November 6, 2007
StorefrontBacktalk: E-Commerce Sites Aren’t Too Social
By Evan Schuman
Through a special arrangement, what follows is an excerpt of a recent article from StorefrontBacktalk.com, a retail technology and E-Commerce blog, presented here for discussion.
The influence of social networking sites on e-commerce has been overblown and such sites have very little influence on purchases, according to a report from Jupiter Research.
“There has been a lot of talk about social shopping,” said Patti Freeman Evans, the report’s lead analyst, but that talk hasn’t translated into sales.
“Social and community sites still rank low in shoppers’ minds as useful places to research and shop for gifts,” said Ms. Evans. “Only three percent of users who plan to buy online this holiday season – and six percent of those in the segment who are ages 18 to 34 – plan to add a wish list or gift list to their MySpace, Facebook, or similar website page to help their friends and family select gifts.”
If we assume Jupiter’s right, this has some fascinating potential ripples throughout e-commerce.
The assumption for years has been that as social networks grew, the collective wisdom of the group would influence huge areas of the members’ lives, from clothing choices to dating advice to the kind of car they should drive. Therefore, the most powerful social networking sites would strongly drive purchases.
Before we completely abandon those beliefs, consider the possibility that the conventional wisdom may not necessarily contradict Jupiter’s conclusion.
Even the best of surveys merely reveal what consumers say they believe they are influenced by. Even if they are being truthful, do consumers truly know what is influencing them?
Let’s also broaden our practical definition of social networking. Amazon’s consumer-posted product reviews are consistently cited as a strong influence on Amazon’s sales. Wouldn’t that be properly classified as social networking? It’s messages from the collective community.
So, are Jupiter’s survey results are a factor of context?
The Jupiter report supports the premise that people today don’t go to those social sites with the objective of doing e-commerce research. But what if the next generation of search engines intelligently combed such sites, looking for product discussions and allowed those to appear near those products on Amazon, EBay or, for that matter, RiteAid.com? You’d then be marrying the social networking site advice with the context of a site designed for e-commerce.
There’s also the susceptibility aspect of influence. Are consumers saying that they hear all of those product discussions at social networking sites, but either don’t care or do not give it any credibility? Hence, they are literally not influenced by it.
If we look at the other big social e-commerce trend today – consumer-created videos – we see one common thread: credibility. Or, more precisely, the eternal search for credibility. The premise being that a large community of consumers will, by and large, police itself as these social mediums mature, and eventually give honest, truthful advice.
Amazon just announced that it has added videos for more than 450 of its top-selling holiday products. The initial videos look to be commercials – and cheap ones at that – but as the community gets involved, will the credibility improve? And will that boost influence?
That’s the problem with consumers today. Just when e-tailers have them figured out, they go and do something surprising. Like show signs of having a brain stem.
Discussion question: How much influence do you think social networking sites have on purchases currently? In what ways do you see social networking sites influencing consumer purchasing decisions? How might that change in the future as these sites mature and gain credibility?
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Jupiter says that 6% folks age 18 to 34 will have gift lists on their social network sites. There seems to be disappointment at Jupiter that the 6% figure isn’t higher. 6% is huge. Here are 4 reasons why: (1) many retailers struggle for 2% comp sales increases, and 6% is triple that number (2) the holidays haven’t started yet so the figure will grow (3) this probably won’t be the last Christmas season, so the 6% might be 12% next year and 18% the year after that (4) folks might post gift lists for other events like parties, birthdays, weddings, graduations, confirmations, bar- and bas-mitzvah’s, etc. The future has to start somewhere, and 6% isn’t a bad place to start. A year ago, MySpace alone had 127 million members. Six percent of 127 million (of course they’re not all 18 to 34) = a big number of shoppers.
Does the networking on My Space only count in this study if someone puts a gift list up on their site? If that’s true, then the study misses the most important impact of all–word of mouth! As people talk with one another, ask about products, make negative or positive comments about products, those conversations will affect sales more than someone posting a gift list. Before applying old assumptions about the impact of discussions on MySpace, some new research is needed to determine who uses MySpace, how, for what purposes, and with what influence.
With all due respect to my colleagues at Jupiter, Evan is absolutely right about the challenges of self-reported research. Part of the reasons social networks and peer recommendations work so well is that people often don’t even realize they’re being influenced. It’s similar to the challenge of online advertising: do you credit only the ad someone clicks on with the sale or do you give a nod to all the impressions they saw before? Just because someone doesn’t immediately move from their social network to a shopping spree doesn’t mean their online (and offline) behaviors aren’t influenced by it.
Credibility is certainly key and the danger is that we end up with an online world cluttered with paid and unpaid sponsors shilling for products. That’s where I think Loyalty Lab’s work is interesting because it links people to their existing network of friends who are the most powerful influencers of all.
