Wow! The announcement yesterday that Salesforce.com is acquiring Radian6, the market leader in world of social media monitoring (used by over 50% of Fortune 100 companies) is pretty dramatic by the standards of any industry.

While the world has tumbled into and through recession, the monitoring industry has been booming over the past 2 years. Radian6 has been leading the pack, but strong players like Sysomos (another Canadian company, recently acquired by Marketwire), Synthesio (based in France), Brandwatch (a UK company that just secured investment), plus the old guard like Visible Technologies, Crimson Hexagon and new players like Ubervu and ViralHeat have made this one of the most innovative and exciting industries to be part of.

Yet monitoring is only one stage in the customer engagement cycle.  In social media marketing we often talk about the need first to listen (i.e. monitor social media), then to engage, and finally to connect. Some monitoring solutions, such as Radian6, have started to offer engagement features – to manage and reply to online mentions – but this has been better achieved by the equally vibrant dashboard market, with players such as Hootsuite (the market leader), CoTweet (for team collaboration) and MarketMeSuite (much more marketing-focused),

But engagement is about as far as the social media marketing industry goes today. What comes next is building a relationship.

This is where we leave marketing and move into what has traditionally been called customer relationship management (CRM). He we have a large and thriving industry with solutions from giants like SAS, Oracle and more recently Salesforce.com, that has been focused on how we manage our customer data and relationships within our companies. In other words, more internal than external communications.

Since this is the more established market with billion dollar players a-plenty, it was somewhat inevitable that these giants would start to snap up the larger and more profitable monitoring companies. While CRM companies have been good at producing robust tech solutions, it makes sense to “socialise” their solutions through the acquisition of social media solutions (and teams) rather than try and build newly open solutions from the ground up. As you can see from my diagram above, the Salesforce.com / Radian6 connection is an almost perfect match.

So what next? Well, as we move towards an end-to-end customer engagement process that includes monitoring, engagement dashboards and CRM, I think the next changes are likely to be within companies. Most companies aren’t currently structured in way that makes managing customer relationships (not data) cross-departmentally workable. As Brian Solis pointed out in his recent visit to London, the “socialisation” of businesses is only just beginning and – to be successful – it’s going to require the whole organisation to understand what customer engagement, as defined by our recent experiences in social media, truly means.

Salesforce.com will be speaking at Social CRM 2011 in London on 6th May. Early Bird tickets @ £145 are available from the ticket site now.

During that event and our subsequent Monitoring Bootcamp we analysed many of the leading monitoring tools, including Radian6, Sysomos, Brandwatch, Synthesio and SM2. We also suggested best practice for brand and reputation management and hammered out a framework for calculating and benchmarking the ROI of listening – which of course depended on what you were listening to and why.

A year on and the social media monitoring industry has dramatically developed. As happens in technology booms – and make no mistake, the social analytics market is booming – there has been a spate of acquisitions. Since Alterian bought Techrigy in July 09, Meltwater Buzz (which was reselling a white label version of Techrigy’s SM2 solution) acquired Buzzgain, a promising start-up co-founded by social PR guru, Brian Solis.

July this year saw, in my view, an extremely savvy deal, when Marketwire bought out Sysomos, the impressive Canadian solution headed up by Nick Koudas. Sysomos is a very smart piece of kit, so I wasn’t at all surprised to see them snapped up. But it was in May this year when Lithium, the social CRM company acquired Scoutlabs – a highly user-friendly social media monitoring tool, though one at the lighter-touch end of the analytics scale (where the likes of Nielsen BuzzMetrics weigh down the other) – that I think the most interesting development for the monitoring industry occurred.

As I mentioned in my previous post about social CRM, the big question for CEO’s whose companies are already monitoring the social web is now: how can we use all this data? By opening up their previously closed CRM databases to new flows of data from the web, companies can start to filter this new information to the people who can action it. In any fiercely competitive industry information is king and those companies that successfully grease the flow of information to their key decision-makers WILL be the winners.

I recently described social CRM as the end-game for social media monitoring companies – but it looks like rapidly growing social CRM companies, like Lithium and Jive, are going to subsume many of the monitoring start-ups before they mature. That said, the monitoring companies aren’t taking that risk sitting down. I know of several monitoring companies that are working with large brands to create complex, distributed systems to ensure that accurate, relevant social media data reaches the right people within their organisation in virtual real-time. Storing and enabling users to manage that data is, in theory at least, just one step away.

This is the topic I expect to dominate the discussion at our Monitoring Social Media conferences and Bootcamps in Boston, San Francisco, New York, London and Paris over the next 3 months – at least among the industry insiders. That said, there are an awful lot of big brands and agencies that are still only now getting to grips with social media monitoring and measurement. The “tools” and “brand management” questions will keep coming back time and again. We will also, doubtless, suffer the habitual cry of “Google’s coming!” and need to re-iterate the models for measuring ROI until they become a manta. Look out. Here comes the early majority.

UPDATE: I’ve just been reminded by @themaria that Attensity acquired Biz360 earlier this year too. Another smart acquisition in my view.

1. The technology is fairly stupid.
2. The services produce unreliable data.
3. Sentiment analysis is flawed.
4. The don’t offer regional-specific data.
5. Influence analysis is flawed.
6. Visualisation tools are misleading (due to data).
7. The process is time consuming.
8. The services are expensive and not value for money.

The discussion has generally flowed with Asi’s criticisms. Many of the commentors, including staff and founders from several leading SMM service providers, concede that the industry is still relatively new, that it’s grappling with difficult issues: how to gather filter data from the masses of spam and nonsense on the web; how to gauge sentiment accurately without using expensive humans in real-time; working out what “influence” means in different contexts; plus the normal troublesome issues web services have – like getting the usability, price and customer support right.

Having collated the data within this post though, identified the influencers and gauged the overall sentiment – there’s a definite feeling that social media monitoring services to date have been oversold. I’ve certainly seen promises of “80% accuracy for sentiment detection” and “we’ll identify the most influential people in your industry”. Claims which, to anyone lacking a world-weary bullshit detector, must seem fantastic. I can see hard-pressed PR Managers around the globe signing off on $1000/month just to bathe in the warm glow of that promise.

Anyway, Justin Kirstner of WebTrends has just boldly struck back for the social media monitoring services, highlighting the novelty of in industry in which many services are still on version 1.0 and criticising Asi as an “armchair critic” an a Johnny-come-lately to the discussion. I can see this one going into extra time. Well worth a read through the comments if you’ve got a spare 15 mins.

P.s An Invitation: If you’d like to take part in a real-life debate about social media monitoring services, meet the vendors and hear case studies, I’m running a conference in London late in autumn 09. I’ll be publicising this in Sept, but you can email me for more info: luke(at)oursocialtimes.com