Cover Story

Social technology for business is much more than networking on Facebook,

LinkedIn or Twitter. Understanding its most critical foundational concepts, and how to integrate them into a business strategy, can be a game-changer for 21st century companies.

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By Scott Klososky

T h e N e x t F ro n t i e r
hy care about the much-anticipated initial public offering of Facebook this month, LinkedIns IPO last year or the potential 2013 IPO for Twitter? Or that in January YouTube was getting four billion hits per day an increase of 25 percent in only eight months, as reported by Reuters? Why care? Because social technology in 2012 is not a subject for any business to ignore. The phenomenon of these abilities to connect seamlessly across the world is much more powerful than most people understand at the moment. And it will not be going away. This expanding social tool box is more powerful than Facebook, Twitter, LinkedIn or YouTube. These are merely tiny pieces in the wider view, applications of a larger picture that promise to tremendously empower those willing to learn and experiment with new concepts. The good news is that the cost of putting these tools to work is quite low, so leaders of organizations small and large have a fair shot at stardom. The bad news is that many will disregard the information as not yet relevant. But the reality is that some of the ideas are already making a big difference for early adopters.

iSTOCKPHOTO / THINKSTOCK

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The World of Social Technologies

To really understand the world of social technology, a primer on its terminology is helpful. n Social networking refers to the tools that allow companies or individuals to communicate, collaborate or be in community with each other Facebook, Twitter and other leading providers. n Social media refers to sites that allow the uploading of videos, documents, graphics/photos or presentations and share them with the world, by way of YouTube, Scribd, Flickr, Slideshare.net and others. n Social relevance refers to a company or individual online reputation or brand. This covers all of the methods by which a searcher would form an opinion online. In addition, there are a number of new tasks that have the word social bolted in front: SocialCRM and Social Recruiting are good examples. The umbrella term for all of these is social technologies. Social technologies are beneficial to all areas of an organization, not just for driving revenue. Outside of marketing, there are many techniques being used in the world

today to lower costs and help organizations get smarter. Social tools can be compared to the Web itself, inasmuch much as there are benefits for every department. An eWord of Mouth marketing campaign can help deliver new prospects through the front door, and a crowdsourcing process can save companies thousands of dollars on a new Web user interface design. Social technologies are most well known for their ability to help drive revenue in new ways as they fit into the larger marketing. To truly understand what is going on in digital marketing, its important to understand the five-element formula comprising digital marketing: 1. Building productive websites. These are the destinations for people to gain access to archived information or to conduct transactions. They will not come to these properties unless they have a specific reason, and websites are not optimized to create ongoing connections. 2. Providing social technologies. These tools create the conversations that build ongoing relationships with clients and establish trust with prospects, for the purpose of sharing valuable information.

The Crowdfunding Provisions of the JOBS Act

By David M. Lynn
Over the past year, various legislative proposals directed at easing regulatory and financing burdens on smaller companies have been discussed by legislators, business leaders and commentators. These proposals were brought together under the Jumpstart Our Business Startups Act (H.R. 3606), or the JOBS Act. The bill was signed into law by President Barack Obama on April 5. Title III of the JOBS Act addresses crowdfunding, a relatively new outgrowth of social media that provides funding for a variety of ventures. Crowdfunding is based on the
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ability to pool money from individuals who have a common interest and are willing to provide small contributions toward the venture. Absent an exemption from U.S. Securities and Exchange Commission registration (or actually registering the offering with the SEC), crowdfunding efforts that involve sales of securities may be illegal. To address this issue, the JOBS Act amended Section 4 of the Securities Act of 1934 to add a new paragraph (6), which provides a new crowdfunding exemption from registration under the Securities Act. The conditions of the exemption are that: n The aggregate amount sold to all investors by the issuer, including any amount sold in reliance on the crowdfunding exemption during the 12-month period preceding the date of the transaction, is not more than $1 million; n The aggregate amount sold to any investor by the issuer, including any amount sold in reliance on the

crowdfunding exemption during the 12-month period preceding the date of the transaction, does not exceed: the greater of $2,000 or 5 percent of the annual income or net worth of the investor, as applicable, if either the annual income or the net worth of the investor is less than $100,000; or 10 percent of the annual income or net worth of an investor, as applicable, not to exceed a maximum aggregate amount sold of $100,000, if either the annual income or net worth of the investor is equal to or more than $100,000; n The transaction is conducted through a broker or funding portal that complies with the requirements of the exemption; and n The issuer complies with the requirements of the exemption. Among the requirements to exempt crowdfunding offerings is that an intermediary used for the offering must register with the SEC as a
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gies are just one of the three legs of 3. Mobile tools. For the first time in are multi-faceted, and the stool, and they play a critical role history, there exists a method for busiin that they create the ongoing convernesses to connect 24/7 with clients geohave the ability to change sation with a companys constituents. graphically and from anywhere in the an economy that is in No other elements have the ability to world. For most businesses, the ability build an ongoing relationship like to connect through a mobile device is chaos to one that is social tools. essential, as clients will want to conmanageable and All businesses must build trust nect at random times and from random and value-filled ongoing relationships points of origin. An organization must predictable. in order to grow and prosper, and the be ready to make that connection. combination of social tools along with 4. Driving online traffic. After integratWeb properties and mobile applications provide powerful ing the three elements above, its time to drive a much larger tools for augmenting a firms ability to do this. volume of traffic than currently exists into a relationship net. Applying a sophisticated and well-considered digital There are many tools available for accomplishing this step, such marketing campaign to the companys market will result in a as traditional advertising, search engine optimization and paychange in the sales process that is more profound than it first per-click campaigns. sounds. The organization will change from one that asks, 5. Measurement systems. Its true that what gets measured gets Where can I find new clients?, to How can I enable clients done. Once the first four elements are in place and integrated, to find me? create a full suite of measurements to understand exactly what is working and what needs improvement. The world of the 21st century is a highly searchable Important points to bear in mind are that social technolorecommendation economy, one in which it is much more

