Sponsored Stories – You’re the “Mad Men” now

Guest Post by Erik Ober, Founder & CEO Booshaka

In January, Facebook quietly released what might become the most innovative and effective advertising product of all time — Sponsored Stories.  The new ad unit converts a user’s activity, such as “Liking” a page or using an app, into an interactive sidebar placement that can be promoted to a user’s friend network.  Essentially, Facebook has developed a way to turn its inventory of Facebook postings into word of mouth recommendations and trusted referrals ─ the holy grail of organic, bottom-up marketing.

 

What’s the power of Sponsored Stories?  It’s the trusted source ─ your friends, your social graph.  I’ll give you a personal example.  A month ago, I saw a Sponsored Story ad that promoted my best friend’s purchase of a 50% off Groupon to a pizza shop down the street from where I live.  I immediately clicked through and bought the same deal.  I never click on ads and I never spontaneously purchase anything.

 

While Facebook reported that its internal tests showed increased brand lift, engagement and ad recall, there wasn’t any conclusive evidence of how much better Sponsored Stories performed than standard ad units ─ until now.  TBD Digital, an Ads API service provider, recently revealed that in a 10 day, 3 client, 2 billion impression test, Facebook’s new Sponsored Stories ad units received a 46% higher click-through rate, a 20% lower cost per click, and an 18% lower cost per fan than Facebook’s standard ad units.

 

Figure 1: Sponsored Stories Yielded a 46% Higher CTR, a 20% Lower CPC and an 18% Lower Cost per Fan

Source: TPD Digital

 

Even in its early stages, the data indicates that Sponsored Stories deliver a significant increase in effectiveness and engagement.  For the first time, Facebook has an ad product that takes full advantage of the platform’s inherent strength – the social graph – to offer a format that is absolutely unique and unavailable in traditional search and display.

 

For brands, the one major constraint to utilizing Sponsored Stories is that consumer expression determines the available inventory to serve these high performing personal endorsements.  Marketers are taking notice of this transformative shift.  Joe Tripodi, CMO of Coca Cola, recently wrote, “Impressions only tell advertisers the raw size of the audience.  By definition, impressions are passive.  They give us no real sense of engagement, and consumer engagement with our brands is ultimately what we’re striving to achieve.  Awareness is fine, but advocacy will take your business to the next level.”

 

It has never been more important that your brand is part of the conversation and at Booshaka, we help brands and businesses optimize consumer engagement and advocacy on Facebook.  We rank and classify fan activity on Facebook Pages so that fans can be recognized and rewarded for their contributions.  One of our customers, OneHope Wine, recently tripled the level of engagement and advocacy on their Facebook Page over a period of one month using the Booshaka platform.  Our customers use Booshaka to cultivate this inventory and make sense of it.

 

To date, we’ve indexed 1.5 million Facebook Pages and 70 million unique Facebook Users.  We only process a percentage of those Pages regularly but we’re tracking over 50 million daily public interactions that could potentially be leveraged for targeting and Sponsored Stories.  By our estimation, there is at least a daily total inventory of 20 billion stories to be promoted.

 

Social advertising is already a big business and we expect that it will grow rapidly in the years to come.  As the Facebook Platform continues to extend its reach through the rest of the web via API integrations and social plugins, the rumored introduction of an off-site Facebook Ad Product is only a matter of time.

 

Due to the high performance of Sponsored Stories, we will see a transformation in which publishers switch from Google and other ad networks to try the new format.  From our vantage point, Facebook looks to dominate the online display-advertising market as it balloons to a $100 billion annual opportunity over the next several years.

 

– Guest Post by Erik Ober, Founder & CEO Booshaka

 

 

DEAL COMMERCE (aka Daily Deals): The New AdSense

A recent survey by the American Institute for Certified Public Accountants indicated that over 23 million Americans (10% of the adult population) purchased a daily deal in 2010.   There is no doubt that the Deal Commerce space (aka Daily Deals) is huge, and poised for continue growth.  But how prevalent will Deal Commerce become?

