Elements of social media - like blogs, community and groups - are fast becoming a part of many financial services websites. Firms have also begun to stake out their place on major social sites like Facebook and YouTube. This year in particular has seen several financial services firms wake up to the potential of social media. As more and more companies dive into this new territory, it’s inevitable that some will succeed in implementing a social media strategy, while many will fail to effectively engage their audience.

A recent post on the Sta.rtup.biz forum, a social network for small business, highlights one major reason why business and social media tools often fail to mix - the level of involvement by the creators. Take a business-hosted online community. For such a community to succeed, the firm must make its purpose clear and compelling. Executives must be willing to take a chance and enter the conversation occurring between participants. It also helps if the firm posts its own original commentary to keep users engaged and encourage participation. It’s not enough to launch a community and hope that people understand its raison d’etre; firms must provide direction without suffocating the dialogue.

Clearly, many companies have been driven into the social media space by an over-exaggerated fear that they’ll “miss the boat” if they don’t do somethingtoday. This explains the bare-bones Facebook pages that many companies have posted in the past year. These often mirror a firm’s corporate homepage and are rarely updated with interesting content. Users find such profiles unprofessional and uninteresting and will most likely avoid connecting to these companies as a “friend” even if positively predisposed to them.

On the other hand, some companies over-saturate their Facebook pages with banner ads and use blast emails, bulletin spam and large image comments to try to promote themselves. Many studies show that Web users are able to tune this noise out. Companies should remember this as they decide how to use their Facebook presence. People join a social network to be social, not to be bombarded by flashing banners.

The bottom line is that when developing a social media strategy, companies should have a clear picture of what they hope to gain and what they hope to give to users. In a nutshell, you have to give if you want to get.

For more perspective on these and other related issues, look out for our upcoming research report - Social Media: Trends and Tactics in the Financial Services Industry. This comprehensive study will be published this October and promises to be the first industry-wide assessment of the way financial services firms are using social media today. Reserve your copy by September 30th and receive over a 15% discount on the price. Please contact Jaclyn Silverberg by email or at (212) 832-2002 x127 for more information.