Can Social Media help Initial Public Offerings?

Guest post by John Gower - Any company preparing an Initial Public Offering (IPO) would be wise to take full advantage of a broad social media presence. Facebook, Twitter and YouTube are all platforms for people to share their experiences, ideas, creative work, or even their interactions with popular products and services of companies. When utilized to their fullest extent, social media sites can serve as inroads to a demographically valuable audience. However, social media campaigns can also sometimes fail or backfire for a variety of reasons. It is important to know how to use social media to your advantage.

Quality, quality, quality

Content shared on social media sites becomes popular because of the quality of whatever’s being shared and promotion by popular users. Some companies fail to even satisfy this basic requirement.

For example, Facebook debuted a series of commercials just after its IPO, one of which garnered widespread ridicule for using an extended metaphor comparing Facebook to a chair. On the other hand, companies like Tinder have successfully used social media to generate buzz and enter new markets by making the participation and interaction of users promoting its software a prerequisite to its release on Android. After 1 million users requested the app via social media (a goal they accomplished in only 2 days), the popular dating platform went live on the Google Play Store.

The most successful companies, like Tinder’s parent IAC, understand that people often invest themselves in a product or a stock because they trust the advice of a credible influencer. The people who make influential suggestions have authority because they have a history of making good suggestions. Social media is simply a reflection of this human instinct.

In general, users are popular because they tend to share things of good quality. However, there are sometimes exceptions to this rule: popular social media users who are paid to promote. This can be somewhat risky endeavor for a subpar product. Because of social networking’s ease of use, a bad product can cause initially interested users to complain publically and the user promoting the product will lose credibility. Social networking via social media sites is great for getting your brand out there on a grassroots level but grassroots promotion also means that feedback is transparent and public.

Promotion via social media pushes and will continue to push companies to make good products. We haven’t even really begun to unlock the power of social media. Top-down advertising will soon be a thing of the past as consumers increasingly integrate social media into our lives. The takeaway: make a good product, find a social media user who is likely to use that product and have them try it out. If they like it, they will become active stewards of the brand on their own.

John Gower is an analyst for NerdWallet, a personal finance website dedicated to helping businesses save money by providing tips on everything from social media marketing to high yield CDs.