The Social Security by Chris Trayhorn, Publisher of mThink Blue Book, September 1, 2006 Sites that rely on user-generated content are altering the human fabric of the Internet and the way that performance marketers reach out to customers and merchants and communicate with each other. Online marketers are testing all of the new communication methods – blogs, social networking sites, wikis, and photo and video-sharing sites – to see if these platforms can help them drum up business. And with good reason. The popularity of many of these emerging areas is seeing steady, if not explosive, growth. Blogs, which allow users to easily post new content to their site as well as effortlessly link to other sites, are on fire. Forty-four percent of American Internet users read and post on blogs, discussion boards and other consumer-generated media outlets according to a February 2006 Pew Internet & American Life project study. Technorati reports that approximately 70,000 new blogs are created every day and that the total number of blogs doubles at least twice a year. But it’s not just blogs. Social networks, such as Bebo and MySpace, are communities in which an initial set of founders sends out messages inviting members of their own personal networks to join the site, and new members repeat the process, are a new national phenomenon. As of July, MySpace has 72 million members, Bebo has more than 57 million members and hi5 has more than 40 million. In addition, there are single-use social networks where people share one type of topic such as YouTube.com for video, Flickr.com for photos, Digg.com for news stories, Del.icio.us.com for links and Wikipedia.com for encyclopedia articles. All these types of collaborative platforms are the crux of the Web 2.0 model where the ease-of-use technology allows anyone the ability to contribute. These sites are built to harness the breadth of experiences so everyone can benefit from the collective wisdom – they have the advantages of collaborative group input but because these services are online and can be anonymous (through aliases), users are not afraid to dissent, according to Jim Nail, a former analyst at Forrester covering the social networking space, who is now the chief marketing officer of Cymfony. “Therefore there is not concern about the dangers of ‘groupthink,’ when individuals intentionally conform to what they perceive to be the consensus of the group.” And when it comes to growing social groups MySpace.com leads the pack. In July, Hitwise announced that MySpace.com, for the first time, was the No. 1-ranked website in the United States based on the number of visits. MySpace.com accounted for 4.46 percent of all Internet visits in the U.S. for the week ending July 8, 2006 and has propelled past Yahoo Mail. Bebo increased its market share of visits by 21 percent from May 2006, the largest percentage increase among the social networking websites. THE SOCIAL BUTTERFLIES So who’s hanging out at these social networking sites? Nielsen has identified a group, called “My.Internet,” that’s especially likely to visit networking sites. Sixteen percent of Web users belong to this group, which has a median age of 32. Nearly all members of this group – 99 percent – visit blogs; 84 percent are members of an online community; 57 percent have their own blogs; and 22 percent use RSS feeds. Nielsen reported that “My.Internet” users tend to be highly engaged with most of the websites they visit, as measured by 10 factors, including whether they “liked” the site and were likely to return. With all of the promising information about traffic and demographics, advertisers are eager to get their messages in front of the young and wired demographic that favors the social networking sites. Combined spending on blog, podcasts and RSS advertising skyrocketed 198.4 percent to $20.4 million in 2005. It is expected to grow another 144.9 percent to $49.8 million in 2006, according to an April 2006 report from PQ Media, a custom media research firm. But advertising on social networking sites can be tricky, and marketers need to take strategic and creative approaches. The audiences skew younger, and often these younger audiences are exceptionally adept at tuning out traditional banner advertising – therefore pushing ads no longer works. Mark Brooks, an analyst for OPW.com, says, “Interruption marketing is old school and not appreciated by the younger audience. Marketers wanting to use social networks need to put their thinking caps on and get creative.Case in point: Burger King is sponsoring downloads of episodes of 24. Very cool and very viral and plays to the MySpace demographic perfectly.” In addition to advertisements and sponsorships, marketers know that the buzz generated on social networks is much more of a powerful endorsement than any form of promotion. In fact word of mouth is widely considered the most powerful form of marketing and the wave of the future for influencing sales. According to a December 2005 McKinsey report, approximately two-thirds of all economic activity in the U.S. is influenced by shared opinions about a product, brand or service. Forrester Research’s 2004 study showed that over 60 percent of consumers trust product recommendations found in online sources like discussion boards. A 2004 RoperASW report, now part of GfK Group, found that over 90 percent of Americans cite word of mouth as one of the best sources of ideas and information. Further, they rate word of mouth twice as important as