Social Media's Impact on Marketing

A Columbia University study published in Science (2/10/06 issue) sheds light on the role that social influence can play in driving consumer demand. Researchers recruited more than 14,000 people in a study to measure the impact of social influence on the choice of songs to download.

Participants were randomly allocated to one of two experimental conditions: “independent,” in which they saw only the names of the bands and songs; or “social influence,” in which they could see, in addition to the bands and songs, how many times each song had been downloaded by previous participants.

The main finding was that social influence amplified the inequality of outcomes, meaning that popular songs were more popular and unpopular songs were less popular than when participants made their decisions independently. These results suggest that when people are influenced by what others think, do or buy, their individual choices clearly change.

The constant proliferation of choice will further exaggerate consumers’ limited capacity to discover and digest content, thus strengthening their tendency to like—or at least consider—what they think other people like. Social networking sites such as MySpace.com and Facebook, tagging sites such as Flickr and Del.icio.us, and user-generated content sites such as YouTube are increasingly exposing us to other peoples’ decisions on what they watch, listen to and buy.

The call to action for buzz marketing execs here? Exploit the emerging social media!

Once a product or service has gained a following, marketers can amplify the corresponding social influence signal. They can direct the attention of a much wider audience to the individuals or groups who are already enthusiastic about it. This strategy differs significantly from word-of-mouth or viral marketing approaches that seek to identify so-called influentials in order to solicit their endorsements.

 

Is Click Fraud for Dummies?

Google says auditing firms can't count! The company put out a report, claiming that third-party auditing firms that report fictitious clicks - clicks Google says were never made on Google’s AdWords platform – are implying that keyword advertisers everywhere are suffering inflated costs.

Despite past efforts to downplay it, click fraud - phony clicks that drive up a site's revenue, rather than direct the clicks to a relevant search for a product or service -- has become a serious issue for ad-driven websites. And Internet companies are trying to get ahead of the problem.

One way Google has addressed this is by introducing an "invalid clicks" reporting tool to give advertisers access to better data.

The industry also is trying to minimize the perceived size of the problem. "We've seen media reports and data from consultants that didn't make any sense," says Shuman Ghosemajumder, Google's business product manager for trust and safety. Google wants auditors to change their accounting, and advertisers to know they may get "distorted data".

The Google report doesn't accuse click fraud auditors of deliberate wrongdoing, but it does say they didn't do basic checking that would've revealed obvious discrepancies. Click Forensics, one of the firms singled out, has said roughly 14% of clicks overall are fraudulent, and CEO Tom Cuthbert stands by his firm's numbers.

So what’s all the Buzz? Click fraud is part of life. What if you click on an ad (and I know you have), but change your mind as it is trying to load? Are you committing click fraud? And could there be more to the story? Are there sweat shops in China just clicking on your ads? I don’t think so.

 

An Apple a Day Keeps the Standards Away?

Apple’s iPod is the number one music player in the world. iTunes is the number one digital music store in the world. But customers don't even seem to care that no one but Apple is allowed to make players for iTunes Music Store songs, and no one but Apple can sell you proprietary file-format music that will play on the iPod.

Competition-proofing music makes switching away from Apple’s product expensive for its customers. But the world of consumer electronics changes quickly.

Say that in 2008 someone finally manages to nail an iPod killer, just as you're ready to retire your 2006 iPod Nano. At $180 for the new device, it's a no-brainer to pick one up on your next Amazon run or duty-free trip.

What if you're the kind of iPod user who also buys the occasional iTunes Music Store song? Just one or two a month, maybe 20 a year since Apple launched the Music Store, and you'll have 100 tracks by 2008. That's a $99 investment in music that only plays on the iPod/iTunes combo. And if you buy more than 20 tracks a year -- or splurge for audiobooks, full albums and other high-ticket Music Store items -- you'll find yourself out hundreds of dollars that you'll flush away if you change vendors.

Sure, you could conceivably burn and rip all that music if you want to spend a couple days with your burner, and if don't mind retyping all the needed metadata. The more music you have -- the more onerous this task becomes.

So what’s all the Buzz about? – This is one case of standards gone wild. Standardization of the digital music player was good. Standardization of the digital music store was also good. But adding to that a proprietary digital music format? That’s bad! And I don’t mean bad as in good!

 

China's Got a New Internet

A recent issue of CIO magazine reported that engineers in China are busy working on a project that the Chinese government has already invested close to $200 million toward. It’s the China's Next Generation Internet (CNGI), a faster, more secure, more mobile version of the current Internet, which the country’ plans to unveil at the 2008 Olympics.

Back in 1983 when the Department of Defense used the Internet to connect a select group of academics and researchers, it adopted an addressing system, IPv4, so that computers connected to the Internet could each have a unique identity for recognizing and communicating with each other. The addressing scheme uses a series of four decimal values, each of which can be a number from 0 to 255 (also known as 32-bit addressing). That provides a total of 4.3 billion possible addresses, which seemed like plenty in 1976 when computer engineers Vint Cerf and Robert Kahn (and, oh yes, Al Gore) developed IPv4. IPv6 solves the address shortage by increasing the number of bits from 32 to 128, resulting in a near infinite number of combinations.

The innovation potential provided by IPv6 is enormous. Any device, from a cell phone, to a streetlight, to a household thermostat, can have its own unique position on the Internet and be connected all the time! Utility companies will be able to read meters remotely over the Internet. Consumers parked outside a grocery store will be able to download shopping lists from their Internet-connected refrigerators to their BlackBerry devices.

Since every computer will have its own permanent IP address, users will be able to authenticate the source of e-mails or other requests, providing the means to track messages and thwart today's hacking, spam and phishing schemes.

Okay, here’s the Buzz Kill: Companies that wait until demand for IPv6 services emerges – from overseas business partners for instance – could face a massive onetime expense hit in the ballpark of what it cost to fix the Y2K problem. So let’s get going on this right now!

 

Is online advertising SOLD OUT?

A recent McKinsey report seems to suggest that we are reaching the maximum utilization of all online advertising. And, we could all be in for a spike in prices. Now that’s a Buzz kill!

The McKinsey research combined quantitative analysis with more than 50 interviews with leading digital advertisers, ad agencies, and media companies. The study compared both current and projected U.S. ad spending for online vehicles—including video, banners, and paid search ads tied to keywords that consumers enter in search engines—with the maximum amount of advertising such vehicles could theoretically absorb today.

The analysis revealed that use of the most attractive digital ad vehicles is already quite high. Plus, without large increases in online advertising "inventory," demand could outstrip supply over the next 24 months (see table). While prices are a closely guarded secret, the MicKinsey interviews indicate that prices are already rising and likely to jump further as advertisers bump up against constrained supply.



I find it hard to believe we’ve reached the limits of the online advertising space so early in the game. There’s a good chance that blogs, wikis and other forms of new media could fuel continued growth. What’s your take on this?