Evan’s right about the brain stem as well–so retail marketers should be careful not to try to influence the environment too much. Consumers prove time and again they can sniff out a sales pitch at 1,000 feet.
I quite agree we are only at the base of a long, steep growth curve. It certainly makes sense to me, though, that as with Amazon, consumer reviews on particular and specific web sites will be more influential than social networking sites. For retailers, that means creating a online community among your customers, and giving them space on your web site for feedback and interaction, both with store personnel and with each other.
There are lies, damn lies and statistics, said Mark Twain, and this is a great example of extrapolating the statistics. Social networking is too immature and too small (even online purchasing is still small compared to onground purchases) to statistically become significant, even if it were focused, clear and demonstrated a cause and effect relationship between online exposure in a social forum and purchases. This however is 2 steps from an action, and difficult to track, let alone control. For now, we need to treat this as statistical noise, and be aware of its presence. Nothing more.
My sense is that while social networking is still in its earliest stages, most of the commercial impact will be in the long tail, and will be difficult for marketers to build buzz, and volume, around. Social networking is such a de-centralizing and spontaneous phenomenon, that it may very well be organically resistant to structured marketing initiatives.
I agree that it is a bit premature to make that conclusion on the part of Jupiter (not a lot of people a few decades back thought television advertising would develop as much as it did). The sheer reach of social networking properties like Facebook and MySpace can build awareness with not only consumers that are in the market today, but also those that will be potential buyers later on. From a different perspective, I also think that companies have underutilized these sites for purposes outside of sales. These sites can be systematically harvested for consumer sentiments on product categories that can yield invaluable information for new product development, product positioning and targeting. These properties are going to be the test markets of tomorrow and there are companies like Umbria that are already creating ways to systematically research the vast amount of information online networking sites are producing.
Mark is dead on. I’ll take six percent of the MySpace market! That aside, this seems like a flawed study. Let’s see, do people look at SOCIAL sites primarily as COMMERCIAL sites? Gosh, they don’t! How amazing!
This is “old think” in its lowest form. The purpose of these sites is to build social networks. If marketers are ever going to be successful in this space they are going to have to learn an important rule: Rule Number One–In the virtual world, the users get to set the rules and the marketers have to learn to follow them. Pretending cyberspace is Madison Avenue in the ether and that 2007 is 1957 may be comforting to some, but it’s not going to move much merchandise.
Social networking is ALREADY beginning to transform e-commerce and in-store buying. If you are a youth marketer, you know what I am talking about. You know your better prospects are no longer clicking your banners and/or not responding as well to your online and offline offers. Clickthrough rates on banners are down 75% this year; to me a big reason is Facebook and MySpace et al. No longer are the eyeballs leaving these sites and it’s impacting the first generation web portals quite a bit. Brands need to have social networking strategies that start with the realization that new buyers are unlikely to visit you directly–and that most new customer acquisition will be via a ‘friend’ or referral now.
We (shameless plug: my company Loyalty Lab) launched our first retail Facebook app with 5-6 more coming later this year. The appetite for retailers to develop and deploy social apps is very high and likely to further increase after the Holidays…I haven’t seen a wave this big since SEM.
Just because the penetration of influence isn’t higher, doesn’t mean that social networking is ineffectual or useless. It may simply mean that it hasn’t reached its tipping point yet. All the more reason for brands to get in on the ground floor.
That it is becoming socially acceptable for people to create a gift registry for themselves for occasions other than weddings and babies is a great trend for shoppers and retailers. And I think this will expand beyond social networking sites.
On the subject of “social shopping,” customers have proven to be very enthusiastic about helping their fellow shoppers by writing reviews. With a purchase like a camera lens, hotel room or pair of shoes, these ratings are very helpful. Online retailers are excited about potentially catching the long tail SEO benefits from the “voice of the customer,” bad grammar and all!
User generated content is THE current BUZZ in the online world, so it may be over-hyped. But it definitely is a growing trend that is not to be ignored.
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Jupiter says that 6% folks age 18 to 34 will have gift lists on their social network sites. There seems to be disappointment at Jupiter that the 6% figure isn’t higher. 6% is huge. Here are 4 reasons why: (1) many retailers struggle for 2% comp sales increases, and 6% is triple that number (2) the holidays haven’t started yet so the figure will grow (3) this probably won’t be the last Christmas season, so the 6% might be 12% next year and 18% the year after that (4) folks might post gift lists for other events like parties, birthdays, weddings, graduations, confirmations, bar- and bas-mitzvah’s, etc. The future has to start somewhere, and 6% isn’t a bad place to start. A year ago, MySpace alone had 127 million members. Six percent of 127 million (of course they’re not all 18 to 34) = a big number of shoppers.
