of participation of users of the online community. If users decide not to participate or be active in an online community, it doesn’t matter how much money companies put into it, it won’t thrive.

  • http://www.greenmooninc.com Green Moon

    I think that many of the attempts at creating an online community are doomed to fail, no matter what steps that the owners take. I think the point about “noise” comes close to identifying the biggest problem. “Community” is based on common interests. Drinking the same bottled water, eating at the same fast food restaurant or wearing the same clothing labels is not, in my opinion, enough to create a community.

    There are a few products or brands that can sustain a community. Sports teams, yes; cars, in some cases. In most cases, however, the ties do not bind enough for a community to stay together.

  • Douglas Tarlow

    Please recheck your source on:
    “Moran’s study revealed that even though 60% of businesses put over $1 million into branded online community building efforts, 35% have less than 100 members”

    You can look here to see that a correction was posed:
    http://blogs.wsj.com/biztech/2008/07/16/why-most-online-communities-fail/

    It is 6%, not 60%.

  • Qlubb-Andy

    I think the statement “most have just a single PR person running the show” really hits an important point. PR and community building are really quite different. Even if you have a great PR person with great resources that produces great content for the community, it still doesn’t mean that the community is going to engage with the company or each other. Instead, you just end up with essentially another newsletter list.

    At Qlubb, where I work, we have it a easier because we’re mostly dealing with real-life groups (to @anonymous’s first point), however, you can still end up with just the ‘heroic few’ basically broadcasting rather than creating community if the technological barriers are too hard (how do I contribute?) and most importantly if the benefit and motivation to contribute isn’t high enough.

  • http://www.mockriot.com/ Josh Catone

    @Douglas: Thanks for the heads up. Rather large typo on Deloitte’s part. ;) I’ve updated the post accordingly.

  • Mayank Dhingra

    I’ve been observing a social network on ning for a India based just for women talk radio channel and within a few months of going live it has got around 7k registered users(not sure how much are active).

    Though the set up is just like orkut or facebook people are flocking it.
    The possible reasons in this case could be

    1) Very strong brand loyalty: They’ve got lots of raving female fans.
    2) Active promotion of the site on their channel(ads and all)
    3) Active participation of RJ’s and other famous people from the channel