We think Deal Commerce can become as ubiquitous as AdSense.

When Google introduced AdSense in 2003, the concept was simple:  take the search experience, and the unparalleled traffic monetization of Google.com, and present contextually relevant paid links all around the net.  Today, AdSense is part of the monetization toolset on millions of websites, in addition to over 50 million “parked” domain names around the world. (Aa “parked” domain is a website that exists simply to monetize the direct navigation traffic through Google AdSense.)  In 2010, Google earned roughly 30% of total revenue through Ad Sense.

AdSense in a Parked Domain:

AdSense spread rapidly because it is such a powerful tool for monetizing from Internet traffic. There has never been a true competitor to AdSense for monetizing traffic on many Internet sites.  Until now…

We believe that Deal Commerce, which is embryonic today, will evolve into an increasingly powerful and personalized commerce experience, with the potential to pose the first true alternative/complement to Google AdSense for monetizing large swaths of Internet traffic.

At the recent heavily attended Daily Deals Summit in New York, we were surprised by the substantial number of media companies including Rogers Media, The Boston Globe, CBS, Hearst, The Wall Street Journal, and others that were looking to develop partnerships to monetize their traffic with Deal Commerce.  We even met a domainer who is buying up Deal Commerce related domain names to monetize their traffic with affiliate deals.

The reason that so many people came to the Daily Deal Summit and the reason for the general frenzy going around Deal Commerce is because the economics work.  Local retailers can easily leverage the Internet to drive significant traffic to their store in a cost effective manner.

And it’s not just local merchants that are participating; big brands are also getting in the mix.  While the press gave a lot of attention to national deals run by The Gap (not happy with outcome) and Amazon (happy with the outcome), we are seeing more nuanced national deals like General Mills recent deal to offer deep discounts on “packages” of 12 General Mills products in Minneapolis.  In short order, 5,000 packages were sold out.  In addition to the one time lift, the General Mills deal also included a book of coupons that was delivered to the buyers’ homes.

While much has been written about the presumed lack of long-term value that customers sourced through the Deal Commerce ecosystem provide to companies, we believe that concern misses the larger picture.  We believe that a new commerce paradigm is emerging to which consumers are responding in massive numbers around the world.   The simple undeniable truth is that…….everyone wants a deal.

The ecosystem is evolving rapidly, and providing incremental value to users and merchants.  A great example is Village Vines (see Guest Post by CEO Dan Leahy later in this report).  The Village Vines value proposition to consumers is very simple, 30% off high end restaurants.  The twist for the restaurants is that they get to choose the days and times the discount can be used ─ so they don’t have to give the discount on a Saturday night when the restaurant would be filled with customers paying the full freight.  We highlight Village Vines as a simple example of how the Deal Commerce space will evolve.

Another example of the rapid evolution is the market share gains made in the U.S. by Living Social:

There are many factors driving the market share shifts noted above, including the Living Social offer by Amazon in which 1.4 million consumers participated, many for the first time ever in a Daily Deal.  However, we believe another factor is that Living Social is a Second Internet company at its core, having its roots in Facebook applications.

That’s why Living Social gets a significantly larger share of its traffic from Facebook than does Groupon:

Recognizing their users’ interest in Deal Commerce, both Google and Facebook are taking steps to retain some of the value they are sending elsewhere.  Months after having their $6 billion offer for Groupon rebuffed, last Thursday, Google unveiled Google Offers, rolling out the initial beta version in the Portland, Oregon market.  In March, Facebook announced its intention to test a daily deals service in San Francisco, San Diego, Atlanta, Dallas and Austin and on Monday, they unveiled their Social Deals product in these markets.

Not only will new entrants contribute to the burgeoning ecosystem, we believe that Deal Commerce is poised for major evolution as location is increasingly factored into the deals offered. The Groupon Now Mobile App is poised to rollout in Chicago.  The app will have two buttons “I’m Bored” and “I’m Hungry”.  When a consumer hits one of the buttons, they will see nearby deals, offered for brief periods of time, which will meet the need indicated.  LivingSocial’s Instant Deals is a similar platform being tested in Washington D.C. that enables merchants to create deals on the fly and get traffic in the doors for certain periods of time.