Does the networking on My Space only count in this study if someone puts a gift list up on their site? If that’s true, then the study misses the most important impact of all–word of mouth! As people talk with one another, ask about products, make negative or positive comments about products, those conversations will affect sales more than someone posting a gift list. Before applying old assumptions about the impact of discussions on MySpace, some new research is needed to determine who uses MySpace, how, for what purposes, and with what influence.
With all due respect to my colleagues at Jupiter, Evan is absolutely right about the challenges of self-reported research. Part of the reasons social networks and peer recommendations work so well is that people often don’t even realize they’re being influenced. It’s similar to the challenge of online advertising: do you credit only the ad someone clicks on with the sale or do you give a nod to all the impressions they saw before? Just because someone doesn’t immediately move from their social network to a shopping spree doesn’t mean their online (and offline) behaviors aren’t influenced by it.
Credibility is certainly key and the danger is that we end up with an online world cluttered with paid and unpaid sponsors shilling for products. That’s where I think Loyalty Lab’s work is interesting because it links people to their existing network of friends who are the most powerful influencers of all.
Evan’s right about the brain stem as well–so retail marketers should be careful not to try to influence the environment too much. Consumers prove time and again they can sniff out a sales pitch at 1,000 feet.
I quite agree we are only at the base of a long, steep growth curve. It certainly makes sense to me, though, that as with Amazon, consumer reviews on particular and specific web sites will be more influential than social networking sites. For retailers, that means creating a online community among your customers, and giving them space on your web site for feedback and interaction, both with store personnel and with each other.
There are lies, damn lies and statistics, said Mark Twain, and this is a great example of extrapolating the statistics. Social networking is too immature and too small (even online purchasing is still small compared to onground purchases) to statistically become significant, even if it were focused, clear and demonstrated a cause and effect relationship between online exposure in a social forum and purchases. This however is 2 steps from an action, and difficult to track, let alone control. For now, we need to treat this as statistical noise, and be aware of its presence. Nothing more.
My sense is that while social networking is still in its earliest stages, most of the commercial impact will be in the long tail, and will be difficult for marketers to build buzz, and volume, around. Social networking is such a de-centralizing and spontaneous phenomenon, that it may very well be organically resistant to structured marketing initiatives.
I agree that it is a bit premature to make that conclusion on the part of Jupiter (not a lot of people a few decades back thought television advertising would develop as much as it did). The sheer reach of social networking properties like Facebook and MySpace can build awareness with not only consumers that are in the market today, but also those that will be potential buyers later on. From a different perspective, I also think that companies have underutilized these sites for purposes outside of sales. These sites can be systematically harvested for consumer sentiments on product categories that can yield invaluable information for new product development, product positioning and targeting. These properties are going to be the test markets of tomorrow and there are companies like Umbria that are already creating ways to systematically research the vast amount of information online networking sites are producing.
Mark is dead on. I’ll take six percent of the MySpace market! That aside, this seems like a flawed study. Let’s see, do people look at SOCIAL sites primarily as COMMERCIAL sites? Gosh, they don’t! How amazing!
This is “old think” in its lowest form. The purpose of these sites is to build social networks. If marketers are ever going to be successful in this space they are going to have to learn an important rule: Rule Number One–In the virtual world, the users get to set the rules and the marketers have to learn to follow them. Pretending cyberspace is Madison Avenue in the ether and that 2007 is 1957 may be comforting to some, but it’s not going to move much merchandise.
Social networking is ALREADY beginning to transform e-commerce and in-store buying. If you are a youth marketer, you know what I am talking about. You know your better prospects are no longer clicking your banners and/or not responding as well to your online and offline offers. Clickthrough rates on banners are down 75% this year; to me a big reason is Facebook and MySpace et al. No longer are the eyeballs leaving these sites and it’s impacting the first generation web portals quite a bit. Brands need to have social networking strategies that start with the realization that new buyers are unlikely to visit you directly–and that most new customer acquisition will be via a ‘friend’ or referral now.
We (shameless plug: my company Loyalty Lab) launched our first retail Facebook app with 5-6 more coming later this year. The appetite for retailers to develop and deploy social apps is very high and likely to further increase after the Holidays…I haven’t seen a wave this big since SEM.
Just because the penetration of influence isn’t higher, doesn’t mean that social networking is ineffectual or useless. It may simply mean that it hasn’t reached its tipping point yet. All the more reason for brands to get in on the ground floor.
That it is becoming socially acceptable for people to create a gift registry for themselves for occasions other than weddings and babies is a great trend for shoppers and retailers. And I think this will expand beyond social networking sites.
On the subject of “social shopping,” customers have proven to be very enthusiastic about helping their fellow shoppers by writing reviews. With a purchase like a camera lens, hotel room or pair of shoes, these ratings are very helpful. Online retailers are excited about potentially catching the long tail SEO benefits from the “voice of the customer,” bad grammar and all!
User generated content is THE current BUZZ in the online world, so it may be over-hyped. But it definitely is a growing trend that is not to be ignored.