Social media is the flavor of the day in marketing, the latest in a line of digital innovations that were supposed to "change everything". But media experts say this innovation really is becoming a revolutionary force, not just for consumers but for marketers. Social media's ability to connect people is reinforcing consumer clout, while at the same time giving businesses more data to create better products and services. Still, the power that social media unleashes can turn on a company, all too quickly.

In just seven years, Facebook, the largest of the online social networks, has grown into the second-most-popular site on the Internet. Only Google is more popular. If Facebook were a country, its 550 million sociable citizens would constitute the third-largest nation on earth.

Of course, anything a half-billion people do is by definition a major business opportunity. But some media critics argue that the importance of social networking is even more profound, almost an evolutionary leap. As one of the characters says in the recent movie about the founding of Facebook, The Social Network, “First we lived on farms, then we lived in cities. Now we’re gonna live on the Internet.”

A number of media watchers argue that social media really does change everything. “I suspect that, 100 years from now, our successors will look back on the social media revolution as akin to the invention of radio — maybe even the printing press,” says Randall Rothenberg, the president and CEO of the Interactive Advertising Bureau, a New York-based trade group.

But what is truly new about it? It’s not the idea that communities influence purchases. That observation goes back to de Tocqueville in the 19th century, Rothenberg says. Nor is it the understanding of the process by which key members of a community influence others, which he says has been understood since the 1940s.

“What’s changed is that, through interactive media, we now have tools and channels that weren’t available to us during the era of mass media, to create, shape, and utilize social communities,” Rothenberg says.

Catching the Cluetrain
Others see the social media boom as a contributor to a longer-range shift toward more consumer power. Social networking sites “further enable the change that we’ve seen occurring already,” says David Weinberger, a fellow at the Berkman Center for Internet & Society at Harvard University, best known as co-author of “The Cluetrain Manifesto”, an influential guide to Internet marketing published in 1999.

In “The Cluetrain Manifesto,” Weinberger and his co-authors argued that the Internet was breaking down traditional mass media patterns, turning what had been a largely one-way lecture by the advertiser into a conversation with the consumer.

From the marketers’ point of view, social media seems to be having a number of impacts, positive and negative: The good news is that the customer can now be more engaged than ever. The bad news? The customer can be more engaged than ever. Or as Weinberger puts it: “The line between being a fan and being an outraged citizen is very, very fine.”

That’s good if you have a happy customer, but very bad news if say someone takes a video of a rat running across a Taco Bell kitchen floor and posts it on YouTube.

As the Taco Bell/Yum Brands debacle suggests, social media raises the stakes in investor relations as well. Some executives speculate that even the apparently innocent activities of an employee, such as posting an update to friends about one’s physical location (for instance, an aerospace engineer in Toulouse or an M&A attorney in Omaha), could inadvertently tip off competitors about a pending deal.

On a more macro scale, investment-related social media risk may be growing as well. Some traders are reportedly even developing tools that can “sense a disturbance in the Force,” as they used to say in “Star Wars” – software that will trawl search engines trained to monitor the tone of blogs and chat rooms for favorable or unfavorable sentiment about a particular company, and then automatically trade on the news.

The Pepsi Challenge
More positively, social media is being used by companies to create closer connections with customers.

Creating a more human face for a big company is certainly the goal of many corporations. PepsiCo, for example, is trying to train and encourage some of its 280,000+ employees to communicate to customers through social media, according to B. Bonin Bough, PepsiCo’s global director of digital and social media, in a recent online conference sponsored by PR Week. Unlike many traditional marketers, Bough sounds accepting of the prospect of non-PR pros speaking for the company. “People are inherently smart and they know what they should say or what they shouldn’t say,” he says.

Beyond merely listening, PepsiCo is also trying to make sure those comments actually go somewhere. “We try to listen, we listen a lot, but it’s not just listening for the sake of hearing what consumers are saying — it’s also listening and bringing it into the organization so the organization can change,” says Bough.

“We say the social web or its instruments enable us to scale up relationships with people, something you can only do in your little shop or when you have branch offices at extremely high cost,” says Martin Oetting, director of research for TRND (for The Real Network Dialogue), a Berlin-based social media marketing agency.

Using a system that is one-part focus group, one-part viral marketing campaign, TRND, for example, tries to leverage social media to encourage a large group of consumers passionate about a particular category to try its client’s product in that category, share samples with a friend, and report back on what they felt and what their friends said about the product.

Others worry that such efforts could backfire if they’re not sufficiently personal. Eric Bradlow, a professor of marketing at the Wharton School in Philadelphia, fears that insufficiently personal connections made by companies through social media could actually hurt loyalty.

Glass House Menagerie
But can brands survive so much transparency? In the future, will we have fewer brands that we’re excited about and more we merely tolerate?

Brands will endure whatever marketers do, some say. “What defines a brand has always been in the mind of the consumer… we can spend as much money as we want to position the brand in a certain way, but however the consumer picks up on that is how that’s defined,” says John Bell, global managing director of Ogilvy PR’s 360 Digital Influence practice in New York.

“There is something lizard-brained about brands,” Weinberger says – a nonrational element likely to resist any medium. Why after 100 years do we feel somehow that Coke is the real cola and Pepsi is the imitation? he asks. Why do I think Volvo is the safest car?

All that is really different in this new era, some marketers say, is that social media gives companies the tools to watch such attitudes develop and crystallize in real time – and less time to respond.

“We have less time to be perfect,” said Jennifer Houston, president, WE Studio D, Waggener Edstrom Worldwide, the social and digital media unit of the public relations giant, in a recent PR Week webcast. “Your brand takes an extra layer of humility and humanity when you’re online.”

Perhaps the most representative new job for the new new medium: “conversation managers.” These are people a bit like the community managers hired a few years back in the first community sites, Bell says, but this time charged with following and contributing to conversations about the client around the Internet.

As one marketing blogger sums it up: when you think about the future of social media marketing, don’t think Don Draper. Think Dale Carnegie.

This Is What Change Looks Like?
However, another Internet marketer is not so sure that social media’s revolution in transparency will be much of a revolution after all, citing the Facebook-friendly Obama campaign as an example of what the future of marketing might look like.

“The Obama campaign enabled millions of voices to be heard and we have unprecedented access to reams of information but now that he’s in office, how much political power do we really have?” asked Andrew Cherwenka, vice president for business development at Trapeze.com, a Toronto-based digital marketing agency, in an April 2009 essay in the Huffington Post on the 10th anniversary of “Cluetrain”.

“We can follow Sun Microsystems’s [former] CEO Jonathan Schwartz on Twitter but his posts, like [those of] most executives participating in this powerful social network, are little more than one-way broadcasts,” he concluded. “For the most part, barriers remain and decision-makers still operate in secrecy at the top of the corporate pyramid.”

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