To sum up our view, we believe that Deal Commerce is not a passing fad, but rather, the category is emerging as a major new commerce experience driven by the ease with which local merchants can leverage the Internet for the first time.  It’s the early days and there will be rapid market share gains and losses as the ecosystem evolves to best serve the needs of merchants and consumers.  But given the ability to drive significant revenue, we believe Deal Commerce may become as ubiquitous as AdSense around the net.

Given how diverse and rapidly evolving the Deal Commerce ecosystem is, we are pleased to present the following guest posts by some of the companies that are driving the revolution.

 

Segmenting the Deal Commerce Market

Guest Post by Jim Moran, CEO Yipit

Though just two years old, the Daily Deal market is now worth billions and specialty layers are forming to slice that value.

Here’s how we view the Daily Deal market:

Daily Deal Sites

The largest players are pure play Daily Deal sites, such as Groupon, LivingSocial, BuyWithMe and others. These companies service both consumers and merchants and they control the majority of value created today.  According to our recent data and industry estimates, Groupon generates around $17K per deal, while LivingSocial generates $23K. Mean price point for both is approximately $45 per offer, however, Groupon runs significantly more offers per day, and thus has total daily revenue above its peers.

 

Vertical Deal Sites

Attempting to compete with the scale of the larger players, newer entrants often focus on a single vertical. Conceivably, they have an edge on user acquisition since everyone who signs up for a niche daily deal service is interested in that niche. Furthermore merchants working with such a specialty site would enjoy better access to enthusiastic, repeat customers for their vertical.

The largest vertical focused site that displays its purchase count is OpenTable, which averages 563 vouchers sold per deal at $25 per voucher, or $13K per deal.  Vertical sites’ pricing can vary widely across niches: LivingSocial Escapes, its travel offering, averages $288 per deal while Gilt City averages $110.  At the other end, Yellowbook’s Weforia, ValPak Deals and the Village VOICE each average $21.

 

Publishers

Major publishers like the DailyCandy, McClatchy, NYTimes, SF Chronicle, San Diego Union Tribune, and Thrillist have entered the space. Their specialty is mobilizing their audience, whom they’ve been telling how to spend their local dollars for years.

Publisher success has varied depending on style of implementation: For instance, San Diego Union-Tribune’s product, which is displayed prominently on its homepage, averages $19K per offer from fewer than 1 million monthly unique visitors, while the Washington Post’s product, which is absent from its homepage and has a separate brand, averages less than $5K per deal despite WashPo having nearly 10X the traffic.

 

White-Label Providers

White-Label providers focus on the publishers with access to consumers. Certain white-label providers such as Analog Analytics and Nimble Commerce are mostly technology plays, while others such as Powered By Tippr and Group Commerce have a large sales forces.

 

Exchanges

There are now at least four Daily Deal exchanges facilitating the transfer of merchant offer contracts between sales forces and publishers.  Presumably the market is made on commissions offered to the publisher and details of the offer. While this is a new segment for Daily Deals, we note that in the display ad world, exchanges represent an increasing portion of total display ad dollars.

 

Merchant Services

There’s no shortage of people trying to own the consumer mindshare in the daily deal space, and similarly, services are forming to maximize the value to merchants in the burgeoning space. Companies like Closely have methods for merchants to convert promotion visitors into repeat customers.  There are also agency models, like Stampede, that help merchants optimize best practices, demographics and commission rates for their clients.

 

Consumer Services

The purchasing and redemption of offers has created new pain points for consumers that startups have formed to address. Secondary markets like Lifesta, DealsGoRound and CityPockets allow users to exchange unwanted vouchers with each other.

 

Aggregators

As the number of daily deal sites has continued to proliferate daily deal aggregators like Yipit have formed to recommend deals to users based on where they are and what they like.

 

Taking a Closer Look at the Stand-Alone Deal Commerce Sites

Guest Post by Eric Yohay, Business Development BuyWithMe

The daily deal industry has seen an explosive number of competitors emerge in the last 18 months (350+ companies).

