Can Sprout Social Win the Social Media Monitoring War?

Brussels sprouts, under CC license by Flickr user baha1210

Brussels sprouts, under CC license by Flickr user baha1210Whether Malcolm Gladwell likes it or not, social media just keeps getting bigger and bigger. But while the gravity is with a handful of networks, there are still plenty of unsolved problems out there. One of them? Helping businesses understand, manage and improve their online presence — that’s precisely what Sprout Social, the Chicago-based social media monitoring service, hopes to do.

The company, which just released its Google Analytics integration, is aimed squarely at small businesses, with a paid service that provides a single dashboard for managing your company’s social media presence. It hooks into Facebook, Twitter, LinkedIn, Foursquare, and other networks, allowing users to see precisely what’s going on across their spread of communities and deal with it through a single interface.

It’s a very smart and usable service, but it’s a very difficult space to get right. I asked CEO Justyn Howard how he’s going to solve some of the big problems — for a start, getting small businesses to understand why they’d need the product in the first place. Although Sprout’s prices aren’t steep ($9 per month for the standard account, $49 per month for an option that lets you manage many more identities), the problem for many companies is that measuring the return on investment of social media is nearly impossible.

“ROI is mysterious…but your business is gaining or losing customers already, you just don’t know it,” Howard says.

“In fact, ROI is something that, for a lot of our customer base, is very difficult to measure in general — not just for social media,” he says. “What we’re doing for now is trying to embrace the concept that ROI is secondary. Let’s spend less time trying to calculate that, and concentrate on the things you can measure: whether people are talking about you more today than yesterday, for example, what’s your response rate and so on.”

That’s a different approach than companies such as Klout and PeerIndex, for example, which are trying to create more straightforward ranking systems. Howard thinks that there will not be a single metric to rule them all, however.

“Klout’s doing some great stuff, but I think the mistake is that the businesses who are just getting their feet wet in social media think that it’s best practice,” he says. “Something like Klout encourages people to only engage with the most influential customers, but not all customers are influential. Would you only sell your product to the richest customers?”

Since social media monitoring is one of the hot spaces right now, there are plenty of competition out there. At the free end, there are lots of powerful clients, and for more direct competition in the business space, Howard points to companies such as Postling at one end of the spectrum or Radian 6 from the big business end. Isn’t the problem with a small-business focus that you’re always going to be attacked from both sides? After all, free consumer tools end up pushing into the premium business to make cash, while large corporate providers can always open up to smaller customers and kill off rivals.

Howard suggests that the answer is simple: great products. In recent months they’ve added dozens of new features, including message scheduling, monitoring and measurement. It’s early days, but there’s plenty more coming up, including better team-based capabilities and other features that users have asked for.

And it’s got money in the bank to help it achieve that, too. Earlier this year, the company closed a $10 million Series B round from New Enterprise Associates, which came on top of earlier funding from Lightbank (the investment fund from Eric Lefkofsky and Brad Keywell, two of the founders of Groupon). With that war chest, the company hopes it can make a serious dent and step up a gear when it upgrades the platform later this year.

“You’re right when you say we could get pinched from both sides — but we’re going to pinch back,” says Howard. “We’re going to start introducing things that peel people away from those bigger guys.”

Image used under Creative Commons license with permission of Flickr user Baha1210

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