advertising or editorial content and put one-and-a-half times more value on it today than they did 25 years ago. Dave Evans, moderator of the social networking panel at Ad:Tech San Francisco in May and co-founder of Digital Voodoo, along with Dave Ellett, CEO of Powered, examined the purchasing funnel of ACP (awareness, consideration, purchase). They saw that the majority of traditional advertising dollars, such as interruptive efforts like television commercials, is applied at the awareness point in the ACP. But because consumers are increasingly finding ways to block advertising through TiVo, spam filters and do-not-call lists, the impact of these types of traditional advertising has diminished. Now marketers are not only tasked with how to get their messages through to potential customers, but they must also worry that their potential customers are increasingly talking with each other and “comparing notes.” To counter this problem, Evans says that, “When marketers reach out in the consideration phase, they contact consumers at the precise moments that they are thinking about a product or service. Through consumer-generated media and word of mouth, evangelists can actively impact consideration processes.” The advantage of social networking for marketers is that it does not involve interrupting like an advertisement (which is in the awareness phase) does. LEVERAGING SOCIAL NETWORKS There are a variety of ways marketers are taking advantage of consumer-generated media and word of mouth. Social networks are having an incredible influence on how business is getting done. Organizations, ranging from movie studios to sneaker manufacturers, are changing the way they make decisions, connect with customers and market products because of the increase of new tools that enable people to express themselves more easily online. “There is a new paradigm where consumers drive the conversation and have the control. Companies have to let go of the marketing speak and let people communicate with each other in an unfettered environment,” Geoff Ramsey, CEO of eMarketer, says. One opportunity is for marketers to take ideas from social networking sites and apply it to their own business, he says. For example, GlaxoSmithKline is working on a social networking site for the weight loss community that lets users talk with each other and answer each other’s questions about how to lose weight, such as diet and exercise. GlaxoSmithKline is doing it for two reasons: To gain learning from these affinity groups – marketers can find out a great deal about how this g roup of people define and express themselves. They can use the language or phrases observed for purchasing keywords for search campaigns. They can apply the learning to sales copy in magazines, radio campaigns or on the Web. To participate at the site, the visitors must register there and provide some demographic information. Now GlaxoSmithKline has a list of consumers to market to when the weight loss product launches. By listening in, marketers have an opportunity to hear how people really feel about their brand or product. With such learning, they could correct misperceptions in the marketplace or make effective changes to their products or customer service. “Until you have demonstrated that you listened and responded accordingly, you cannot deliver hard-core messages to people,” Ramsey says. For this reason, there are many natural language processing companies that can determine what users are saying. One company, Cymfony, offers a product that follows the flow of the message, tracks the positive and negative reactions to it and measures its influence on the audience. It scans and interprets the voices of users in blogs and social networks to determine how these discussions are impacting potential customers. Nail points out, “In Web.1.0, the marketers’ job was to appear adjacent to that content but now that users are generating the content and are looking for a social engagement, marketers’ messages need to be part of the content.” To do this, companies need to know what their customers are saying. Another way that companies can use social networks is to create profiles on the sites. For example, MySpace is currently charging upwards of $50,000 per month for big brands such as Pepsi, Adidas, Dell and Ford to build and promote profiles. Although this seems like something that members would dismiss as sheer commercial promotion – a quick look on MySpace shows that Jack Box, the character behind the Jack in the Box restaurants, has 130,989 friends (meaning that these MySpace members intentionally linked to the Jack Box profile). Of course, MySpace must be careful that selling these types of member profiles does not cause a mass exodus of its members. Another way that marketers are leveraging user-generated content is by having consumers create their advertisements. The benefits are multifold: It gets consumers involved in the brand; the ads feel more authentic; it saves marketers money because they don’t have to hire an advertising agency; and if the ads are funny or interesting, they propagate themselves by being sent around on platforms such as YouTube.com or GoogleVideo. Companies like Volkswagen and MasterCard have harnessed the affection that some customers have for their specific brand by asking them to create and vote on ads, and created successful campaigns and tremendous buzz in the process. AFFILIATES GOING SOCIAL When it comes to testing the waters in burgeoning areas, affiliates