The Business Technology blog over at WSJ reports on a recent study of more than 100 corporate social networks. Ed Moran, a Deloitte consultant, found that:

Thirty-five percent of the online communities studied have less than 100 members; less than 25% have more than 1,000 members – despite the fact that close to 60% of these businesses have spent over $1 million on their community projects.

Moran’s conclusion is that companies get seduced by the technologies involved without understanding the terrain. These sites fail, he believes, because companies don’t invest enough money or manpower in supporting them, and because the things the companies measure don’t really align with their professed business goals.

The title of the article – “Why Most Online Communities Fail” – is misleading, since Moran is talking specifically about corporate social networks, and the very premise of these sites is flawed if you ask me. I haven’t seen the list of companies he looked at, but I would guess that most of them actually have thriving online “communities” whose activities just happen to be distributed across the Internet. People are twittering. They’re posting about those 100 companies on their blogs and MySpace pages.

I understand the urge that companies have to contain this activity, but it’s a pipe dream. You can build the snazziest playground in the world, and most of your community still won’t show up. If you want to connect with them, you have to do it on their turf. If you want to quantify their effect on your brand perception or your sales numbers, you have to find tools that can do that.

That’s what my most recent venture, Scout Labs, is aiming to provide, and that’s why I believe in their product. Companies are willing to spend millions on the fantasy that they can bring their communities to them because they don’t have very good ways of tuning in to the communities that are already out there.

But that’s changing.

• Create a MySpace profile
• Enlist the Black Eyed Peas (they were especially hot at that time)
• Put some videos on YouTube

Then… POOF! it spreads like wildfire.

Now, reading the pitches from the current lot of would-be gurus, it seems things haven’t changed very much.

The basic pieces of a social marketing campaign today seem to be…

• Create a profile/group on MySpace/Facebook/Twitter/Jaiku
• Launch a blog advertising campaign
• Create a contest that has some viral hooks

This formula is attractive because none of these things necessarily requires much effort on the part of the company. It might get kudos from the Madison Avenue crowd and a few marketing pundits, impressed by your “revolutionary” foray into the frightening universe of social media, but the long term rewards from real people will be thin and fleeting unless you do a little more.

Give something good away.

I’m personally tired of the whole contest thing. Too many big companies think it’s good idea to create some kind of cheesy campaign where, for example, they entice people to make their own commercials for you or slog through a ridiculous scavenger hunt for the chance at a big prize. This doesn’t count as a giveaway because contests like this demand payment (manual labor and/or creativity) in exchange for nothing but a chance at a reward.

Instead, what I’m talking about is not all that different from the old concept of a loss-leader. You take a loss on something that will attract people to you, and then you try to deepen the relationship with those people and persuade them to (or simply hope they will) buy more stuff. What if Microsoft simply gave away the Xbox for free, knowing that such a move would push their console market share way past the PlayStation? Could the resulting increase in game sales make up for the cost of such a move?

I’m sure Microsoft has already run the numbers on this, so I won’t fantasize about getting a free Xbox, but there are plenty of giveaway ideas that cost almost nothing.

A lot of companies have quite a bit of capital in the form of information. Become the expert. Make your company’s blog the go-to source. Tell secrets. Teach people something cool or valuable. Enable. Entertain.

The February issue of FastCompany magazine includes an article provocatively-titled, Is the Tipping Point Toast? about the work Duncan Watts has done researching influence. The article doesn’t exactly torpedo Gladwell‘s hypotheses, as the title suggests, but it does argue that influence is a much more random phenomenon than Gladwell and a string of high-profile marketing gurus – not to mention our own intuition – would have us believe:

[Watts] has written computer models of rumor spreading and found that your average slob is just as likely as a well-connected person to start a huge new trend. And last year, Watts demonstrated that even the breakout success of a hot new pop band might be nearly random. Any attempt to engineer success through Influentials, he argues, is almost certainly doomed to failure.

Strong words, and not ones that marketing folks want to hear. But let’s back up and look at the two schools of thought at odds in this debate.

The Gladwell school (previously put forward by Ed Keller and Jon Berry in their book, The Influentials) holds that a relatively small number of elite and well-connected tastemakers is responsible for igniting the first small flames of buying or behaving that eventually spread like wildfire to become mainstream trends. Marketers like this model partly because it makes sense intuitively. We can all think of people in our lives who are consistently ahead of the curve with things, or whom we depend on as consistently reliable sources of information. It’s nice to think that if you can, as a marketer, put your message or product in the hands of these elite few, then they will do the rest of the work for you.

Watts, however, isn’t buying it. His research – a variety of computer models as well as social experiments using real people – doesn’t support the existence of this special class of powerful people. As far as he can tell, a trend can start anywhere and with anyone, as long as the marketplace is primed for it. This is borne out in a well-known experiment he conducted by building two identical online music communities where users could rate unknown songs from unknown artists. In one community, the users couldn’t see anyone else’s rankings. In the other, people could see how everyone else rated each song. He wanted to see whether word of mouth would affect the rankings in this second community, and whether any of the participants would emerge as the tastemakers.

In the first community, people rated the songs fairly evenly. But in the second community, as one would expect, favorite songs did emerge, as word of mouth took hold. Even more interestingly, in eight repeats of the experiment, different songs emerged as the favorites each time. For the most part, it wasn’t even close. The #1 song in one community, for example, was ranked #40 out of 48 in another. And there was no evidence to suggest that any participant in any community was significantly more influential than anyone else.

Watts’ experiment confirmed that word of mouth is powerful but, to the chagrin of marketers, it also seemed to show that it’s completely unpredictable.

So is the Tipping Point toast, like the article says? The most likely answer of course is no, and that both arguments are correct. There certainly are people who are influential by virtue of a large audience or expertise with regard to a particular subject. On the other hand, there are certainly many trends that started with seemingly random people.

Watts’ solution is to forget about trying to identify or engage with any supposed influencers and to focus instead on the masses. To this end he has developed a form of advertising with built-in sharing (and tracking) mechanisms designed to facilitate their spread.

Perhaps he’s onto something, but I think that developing a good mechanism for sharing is much less important than developing a good message that people will want to share. The “why” is more important than the “how.”

The currency, so to speak, of influence is the meme. There is a science to what makes a good meme. For content-based memes (as opposed to behavior-based ones like fashion trends), I like the formula offered by Chip and Dan Heath in their recent book, Made to Stick, which states that a good message is:

• Simple
• Unexpected
• Concrete
• Credible
• Emotional, and
• a Story

If marketers follow this formula, the chances that their messages will go “viral” are much greater, whether influencers are specific and identifiable elites or just random folks on the street.

The last piece of the puzzle is the marketplace, and this is something we’re trying hard to make more predictable too. Or, if not predictable, then transparent. Understanding what makes an effective meme is key to spotting them as they develop, but it’s still very difficult without reliable visibility into the marketplace. We’re aiming to provide this with some of the tools we’re developing, because this is at least as essential to the influence problem as attempting to identify some elusive special people at the top of the chain.