Syncapse's bankruptcy raises doubts over sustainability of social media companies

by Ankita Mohinta    Aug 13, 2013

social media

The fall of the Toronto-based social media marketing company Syncapse has shocked many in the industry. Once noted by analysts as the industry leader in social media, the company had received a $ 45 million in funding initially. It also had offices in London, New York, and India. With high profile clients like Coca-Cola, Johnson & Johnson and JPMorgan Chase the company contributed to the innovation in social media in the 2000’s. However, A week ago, the company consisting of 154 employees filed for bankruptcy. So what led to the fall of this global company?

It has been widely reported that social media is growing by leaps and bounds. And most companies enlist the help of social media in their marketing initiative. Some insiders say, that the company barely made 15 million in revenues annually and hardly ever managed to make profit, was one of the reasons for its downfall. But other analysts disagree with this point of view stating, that most social media companies for instance Twitter have not been able to make a stable profit until recently.

There have also been reports of Facebook’s declining user base in developed nations like US, Europe. But in emerging markets like India, Brazil Facebook’s user base has shown a strong growth in the last few years, increasing the monthly active users (MAUs) worldwide to rise by 21 percent to 1.15 billion as of June 2013. So is there a social media fatigue among users? Another study published by the journal of consumer research cited that increased internet usage is leading to people overexposing themselves in public, which has led to people getting tired of social media.

But reports of declining user base doesn’t necessarily mean the demise of social media. Whether is B2C or B2B, social media is being utilized on a daily basis. What appears as a reason for concern, could simply be a case of a shift in the trends of the industry. Some companies such as Twitter and LinkedIn have been successful in this respect by announcing new updates and innovations in their model to attract new customer base. In an article by Karim Kanji, published by itbusiness.ca, a social media expert says, that the industry matured and has become more competitive. Clients are smarter and educating themselves.  They are asking how social media drives business results.  And by business results, it doesn’t necessarily mean more Likes, followers, Re-Tweets. People are now getting down to basics and are asking how social media can help businesses increase its revenue and decrease costs and help keep up with the latest trends.

Syncapse’s former CEO Michael Scissons believes that no single reasons can lead to social media’s downfall. In a statement to The Globe and Mail he says,“Despite our best efforts, multiple factors relating to evolving customer needs, market pricing changes, customer revenue concentration and rapid changes within partners like Facebook, Twitter and YouTube left the company in a position where this action was necessary.” He added saying the biggest challenegs faced by most media companies nowadays is to  innovate in an industry that is constantly evolving.

Most analysts believe that social media will continue to grow strong and be a profitable sector in the marketing industry. The problem occurs when some feel, that social media is just another tool to be used in a marketing initiative. But the truth is that social media is no longer separate from marketing. Instead of social marketing, maybe companies need to take a different approach and think of social media as social business. Social media is not just a fad, it’s here to stay.