While surveying the competitive landscape, we have found single city daily deal players gravitate towards two separate buckets:

  • Peaks ~10K unique users, 2K registered buyers, gross monthly sales from 10-20K at a frequency of 1-3 deals per week.
  • Peaks ~30K unique users, 5k registered buyers, gross monthly sales from 30-75K at a frequency of 3-6 deals per week.

Through conversations with over 50+ daily deal sites, we found that 90% fall into the first bucket.  For these companies, growth typically flatlines due to low (or no) paid marketing efforts, narrow focus on single city growth, and lack of sufficient capital to staff for sustainable future growth.

At the top of the spectrum, the largest national stand-alone players are Groupon and LivingSocial.  These players are the few who are able to run true local deals (compared to national e-commerce deals) with local merchants through their shopping portal (no aggregation of deals from other sites) and have been able to sustain a new deal every day in every major US market.  This type of frequency and scale is only obtainable through heavy investment in a direct sales force, tech resources, and user acquisition.

While a majority of the market typically can only feature 20-30% new deals (merchants first time running on a daily deal site), Groupon and Living Social are able to fill over 80% of their deal calendar with first time deals.

The major differences in growth strategies between the single city daily deal players and the top national players can be explained by their ability to dedicate financial resources to different channels.  Single city players must rely on organic word of mouth growth, merchant participation (emailing the deal to their list), social media, and event type marketing.  Living Social and Groupon, conversely, can rely on the snowball effect of tying up high quality merchants who have never run before, with massive distribution channels stemming from affiliate type relationships and large member lists.  These large member lists are fueled by rapid investment in digital marketing efforts, the network effect of having quality deals worth sharing (refer a friend programs), and PR/offline outreach.

With a deep understanding of the economics to the deal space, BuyWithMe is working to secure its place as the number three player. There are so are many other players.  Most will fail.

 

Utilizing a Unique Model of Deal Commerce To Improve Restaurant Yield Management

Guest Post by Dan Leahy, CEO Village Vines

With their ability to drive thousands of new customers to a local business in a single day, daily deal sites have quashed the notion that small businesses cannot use the Internet as a marketing tool.

Yet the very simplicity that has enabled these websites to scale at breathtaking rates has also limited their ability to serve a wide segment of the local business landscape.  A popular restaurant typically filled to 80% capacity is hard pressed to slash its prices through a daily deal when doing so means its loyal customers won’t be able to get a reservation (at full price) for months while the venue is inundated with coupon-wielding patrons.  As such, the restaurants that opt to offer daily deals are typically those in dire need of huge influxes of new customers, certainly an adverse vendor selection from a consumer’s perspective.

VillageVines is the web’s premier yield-management solution for restaurants, incentivizing consumers to dine during times when its restaurant partners have empty tables.  Members pay $10 to make reservations with over 500 restaurants in New York, Washington DC, Chicago, Los Angeles and San Francisco, and in turn their parties receive 30% off their entire bills (food and drink). Restaurants populate the inventory on VillageVines.com with their tables that do not typically turn, driving substantial new business (many VillageVines restaurant partners report over $30,000 in incremental monthly sales from the service) while ensuring that they do not cannibalize their natural demand. And consumers can enjoy the finest restaurants their cities have to offer at unbeatable values.

Just as Priceline and Expedia revolutionized the way in which consumers book travel, VillageVines is changing the way consumers make their dining decisions by introducing pricing sophistication to the restaurant industry, and our marketplace is growing stronger every day. The daily deal space is not going anywhere, but as the market matures, solutions custom-built for targeted market segments will distance themselves from generic products trying to serve every type of business.

 

Iterating the Model to Improve Profitability

Guest Post by Chad Nell, CEO Stampede

Stampede aims to help businesses smartly use Deals and Social Marketing in new ways to maximize business growth.

