Social networking is having a significant effect on the way that consumers now search for information about products and services they wish to buy. Consequently, this has huge implications for the marketing strategies of firms.Research by Yahoo! in 2006 showed that 77% of consumers are influenced by Internet research and on average customers spent 12 hours researching a potential purchase online, but spent 15 hours researching on more expensive products, such as TVs and laptops.
Increasingly significant in acting as sources of information are social networking websites such as digg.com, Reddit, Newsvine, Stumbleupon, which rely on users to create content by sending in their own stories or links to stories they have found on the web. Users vote for stories and these end up on the front page, where they attract more attention and so the snowball effect continues.
Consumers often express their opinions on the Digg website, (a site claiming 20 million visitors per month), one consumer stated the following about Apple:"Steve Jobs and Apple don't produce good tech, they produce good marketing", other contributors were more positive. Smaran Dayal, an 18 year old, from India was observing that Apples computers and Ipods were revolutionary products. Unlike the first consumer Dayal has 500 "friends" who track his Appple stories, so any recommendations he makes carry 500 votes and this provides a good start towards getting a story on the front page. The different aspect of this type of site from other sites, such as Google and Yahoo that also aggregate stories, is that they rank stories and also recognise the vocal nature of their users and that some are regarded as opinion formers.
There are many implications this has on marketing. For example a casual remark by a Senior company executive will be pounced upon by users. When Sony senior executive dismissed a rival product, "The Wii" as an impulse buy, this attracted 270 comments generally criticising Sony as arrogant and complaining about the high cost of the Playstation 3. These stories may seem insignificant, but they all add up and can create a negative attitude towards brands and products.
Another powerful example happened in 2005 when blogger and media commentator Jeff Jarvis complained about his problems with online computer seller Dell, and this triggered an avalanche of similar complaints, which led to a drop in Dells share price. This does not only illustrate the power of the Internet, but the power the Internet gives to the users.
Marketing companies may see the opportunity to exploit this grass roots marketing by providing the seed stories, but the risks if they were to do so are potentially huge due to backlash if consumers found out. They see these websites as their own and not part of traditional media, and object if they are invaded by big marketing firms.
