Monday, May 12, 2008

Short Takes: 5.12.08

Here are some interesting XM and online marketing news items and links for your perusal:

  • Social Networks Not the Place for Advertising? There's been some buzz that advertising on social media sites is not working well, despite the flood of traffic sites like Facebook and MySpace receive. News Corp., owner of MySpace, has fessed up that things are not going well--revenue from MySpace dropped last quarter despite increasing traffic.

    Maybe consumers are ready for ads based on the data they provide to social media sites. A new study found that 56% said their social networking experience would be better if marketers pushed more targeted ads and 62% said they'd be interested in offers from their preferred brands.

    Eventually social media networks will find a way to earn a buck from all those visitors, but it's going to take more creativity than the sorts of banner ads currently featured on MySpace. The challenge lies in consumers' fickleness; they say they want targeted ads, but if users perceive their favorite social site is becoming too full of advertising or is misusing their data, they'll jump to a different site (and it is damn difficult to win back trust and traffic once it is lost online.)

  • Ethics or the Dangers of Social Media? The Wall Street Journal has an interesting article about studies designed to test consumers' willingness to pay for ethical products. As I've noted in the past, I am pretty dubious of studies that ask consumers to predict their own purchase behavior, since this introduces a great deal of bias to the results. Plus, the structure of studies like these can have a major impact on the results; for example, in one of the studies, they asked consumers what they'd pay for T-Shirts with different levels of organic cotton, but first they told consumers about "the detrimental effects of nonorganic cotton production on the environment." Since the average consumer shopping for T-shirts doesn't know this (and likely doesn't check the tag for fabric composition), I question the validity of the findings.

    But, I did find something interesting in the results worth sharing. The researchers thought they were testing the impact of ethics on consumer purchase decisions, but I think they actually stumbled upon evidence of how adverse buzz can impact a brand. The study revealed that consumers are willing to pay more for ethically-produced products, but the price premium is less than the price harm for companies with unethically-produced products. In other words, being ethical adds a little too your margin, but having it discovered you are unethical can cause deep discounting in consumer purchase decisions. I think this says as much about the need to monitor and manage your brand image on social networks where consumers are talking as it does about the need to have ethical production standards.

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