As an example, Closely just launched “Social Select”, a program that turned the concept Daily Deals into a social tool for converting visitors into recurring customers, and for generating social referrals from the best customers. Offer Cards are printed with unique codes that take the user to a personal daily deal designed for return visits and for sharing with friends. Businesses have embraced the increased control of how and when they use these deals.

Another example is with the work Stampede is doing with OpenJar Concepts, Inc, an Integrated Marketing Firm.  OJC has a core competency of generating leads for clients in a variety of verticals ranging from Cost-Per-Lead to Cost-Per-Order offerings, using TV and Radio as the medium for awareness.   OJC brings a proprietary tracking and reporting system to their clients as well as enabling mobile offers and other key components to the marketing mix. OJC will be working with Stampede to bring national clients from products, services and brands to the Daily Deals market, with most deals supported by traditional marketing awareness.  In addition, OJC will assist Stampede in building out a Daily Deals network, similar to ad networks, that will include Tier 1 to Tier 3 sites, as well as sites with varying subscriber bases, and sites that are broad in focus or more narrowly niche-focused around topics or demographics.  The shared focus is to simply enhance the client experience.   By finding the tools that offer incremental value to merchants, the market will continue to expand as merchants that previously wouldn’t have considered Daily Deals, now find real value.

Celebrity Influence – and Economy – Grows Online

Guest Post by Ryan Steelberg, CEO Brand Affinity Technologies

Over the last two years, we’ve seen a seismic change in the relationship between celebrities and fans. Online media provides 24/7 access to news, gossip, and anything and everything consumers want to know about their favorite celebrities. Social media takes this dynamic further: people can easily follow commentary directly from stars on Facebook and Twitter.

 

Brand Affinity Technologies (BAT) has created mechanisms for brands, media companies, and celebrities themselves to monetize this evolving celeb/fan relationship. (We’ve also started to quantify this changing relationship: in a recent survey, we confirmed that 61% of Americans feel more connected to celebrities because of online media and tools.)

Proof point: endorsements ignite social media advertising

To get a sense of the power of celebrities – and a taste of the business opportunity tied to the celeb/fan relationship ─ consider how celebrities boost social media performance.

BAT recently conducted the largest analysis of endorsed and non-endorsed social media advertising to-date. We compared more than 200 Facebook and Twitter endorsements with similar Facebook ads that did not feature celebrities, and found that – for the same spend – messages from celebrities delivered monumental performance lifts.  Click-through rates jumped significantly, and the cost-per-action improved dramatically:

Where we’re headed: deep engagement, personal interaction, meaningful brand opportunities

As the data reveals, much of the hype over celebrity social media endorsements is well-deserved. However, the power of celebrity as a business driver goes far beyond endorsements.  BAT has recently launched a new platform that brings online celebrity engagement to consumers beyond the comparatively closed worlds of Facebook and Twitter.

More than 800,000 fans have downloaded Fantapper since it became available in December 2010, making it one of the fastest growing Web downloads released – outpacing Twitter in early adoption rate. In addition to the free download, leading websites – reaching more than 100 million unique users every month – run the Fantapper application.

Fantapper changes the way consumers experience celebrity and sports content – giving people more of what they want, at the moment they are interested. Fantapper populates celebrity and athlete images and stories – on any website – with relevant, interactive apps, giving people always-on access to YouTube videos, exclusive celebrity info, news, Twitter and Facebook feeds, and more.

  • Celebrities benefit as editorial content now opens doors to their Twitter and Facebook feeds, monetization channels (iTunes for musicians, etc.), and in some cases, custom content developed for Fantapper. For the first time, celebrities gain real estate within the content that features them ─ wherever it appears.
  • Consumers experience content in an entirely new way. Immediately, the celebrity and sports content they crave becomes engaging and interactive – giving people what they want at the moment it interests them.
  • Advertisers benefit by being able to insert their brands at the point of engagement and interactivity, as well as include custom apps of their own.  Advertisers such as PepsiCo, Versus & Intuit have created custom Fantapper apps that drive traffic to their sites and include interactive elements such as polls and contests.
  • Websites benefit by providing a better experience for their communities and thus users spend more time on their pages.