Social technology tools

broker or a funding portal. Funding portals would not be subject to registration as a broker-dealer, but would be subject to an alternative regulatory regime, subject to SEC and self-regulatory organizations (SRO) authority, to be determined by rulemaking at the SEC and SRO. A funding portal is defined as an intermediary for exempt crowdfunding offerings that does not (1) offer investment advice or recommendations; (2) solicit purchases, sales or offers to buy securities offered or displayed on its website or portal; (3) compensate employees, agents or other persons for such solicitation or based on the sale securities displayed or referenced on its website or portal; (4) hold, manage, possess or otherwise handle investor funds or securities; or (5) engage in other activities as the SEC may determine by rulemaking. An intermediary also must register with any applicable self-regula-

tory authority and provide specified disclosures to investors. Further, intermediaries must take other steps related to the offering that are oriented toward investor protection, such as ensuring offering proceeds are only provided to issuers when the amount equals or exceeds the target offering mount, allowing for cancellation of commitments to purchase in the offering, monitoring the amounts invested, protecting privacy of information and avoiding conflicts of interest. Issuers also must meet specific conditions in order to rely on the exemption, including that an issuer file with the SEC and provide to investors and intermediaries information about the issuer for example, financial statements, which would be reviewed or audited depending on the size of the target offering amount. Other information would include its officers, directors and

greater than 20 percent shareholders, and risks relating to the issuer and the offering. In addition, it would disclose specific offering information such as the use of proceeds for the offering, the target amount for the offering, the deadline to reach the target offering amount and regular updates regarding progress in reaching the target, as well as ongoing reporting after the offering as the SEC may determine pursuant to its rules. The SEC must issue rules to carry out these measures not later than 270 days following enactment. The dollar thresholds applicable under the exemption are subject to adjustment by the SEC at least once every five years. David M. Lynn (dlynn@mofo.com) is a partner with law rm Morrison & Foerster who chairs the rms Public Companies and Securities practice.

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A New Way To Tap Into Capital

The power of the crowd has always been around, but the difference for todays organizations is their ability to tap into the power of the Internet herd to get work done less expensively, faster and with more innovation. Its also a way to tap into the capital markets for launching new businesses or expanding on existing businesses. For more than a decade, companies have been moving certain types of work overseas in order to take advantage of educated workers who have a lower wage base. Crowdsourcing has the ability to dwarf the volume of work that is currently being outsourced. The difference is that tasks can now be performed by nearly anonymous workers who compete to impress virtual employers with their output. That competition is what raises the bar over traditional outsourcing as workers from around the world join online competitions with the goal of winning. Crowdfunding can be used to raise money online for a not-for-profit organization or to raise money for a startup idea (Kickstarter.com). Crowd Accelerated Innovation provides the ability to dramatically speed up the innovation process by leveraging ideas and observations from the crowd. In addition, the Jumpstart Our Business Startups Act allows crowdfunding, in some cases, thus permitting groups to contribute relatively small amounts of money to a pool of funds to be used by a small or startup company for further growth or other objectives (see page 42). Other uses for crowdsourcing are growing. For example, the wisdom of crowds is tapped by sites like Quora.com and Jig.com, which allow a person to ask any question of the crowd and get answers. Crowdscribing is the process of leveraging the Internet herd to build a book project. The list of new crowd dynamics will certainly grow over time and savvy leaders are investing resources in learning how to apply these new tools.

difficult to hunt for new clients without the backing of a digital marketing net. Companies must learn to use digital marketing to create an environment where individuals can close more sales. It will not be unusual for colleagues to ask for recommendations on business firms through friends on LinkedIn, and then to verify the credentials of the recommendations by doing a search online to see if their own firm is expert and well-regarded by its current clients.