are usually eager to dive in headfirst. Rosalind Gardner has a blog called Net Profits Today, which she updates daily. She says: “I love my blog. They make posting new content to the web such a breeze. No uploading required. Just write and publish. It doesn’t take much to copy and paste a merchant offer and add a few of your own editorial comments. Another advantage is the free search engine traffic that blogs invite. Search engines love fresh content, so I’d highly recommend that any affiliate who isn’t blogging yet, start ASAP! Of course, the best benefit is that blogs are yet another way to enhance the relationship you definitely want to build with your visitors as an affiliate, especially in light of how difficult it is becoming to make sure the mail gets through nowadays.” One social network specifically for affiliates is the Affiliate Summit Social Network. Consultant Shawn Collins, the Affiliate Summit co-organizer, says the network “helped Affiliate Summit by enabling attendees to network in advance of the conference, as well as to brand themselves through posts to their journals, sharing bookmarks, etc. This value-add assisted us in selling Affiliate Summit, and I think it is conducive to our goal of bringing the community closer together.” He adds, “Now that the [July] show has ended, I will be focusing on getting more attendees to register after the fact. The ongoing network will benefit them, and we will be using it as a retention tool that ties to our mission of creating a unique educational environment and networking opportunity that facilitates the exchange of information about affiliate marketing.” Affiliates are also testing the waters of mainstream social networks, such as MySpace. Collins has created a profile on MySpace, with the user name affiliate manager, and posts the content of his blog, AffiliateTip.com, on his MySpace blog. “My goal is to get more eyeballs for my blog. The goal is awareness – to get incremental readers – the ultimate goal is to recruit managers for affiliate programs. The first thing I talk about in my profile is that I am running these two programs and I have banners up to join them – PayLess Shoes and Snapfish.” One clever affiliate whose social networking site has garnered lots of media in the past six months, including spots on CBS Early Show and Good Morning America, is 23-year-old IT manager Kevin McCormick. Six months ago he started DressKevin.com, a site that is a graphical database of his wardrobe, where users vote on what Kevin should wear on a daily basis and later comment on it. DressKevin.com inspired a second site, MyDrobe.com, a wardrobe management system for users. Both sites keep track of the last time an item of clothing was worn, the size, brand and style details. On DressKevin.com, the clothes descriptions sometimes include a link to the merchant or affiliate program where it can be purchased – but not for every item. “If affiliate marketing did not exist, I would be providing uncompensated referral links anyway. I am trying to maximize it without comprising the integrity of the site. That is why affiliate marketing works well for me. I have Old Navy shirts on my site and they have links to Old Navy through Commission Junction. But I also have descriptions of my shirts from Hollister and Express with no compensation because I like their shirts.” He attributes this growth and popularity to the credibility and authenticity of his site. McCormick says he started his site not to make money but to see if it would catch on and people would pass it on to their friends. “I was uninformed about CPC advertising, media, PR, affiliate marketing or even making a website.” McCormick does not actively seek out affiliate agreements with merchants. He signed up to participate with some retailers such as Old Navy and Macy’s through Commission Junction. He appreciates the convenience that the network offers in terms of finding him appropriate merchants to sign up with, and the tracking and processing of commission paychecks. McCormick’s other site, MyDrobe.com, offers more opportunity for generating revenue. It is a wardrobe management system that is a database for clothing, and enables users to manage their wardrobe and create a profile as well as enabling people look through other people’s clothes and to see what they are wearing. MyDrobe.com has 4,900 registered members and the demographic is heavily female, with a significant amount of girls between the ages of 13 to 16, followed by a concentration of girls in the 16-to-20 age range. “Any website that focuses closely on brand-name products like clothing is a great candidate for utilizing affiliate marketing channels that will pay a commission on referral sales. MyDrobe’s clothing descriptions have ‘click here to buy this shirt online now’ for those who see a particular item of clothing that they like in someone else’s wardrobe and would like to buy it for themselves as well,” he says. The site offers complete product catalogs that are provided by affiliate networks in “vendor showcases,” which are made for a single cloth ing company. For example, at the vendor showcase at MyDrobe.com/gap, users can browse through clothes currently for sale at Gap. Users can add clothing to a wish list, post comments and provide ratings and click on links that will bring them to Gap.com. “Product feeds make this possible because MyDrobe will automatically update these vendor profiles based on what is currently for sale, so that my site