Post image for Altimeter Group Broadly Redefines Risk for a Bogus Study

Altimeter Group Broadly Redefines Risk for a Bogus Study

on September 4, 2012

I’m so tired of research firms releasing leading studies just to raise their industry profile. I’ve seen it done with organizations I like and respect such as Forrester, IDC (see “Social Media Research is Full of Leading Questions”), Facebook (“The Report that 85% of Facebook Users Are Creating Content is a BS Statistic”), and now Altimeter Group. It’s the latest foray into alarmist research in a report entitled, “Guarding the Social Gates: The Imperative for Social Media Risk Management” which is the result of their “2012 Altimeter Social Media Risk Management Survey.”

In the report, Altimeter defined risk as “The likelihood that a negative social media event will happen (multiplied by) The impact that negative event will have if it does happen.” The report does neither:

  1. They don’t calculate the “likelihood” that a negative social media event will happen. They asked, “How risky do you currently consider the following social media channels to your organization?” That’s an opinion of actual risk, which is actually “fear.”
  2. They don’t calculate the “impact” of the negative event. The closest they get is show the reader what a risk assessment would look like. It’s a laughably simplistic chart (see below). And they also ask a “Yes/No” question, “Does your company currently assess its social media risk?” That question should have been the qualifying question to even take this study.

By Altimeter’s own admission risk is an equation, and yet they don’t calculate anything. This study on “risk” negates the real analysis of risk performed by actuaries, financiers, and many others.

This study is NOT a calculation of risk. This study is a calculation of fear.

To defend their stance that social media is “risky,” Altimeter pulled out single well-known public examples of companies being damaged with regard to IP, brand, and other supposedly risk-prone areas of business.

This study shows that given communications can no longer be controlled, companies are afraid of others’ ability to freely communicate in a public sphere. And of course that communications could be damaging if someone posted your intellectual property or said how much they hated your brand or product. We all knew that before this study was every conducted.

This study does not provide any insight into where risk lies and how damaging it is. Instead, it tells the reader that these well known social media experts working for big brands named in this study are afraid of these things. Are you afraid like they are? Well maybe you should be.

Here are the questions that should have been asked:

  1. Where do you fear loss in your company?
  2. What are the prized jewels you’re trying to protect?
  3. If someone actually damaged those prized jewels in social media, what would that cost your company?
  4. Have you currently had any loss due to social media? If so, what was it and how much did it cost you in damage control, brand rebuilding, legal fees, and employee time?

Given that we don’t have many examples of social media loss, and the fear expressed in this study is so high, we should see a huge discrepancy between question 1 and 4. If true, that would mean that fear of social media loss greatly supersedes actual loss from social media. But if Altimeter Group released that study, no one would be rushing to them for business. Alarmist research causes the phone to ring.

This was one of the many stories I harped about on this week’s edition of “The Beancast” with Bob Knorpp (@BobKnorpp). On the show with me were:

Listen to the entire show below or download it.

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NOTE: This was actually a tough post to write because I’m actually friendly with many members of the Altimeter Group and completely respect their work. This is not intended to be an attack on their brand and the quality of their client work, but rather a discussion on the issue of how social media can negatively affect many aspects of our business, and how businesses can prepare and mitigate those potential damages.

Stock photo of Risk being erased courtesy of Big Stock Photo.

{ 3 comments… read them below or add one }

Hal Thomas September 5, 2012 at 6:19 am

Nice post, David. I totally agree: if you claim to calculate something then actually have measure something that can be quantified (i.e. not a “feeling”).

And I don’t think this post attacks Altimeter. They do some good work but even the best of us swing and miss sometimes. This study just happened to be one of those misses.

Alan Webber September 5, 2012 at 10:27 am

Hi David,

 

Thanks for the post and I appreciate the honest feedback. I
also want to take the opportunity to to respond.

 

I agree with you that there are firms, consultants, and
bloggers who release reports and write posts just to raise their profile. That wasn’t
the case here. The purpose of this report was to begin to establish a new field
of credible research around whether social media presents a risk to
organizations, what that risk is and how to manage it. I guess it is a matter
of opinion if social media presents a risk to an organization, whether real or
perceived. I and a number of others are of the opinion it does.

 

You are absolutely correct that I placed the equation for
calculating the risk matrix for social media without calculating that risk in
the document. If that was implied in the document that I would be calculating that risk, it shouldn’t have been. But
I think it is important to understand how risk is calculated and that is why I
included that.

 

You also pointed out that the study doesn’t provide any
insight to where the risk lies or how damaging it is. We did a top level of
that by the categories and breaking down where the potential issues are. But just
like any good actuary would tell you about calculating the risks of any event,
there is no one single risk calculation that covers every firm and every threat
– essentially there is no way to do that yet.

 

Just as your risk profile is likely different from mine, it
is the same for social media for every brand, firm and organization. So what is
required is not a score, but a methodology and data to test it against. There
was such a methodology included in earlier versions of the document that firms
could use to calculate their own risk profile, but it was removed. We probably
should have left it in there. As for data, most firms are loath to report any data
about damage to their brand or real issues, so we really don’t have data yet
about social media risks to determine if the likelihood of risks are real and
what the actual bottom line impact is.

 

The fact is that social media is a fairly immature channel
and we really don’t know that much about the risks or for that matter the benefits of it. For
example, we don’t know what the
real benefits of social media are – though there are a lot of assumptions and
case studies, does it really lead to better client engagement or bottom line
revenue in every case? I haven’t seen an ROI model for social media yet that
isn’t so loaded with assumptions that it actually proves the value. Yet we read
“alarmist research” about if you aren’t on Facebook/Twitter/Youtube and whatever
other platform you are loosing customers, your competitors are beating you, on
and on. It isn’t that there isn’t value in social media, it is just that our research to support that position hasn’t caught up to the market yet.

 

Just as I think the research on the value of social media is
important, I think this is an important area of research but it is still emerging and definitely
needs more study and more work. And you have asked some great questions that need
to be answered. As I work on more research in this area, I am willing to share
my research agenda and I would appreciate your feedback.

 

Cheers,

 

Alan

David Spark September 5, 2012 at 1:27 pm

 Alan, thanks for your response. Why this report set off alarms for me is it was asking for unfounded questions about risk. To just ask someone, “What do you think is the riskiest social media outlet?” actually does not give us any insight into the riskiest social media outlet. What do they base that on? A hunch? That’s not risk. How could Facebook be riskier than Twitter, Pinterest, or YouTube? Open communications is risky, not the delivery method. It’s like asking what’s the riskiest cell phone? Is it the Samsung Galaxy III s or the iPhone? That provides no insight to the issue. It’s a complete red herring question.

What I would have asked is “What are you afraid of and why?” And like you did in your piece talk about the different ways to mitigate these issues through privacy policies. But, as you well know many people who abuse social media are not beholden to a company’s privacy policies. So the other issue is creating some of triage where you can respond to those issues for which Hal Thomas described an example on the podcast.

The word “risk” is emblazoned all over this report and there appears to be constant claims and measurements of risk. In no case do I believe there was ever a measurement of risk. But as you mentioned in your response, we all know that both social media ROI and risk are essentially impossible to measure because there are far too many non concrete variables.

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