The Bankwatch

Tracking the consumer evolution of financial services

What is the value of Social Media to commerce?

An increasingly obvious observation from this Economist piece on the value of social media for commerce.  In particular the original promise was that social media would allow companies to infer and interpret customer preferences in a particularly granular and specific way, by associating customers buying preferences with their friends and their buying behaviors.

Too much buzz – Social media provides huge opportunities, but will bring huge problems | Economist

Most commentary on social media ignores an obvious truth—that the value of things is largely determined by their rarity. The more people tweet, the less attention people will pay to any individual tweet. The more people “friend” even passing acquaintances, the less meaning such connections have. As communication grows ever easier, the important thing is detecting whispers of useful information in a howling hurricane of noise. For speakers, the new world will be expensive. Companies will have to invest in ever more channels to capture the same number of ears. For listeners, it will be baffling. Everyone will need better filters—editors, analysts, middle managers and so on—to help them extract meaning from the blizzard of buzz.

I remain skeptical about how social media might create value for commerce, beyond advertising and awareness.  The original promise (above) has faded.  It has largely been replaced for now by attention to social media for advertising and negative customer opinion awareness.

I would cite two large problems within the data problem that The Economist mentions above:

  1. If any commercial value did appear, it would be instantly gamed by advertisers using fake users
  2. Beyond the ubiquitous ‘like’ or ‘+1” buttons, people generally focus on the negative rather than promote the positive.  The qualitative product comments are definitely something to be closely monitored.

Don’t get me wrong.  Trends and new stuff will surface in social media.  In fact one study quoted here in Quora suggests that 71% of tweets are original and ignored, with 6% being retweeted.  This suggests that the 71% may well hold some new knowledge and startups are frantically working to assess that data from Twitters feeds.  Mind you, what percentage of those original tweets are ‘what I had for dinner’ or ‘links to web news’.  There is clearly an emerging value around the immediacy of news that is game changing for media.  There is also value in keeping family and friends updated on news.  There might be some user social and personal behaviour inferences that can be inferred.

Time will tell what other value might appear from that data.  But for now, Social Media’s value to commerce is becoming just another media buy to generate awareness and promote purchasing.

Written by Colin Henderson

December 28, 2011 at 22:02

Posted in Uncategorized

One Response

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  1. It always amazes me how much Social Media sites has an impact on the amount of traffic that you can get when done properly

    Keep up the great work,

    Robert

    Rob

    January 9, 2012 at 17:02


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