In 2019, one of the fastest-growing media for branding and marketing is social media. Companies will spend an estimated $30 billion in 2019 using social networks such as Facebook, Instagram, Twitter, and LinkedIn to reach millions of consumers who spend hours a day on social sites. Expenditures for social media marketing are much smaller than for television, magazines, and even newspapers, but this will change in the future. Social networks in the offline world are collections of people who voluntarily communicate with one another over an extended period of time. Online social networks, such as Facebook, Instagram, Pinterest, LinkedIn, Twitter, and Tumblr, along with other sites with social components, are websites that enable users to communicate with one another, form group and individual relationships, and share interests, values, and ideas.
Social e-commerce is commerce based on the idea of the digital social graph, a mapping of all significant online social relationships. The social graph is synonymous with the idea of a social network used to describe offline relationships. You can map your own social graph (network) by drawing lines from yourself to the 10 closest people you know. If they know one another, draw lines between these people. If you are ambitious, ask these 10 friends to list and draw in the names of the 10 people closest to them. What emerges from this exercise is a preliminary map of your social network. Now imagine if everyone on the Internet did the same and posted the results to a very large database with a website. Ultimately, you would end up with Facebook or a site like it.
According to small world theory, you are only six links away from any other person on earth. If you entered your personal address book, which has, say, 100 names in it, in a list and sent it to your friends, and they in turn entered 50 new names of their friends, and so on, five times, the social network created would encompass 31 billion people! The social graph is therefore a collection of millions of personal social graphs (and all the people in them).
If you understand the interconnectedness of people, you will see just how important this concept is to e-commerce: The products and services you buy will influence the decisions of your friends, and their decisions will in turn influence you. If you are a marketer trying to build and strengthen a brand, you can take advantage of the fact that people are enmeshed in social networks, share interests and values, and communicate and influence one another. As a marketer, your target audience is not a million isolated people watching a TV show but the social network of people who watch the show and the viewers’ personal networks. Moreover, online social networks are where the largest Internet audiences are located. Table 10.7 describes the features of social commerce that are driving its growth.
Facebook, with 74 percent of all social marketing in the United States and 208 million U.S. monthly visitors in 2018, receives most of the public attention given to social networking. The other top four social sites are also growing, though at far slower rates than in the past. LinkedIn had 93 million visitors a month in 2018. Twitter grew to reach 146 million active users in 2018, with stronger offshore growth than in the United States. Pinterest hit the top 50 websites with 110 million users, a 25 percent increase from 2017. According to analysts, 25 percent of the total time spent online in the United States was spent on social network sites (about 56 minutes a day), and social networking is the most common online activity. The fastest-growing smartphone applications are social network apps; nearly half of smartphone users visit social sites daily. More than 70 percent of all visits to Facebook in 2018 came from smartphones.
At social shopping sites such as Pinterest you can swap shopping ideas with friends. Facebook offers the “like” button to let your friends know you admire a product, service, or content and, in some cases, purchase something online. Facebook processes around 5 billion likes a day worldwide. Online communities are also ideal venues to employ viral marketing techniques. Online viral marketing is like traditional word-of-mouth marketing except that the word can spread across an online community at the speed of light and go much further geographically than a small network of friends.
The Wisdom of Crowds
Creating sites where thousands, even millions, of people can interact offers business firms new ways to market and advertise and to discover who likes (or hates) their products. In a phenomenon called the wisdom of crowds, some argue that large numbers of people can make better decisions about a wide range of topics or products than a single person or even a small committee of experts.
Obviously, this is not always the case, but it can happen in interesting ways. In marketing, the wisdom of crowds concept suggests that firms should consult with thousands of their customers first as a way of establishing a relationship with them and, second, to understand better how their products and services are used and appreciated (or rejected). Actively soliciting the comments of your customers builds trust and sends the message to your customers that you care what they are thinking and that you need their advice.
Beyond merely soliciting advice, firms can be actively helped in solving some business problems by using crowdsourcing. For instance, BMW launched a crowdsourcing project to enlist the aid of customers in designing an urban vehicle for 2025. Kickstarter.com is arguably one of the most famous e-commerce crowdfunding sites where visitors invest in start-up companies. Other examples include Caterpillar working with customers to design better machinery, IKEA for designing furniture, and Pepsico using Super Bowl viewers to build an online video.
Marketing through social media is still in its early stages, and companies are experimenting in hopes of finding a winning formula. Social interactions and customer sentiment are not always easy to manage, presenting new challenges for companies eager to protect their brands. The Interactive Session on Management provides specific examples of companies’ social marketing efforts using Facebook and Twitter.
Source: Laudon Kenneth C., Laudon Jane Price (2020), Management Information Systems: Managing the Digital Firm, Pearson; 16th edition.
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