As an example, if you’re reading about Kirstie Alley as she competes on Dancing with the Stars, Fantapper appears and provides instant access to related tweets, news stories, video clips – all without leaving the page you’re on.

The takeaway

Consumer passion for celebrity and sports content is boundless – and drives a significant amount of online activity. Consider that 20 months after launch, Twitter had 100k followers; that number went to several million almost immediately once celebs got involved.

Nothing demonstrates the insatiable hunger for celebrity and sports content better than Fantapper. Based on what we’re seeing in terms of the time that people choose to spend interacting with Fantapper apps, there is no saturation point in sight in terms of the ability for celebrities to drive engagement.

Online and social media have changed the relationship between celebrities and fans – creating a closer relationship and amplifying celebrities’ ability to influence consumers.  There is a tremendous market opportunity for brands, media outlets and celebrities that capitalize on this new dynamic.

 

 

THIS WEEK IN GUEST POSTS: MONETIZING SOCIAL

 

Refocusing the user value proposition for Twitter is not only designed at growing the sheer volume of the user base, if successful, this strategy will also allow Twitter to better monetize its traffic by enabling advertisers to more effectively target users with offers that match known interests.

 

This is one example of the unique advantages that are driving revenue growth at social media companies.  While the major macro trend driving social media is the shifting of advertising dollars online, we also believe that social commerce is poised for dramatic growth as well.  The following guests posts from XA.net and Gigya, and Epic Social, will show different data sets that give insights into how fast the ad dollars will shift.  The final three posts, from Adgregate, Bonobos and Venessa Miemis, focus on social commerce.

 

The Need for More Data… Facebook: Audience Targeting and Monetization Trends

 

Guest Post by Rob Leathern, CEO and Founder, XA.net (creator of optim.al)

 

Facebook has established itself as the number-one source of online user data, and is rapidly becoming one of the premiere advertising destinations on the web.  Monetization, however, still lags the amount of time users spend.  It is interesting to look at some specifics of how Facebook is working on closing this gap to achieve its lofty revenue goals.

 

 

Global Platform:

Facebook really is global, with over 502 million of the 655 million total Facebook user accounts coming from non-US locations.

 

 

 

 

 

 

 

 

 

 

 

 

Many non-US locations are proving to be fruitful hunting grounds for Facebook advertisers (and thus proving profitable for Facebook), as judged by a recent examination of “suggested” bid rates for users in various countries with at least 100,000 Facebook users.

 

 

 

Riding the Category Train:

 

For any social network, the keys to creating a more compelling community and increasing monetization are getting users to engage more and to share more information with fellow network members.  In this respect, Facebook is succeeding as the average Facebook user is now connected to 80 community pages, groups and events.  For advertisers, more interactions mean more data which means more ways to establish relevance.

 

With Facebook’s self-defined category information, for the first time, we have a measurement of how much user data it considers interesting and saleable.

 

For its initial beta launch of broad categories, Facebook has created 8 parent categories and a total of 83 subcategories. The average Facebook user in the United States shows up in about 8 different categories, so you can look at it as 153 million users x 8.17 = 1.255 billion category-user combinations.

 

Facebook has a LOT more data on younger users — and if we make the simplifying assumption that older users are more valuable to advertisers, we can see that Facebook doesn’t have nearly as much targeting data on older, more valuable users.

 

 

 

 

 

 

 

 

 

 

The nature of the categories themselves is informative as well — categories based on music or movie tastes (29 of the 83 total categories) don’t monetize or predict behavior nearly as well as, say, disposable income which is not available among these data categories, of course.

 

The takeaway here is that Facebook will have to help convince users to share more explicit data about themselves, and better coordinate the implicit data that users leave behind in order to build a more valuable advertising environment. A good deal of this may involve coordinating and managing “likes” and making these a bigger part of the targeting world — but one way or the other, we’ll see more novel/innovative uses of data and new ad formats that will convince us to share advertisers’ messages with our friends and contacts within Facebook.

