Social Media and E-Commerce Converging: Report

Market research firm Compete has released a report on the convergence of social networking and e-commerce, and in the process has tried to coin a new buzzword: “social commerce,” or s-commerce for short.

The report, “s-commerce: beyond MySpace and YouTube,” finds consumer visits to social networking sites have increased 109 percent since January 2004, and page views per visitor have grown by 414 percent in the same time period. “Social networkers” spend less time viewing traditional media and have more discretionary income and agreater penchant for online shopping than non-social networking site users.

Marketers having the most success with s-commerce are using a combination of branded micro-sites, customer reviews, forums, peer-to-peer transactions, product blogs and user-generated content projects, according to Compete.

Advertising on social Web sites is an entirely different prospect, said report author Stephen DiMarco, VP of marketing at Compete.

“Some marketers are going to advertise on MySpace and YouTube because they are the two easier places to go. That will be an obvious choice. But the return on investment isn’t going to be any better than traditional customer acquisition campaigns,” he said. “It’s stupid to just advertise on MySpace and assume you are a social marketer. The better thing to do is get your customers associated with your brand.”

On the other hand, launching a branded social network means competing for a dwindling slice of end users’ attention. Compete found visitors to social networking services are currently involved with an average of three such sites, and that these would only be willing to add a fourth Web site before losing interest.

“Consumers have limited social bandwidth. People only want so many
friends, so the bar is high for marketers to create that bond that social
networks have,” he said. “Already people are starting to become social-saturated. For marketers, there are not going to be as many opportunities as they think there are. So they need to be more creative.”

The key, DiMarco says, is to create social Web sites as part of a brand designed to track customers and listen to them at the same time.

“Companies would be better served to build online forums on their sites, micro sites that support their brand, or explore other ways to get consumers to participate with them versus going to social networks to find more consumers,” he said. “If I we’re a CMO or VP of marketing or head of media buying for an ad agency, I would seriously reexamine the sites that I’m looking to spend my money on in 2007 and see how I can redirect it back into more research and internally customer focused marketing.”

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