The Organizational Voice and Reputation

The first foundational social tool to apply in creating the companys selling environment is to create and master the delivery of an organizational voice. There are many channels through which to deliver this voice, such as Facebook, Twitter, print and video blogs. In many cases, a combination of these should be used to reach diverse audiences. Building an organizational voice provides a method to communicate with constituents on an appropriately regular basis. Providing real value to clients will produce for the company an earned media relationship with its constituents. This replaces many of the interruption marketing methods used in the past, such as advertising. In other words, this approach moves to more conversation and less shouting at clients and prospects. The other benefit of creating such content will be the boost to the firms online reputation as it provides digital proof that it is an expert in its field a key attribute for clients who want to deal with industry experts. In addition, delivering a useful organizational voice channel tightens the perceived relationship between a company and its clients. This is, of course, if the companys blogs, Twitter streams and podcasts, among other outlets, are truly interesting to read and full of valuable insights and information. Absent this, it will not even get a second glance. Provide valuable content and clients will feel that the company is talking to them regularly and thus building a value-based relationship, which will serve to augment in-person meetings that must continue. The next step will provide a number of benefits through one critical technique the social media campaign. Once the conversation has started, it should be augmented with a large inventory of online assets. Thankfully, there are very inexpensive ways to communicate with millions of people in an instant. Start by creating custom channels on YouTube, Slideshare.net, Flickr and Scribd. The setup is free, so there is little rationale to delay. Once the accounts are established, create unique and interesting content for each one that would appeal to the client base. Think in terms of 100 or more assets spread across all channels. Be clever with what is created creativity and innovation are critical to standing out and attracting lots viral uplift when these assets are sent out. For example, if it is a financial services company:

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n Videos that show financial best practices for retirement plans, college savings plans or retirement rollovers; n PowerPoints that highlight specific instructions and steps for teaching young people financial literacy or what it means to have a balanced portfolio. n Pictures and infographics that provide helpful or fun facts about the successful management of money. n Whitepapers that outline everything someone might want to know about possible investment strategies in different economic climates.

the Internets rise as a force in business decision-making and reputation-building, learn to manage the firms online Just Scratching the Surface reputation to reap benefits, Once the ability to drive more revrather than losing out to others enue is enhanced, it would be wise to focus on lowering costs and improvwho take advantage of it. ing the IQ of the team. This can be

Instead of fretting about

tive. Learning to thank people for complimenting performance and products, for example, is a positive reputational step. Analyzing monthly how many times the company is mentioned is also important

There are millions of clever ideas for creating digital media assets that will help with business clients and prospects. Those who are especially clever can go viral on the Web and get large amounts of views. So instead of feeling as though expertise is being given away for free, think of it as proving industry expertise to prospects. Once these assets are uploaded and ready to distribute, there are many ways of reaping the benefits. They can be sent to individual prospects and clients for individual use. Assets can be included in sales proposals and sent to online magazines and newspapers for placement in their online properties. Embedding links to a company website, or having a business partner do the same, can help drive inbound traffic. All of these efforts can go a long way toward building a superior brand. In addition, consider the eWord of Mouth marketing method. Identify the top 50 bloggers and Twitter users who already have thousands of followers in the relevant market and enlist them in distributing the companys digital assets. Bloggers and Tweeters are always looking for exceptional content to send to their readers. Once Web traffic increases, maximizing reputation is the next step in closing deals. A company could do everything else right, and still lose it all by failing to build a positive online reputation. As mentioned, the social networking world is a recommendation economy, where people make the bulk of their decisions based on what their friends or the Internet herd says about a product or service. That might seem unfair, or potentially problematic because of the chance of fraud. But instead of fretting about the rise of the Internet as a force in business decision-making and reputation-building, learn to manage the firms online reputation to reap benefits, rather than losing out to others who take advantage of it. Ratings systems and online commentary about products, services and skills will form the basis of a companys online reputation. Managing reputation should include having a plan for responding to any online comments negative or posi-

done through applying crowdsourcing and building rivers of information. Crowdsourcing is the process of leveraging Internet readership to do work on the companys behalf less expensively, faster and with more creativity. There are now more than 150 websites that specialize in various forms of crowdsourcing. Examples include sites to help produce any creative design (new logos, website design or brochures) and sites that do everything from helping to raise money to doing research. Many organizations today are using crowdsourcing to cut thousands of dollars from their monthly bottom line. All of the social tools that allow people to publish information have created an explosion in the volume of information available on any subject. For example, the financial space is a knowledge economy and the smarter players win, as do the smarter teams. Yet with the huge quantity of this information flying around in real time, most people are wasting the opportunity to harvest and digest it. Thats a shame because it costs nothing to access this information. For lack of 30 minutes a day and knowing how to use tools such as Netvibes.com, Google Reader, Flipboard, Twellow.com, and blogs.com, people could dramatically improve their financial intelligence. In case the volume of information seems too great to sort out, just remember it is not information overwhelm, it is filter failure. The reality is that todays capabilities are just scratching the surface. The social tool box is vast and growing rapidly. There really is not a choice to just opt out of learning to use the tools. Competitors will be using them and the advantage will be exponentially greater going forward. Social technology tools are multi-faceted, and have the ability to change an economy that is in chaos to one that is manageable and predictable. Scott Klososky (scott@klososky,com) is founder and chairman of the board of Alkami Technology, a technology startup. He is a much sought-after speaker and former CEO of three startup companies who specializes in looking out over the horizon to describe how technology is changing the world. Hes also authored three books including Enterprise Social Technology (Greenleaf Book Group Press, 2011).

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