 

Permission Marketing Helping Sites Leverage Social Graph To Better Monetize

Guest Post by Liza Hausman Vice President of Marketing, Gigya

In 1999 “Permission Marketing” was the buzzword of the year when Seth Godin wrote a book about “turning strangers into friends and friends into customers.” As Godin told marketers, “By talking only to volunteers, Permission Marketing guarantees that consumers pay more attention to the marketing message. It serves both customers and marketers in a symbiotic exchange.”

 

Today, technologies like Facebook Connect and Twitter for Websites are helping to create a new concept of permission marketing. Using these technologies on their own sites, businesses are able to establish a permission-based relationship with their users and customers that complements their efforts on Facebook, Twitter or other social sites.

 

The Huffington Post is the poster child for this new social-data-based permission marketing approach. Readers raise their hands by using their existing Facebook, Twitter or other social identity to register, giving HuffPo access to data with which the site can socialize the user experience. Readers can see what their friends are reading and sharing on their site, giving them a powerful social filter for relevant content. It also means The Huffington Post can sell advertising on their own site based on everything they know about the user from a social perspective.

 

 

 

 

The Huffington Post’s application of Facebook Connect and similar technologies to create a social news experience has been the key driver of its phenomenal traffic growth over the past year plus. Social advertising is also a key source of its revenue growth.

 

But it is the layers on top of the Social Sign-on foundation that are the most promising for the future of advertising. In addition to basic demographic targeting, sites could offer advertising based on interest data, targeting fans of True Blood or Android.  Sites could also sell against social influence and activity — factors such as the number of friends, their propensity to share and their history of driving new visitors to the site, or even the number of items “Liked” as an indicator of engagement.  Reward programs driven by game mechanics are a key part of the nurturing process in this new model, where a loyal, engaged and most importantly non-anonymous audience is the new currency of marketing.

 

Challenges do remain, but a permission-based approach will be a competitive imperative, and those that are able to embrace and experiment with its possibilities will be able to more effectively increase customer value, command higher CPMs and ensure their social efforts deliver real ROI.

 

Peeling the Onion To Understand Lifetime Value of Social Media

Guest Post by Matt Monahan, Epic Social Director

 

 

Long before the Social Web was invented, email marketers and search marketers were building scalable, sustainable businesses by understanding two simple principles; their customer’s life-time value (LTV) and their customer’s acquisition cost.  The customer LTV principle has not evaporated along with the many industries disrupted by the Social Web, but it needs to be re-embraced to ultimately define an acceptable acquisition cost for fans, followers and owned audiences on the Social Web.  Measuring LTV can be like peeling an onion if you don’t know how to slice the data. Below are a few measurement tips we give marketers:

 

  1. Measure sales through tweets and status updates:  Use URL shortening services to track click volume and conversions from your posts on Facebook, Twitter and anywhere else you can freely communicate with your customers.  Each click generated through an owned audience channel, like a Fan Page, is a click you didn’t have to pay for elsewhere.

 

  1. Offer a native point of sale: If you are selling products online, why don’t you have your store available on your Fan page?  Anytime a user has to click out, you have lost some.

 

  1. Survey your customers after they have purchased: Use a service like KissInsights to survey customers after they have made a purchase.  Ask them if they are on Facebook, and if the are a Fan of your business.  There is a lot you can learn about where to be spending your marketing dollars based on where your customers are coming from and what they think of your product.

 

  1. Start measuring and attributing value the less obvious metrics:

 

Every time you post an update to your Facebook Fan page, your customers are being reminded you exist.  Those impressions and the imprint you have left on the mind of your audience in not valueless; start to think about how much impressions, likes, retweets, video views and comments mean to your brand, start to measure how much attention you are creating, and start to realize that the cost avoidance created through your owned audience is worth something.

Adgregate – Provider of Secure Social Commerce

Guest Post by John Underwood, COO Adgregate

 

The Goldman chart was based on surveying users, not research into actual user behavior.  Actual user behavior reveals a greater social network influence.  For example, Amazon referral traffic data indicates that Google is now only about 2.5x ahead of Facebook as a source of traffic (far lower than the 6x in the GS survey chart) — with Facebook referral traffic rapidly growing year over year.