does not need to continually manually enter new clothing into the site. XML technology makes this easy to implement for both the clothes manufacturer and site operators,” McCormick says. Another property exploring how much social networks affect e-commerce is the brainchild of Lisa and Brian Sugar in San Francisco. In March 2005, they started a blog devoted to celebrity news called PopSugar and a community developed rapidly around it. By June 2006 they had 4,000 registered users chiming in about Jennifer Aniston’s new YSL bag or Britney’s second pregnancy. In June 2006, they launched TeamSugar, which offers its readers a service similar to MySpace, providing registered users with their own profile, Web page, blog and the ability to send messages to one another. FabSugar, a fashion blog, launched in July with other sites devoted to topics like technology, home decor, and fitness to come subsequently. Brian Sugar, who previously was the chief Web officer at Bluelight.com and vice president of e-commerce at J.Crew, explains that “eventually, we will have 12 categories that sit on top of your social network which is called TeamSugar.” Sugar’s goal is to get 100 million page views and 25 million unique users per month from the combined sites that will target trendsetting women between the ages of 18 and 35 and the advertisers that seek to reach them. He points out that, “TechCrunch and MySpace cater to guys, and DailyCandy is about fashion but without the celebrity gossip component. There is a massive crossover between InStyle and RealSimple and Allure and I don’t think the readers are getting served online from social networking and an editorial standpoint.” FabSugar blogs about style and beauty products; for example, it contains an entry about the flats that Kate Bosworth and Sarah Jessica Parker are wearing, with links to two sites that sell them. Right now the site has text links with no merchant agreements yet but Sugar thinks that, “We definitely will be linking at Sephora and J.Crew. If they offer an affiliate program, we will sign up. If they don’t use affiliate programs, I think we will be able to broker the deals,” he says. “We have always believed that the majority of revenue would be from our advertisers.” LOTS OF BUZZ Another site that drives word-of-mouth commerce by leveraging the community aspects of a social network is MyPickList.com. The effort integrates a user’s profile and his or her favorite product recommendations into a networked community. It works like this: Users create a list of their favorite items from multiple categories, called a pick list. They add the product, choose a preferred merchant for product sale, write a short product review and tag it. Only products that are sold through a retailer in the MyPickList network are eligible for a product commission. Once the pick list is created there are four ways to get a pick list viewed/distributed: Send to a userdefined buddy/email list; RSS feed; a banner ad creation (MyPickList.com badge/widget) that allows users to create custom ads to promote their pick list on websites and blogs and MySpace page; and direct from the MyPickList.com website. Jeff Eichel, CEO of MyPickList, says it helps users become affiliates “by allowing them to recommend products and services under their MyPickList account. If a product that a user recommends gets purchased from the pick list, that user will earn a commission ranging from 1 percent to 10 percent. Most of these people would never get approved for affiliate programs on their own, but because they are under MyPickList there is no approval needed.” Another social media platform for affiliates is Affilipedia, which, like Wikipedia.com, uses Wiki software to allow users to contribute articles and edit entries. Novices to experts can submit new information on affiliate marketing as well as edit the existing pages in the affiliate marketing encyclopedia if they disagree with the explanations of affiliate, merchant, commission or other affiliate marketing terms. This egalitarian collaboration works – Cymfony’s Nail points out “Wiki in general is a collaborative platform and therefore they don’t have [to have] a centralized editorial staff. They are not limited to how much you can afford to pay.” Although the sharp increase in content presents more prospects, it can be risky to be associated with some of the uncensored and often-critical material of user-generated content. “You might come to the conclusion that this is not a ‘safe’ environment for advertising your product or service,” says eMarketer’s Ramsey. If affiliates do decide to invest their time and effort into a specific social network, they should be aware that although members can be loyal to their favorite sites – studies find that users are driven to return often by ever-changing content and membership – audiences (especially young audiences) can be fickle and move on to the next great thing and online marketers need to be ready to move on as well. ALEXANDRA WHARTON is an editor at Montgomery Research Inc., Revenue’s parent company. During her four years at MRI, she’s edited publications about CRM, supply chain, human performance and healthcare technology. Previously she worked at Internet consulting firm marchFIRST (formerly USWeb/CKS). Filed under: Revenue Tagged under: 13 - September/October 2006, Blogging, Communities, Features, Industry Trends, mtadmin, Social Media, User Generated Content About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.