 

In a white paper we produced with Webtrends, we documented the ongoing traffic shift from websites to Facebook pages. While the shift is significant in the case of brand websites, the shift is much more modest for eCommerce websites.  Our conclusion is that there’s pent-up demand to do more in Facebook — including eCommerce — but that the social shopping experience in Facebook hasn’t yet caught up with that demand.  And we think it’s just now truly catching up.

 

 

 

Lastly, it’s still early for physical-goods social commerce.  Ten years ago, while social virtual goods sales were exploding in places like South Korea, no one thought it could happen here.  It took a few years, but once the right user experience was found, sales took off, with now an estimated $1.6B in virtual goods sales last year on virtual farms, cities and such.  We think physical-goods will follow a similar trend.

 

Bonobos (Men’s Clothing That Really Fits): Conversational Social Media

Guest Post by Richard Mumby, VP Marketing at Bonobos

 

Bonobos is the largest apparel brand ever launched purely over the Internet. Because we use a web-driven model, customer interactions are not just to drive immediate sales. Every touch point is an opportunity to better serve the customer.  Social media is an ideal platform to connect with customers. Due to people’s transparency in social media, we are able to get a dynamic read on what our consumers are thinking.

 

Bonobos learned early on that social media affords a unique exchange with customers. Social media platforms are a great channel for research, development and better service. The value is less in direct sales and promotions than in developing a lasting connection with our customers and leveraging unique insights. We experienced the added value of these channels as we developed our dress shirts in early 2010. We casually started asking fans and followers what shirt brands they like, what they’d pay for the perfect shirt, and where shirts typically fall short.  That initial conversation gave us a peak into the customer mindset, opening ongoing communication. We have used these dialogues to understand better their views on our products, other brands they like, fashion, and their interests and passions. We have a rich understanding of our customer — across a wide spectrum of areas — and this informs our marketing and product development.

 

Last spring, Bonobos was finalizing details for a line of jersey polos, and we couldn’t decide whether to include a chest pocket.  Within an hour of posing the question to Facebook fans, Bonobos received over 50 opinions, which helped the design team focus on details they knew people liked.  A quick question asked via social media informed our product development to ensure customers would like it.

 

 

 

Some 25% of our incoming volume of customer interactions is through social media.  Customers want to engage through these channels.  Would you consider not picking up the phone if it rang?  Then how can you consider not taking advantage of the opportunities for engagement offered through social media?

 

 

 

While the Goldman Sachs chart claims that social media has little effect on online purchases decisions, we’ve found that customers are more likely to come back to a brand or store they trust and feel they have a relationship with. The data in the chart may be accurate, but misses the broader point regarding how companies should think about social media.  It’s not just about a narrow definition of “shopping” as we traditionally think about it. Recommendation engines and comparative searches are great at facilitating a traditionally defined “shopping” event but social media campaigns allow you to engage with customers outside of that store-to-checkout experience. Social Media allows you to receive feedback on products, get input about the brand’s voice and build trust, intimacy, and reliability by giving customers greater access to a live, dynamic conversation that drives loyalty, word of mouth, traffic and eventually sales.

 

Most recently, Bonobos’ Super Bowl social media promotion accounted for more than 2x the average new customer volume in one weekend. Bonobos created a fairly straightforward discount promotion on select items and added an element of play by allowing people to “vote” on who they wanted to win.  We’ve had big, fun promotions before, but because this lived on social media, the bar for customers to spread the offer through their social network was very low.  The majority of people that participated didn’t hear about the promo through us, but through their friends.

 

Overall, social media allows Bonobos to meet customers and interact with them in a format in which they like to engage. We aren’t pulling teeth to get information.  We learn more about the customers and open up a greater conversation, one that mailers and ads in magazines don’t permit.  Today Bonobos has over 11,000 Facebook “fans”, nearly 5,000 Twitter followers and was named one of Inc.com’s “20 Awesome Facebook Fan Pages” (March 2011).