When voting moves online, as it undoubtedly will (just think about all of the tax money we would save if we did not have to set up temporary voting centers everywhere), the marriage of social media and election campaigns will be that much more profound.

To be frank, I do realize that the title of my post is too far reaching.  The reality is that Obama is a truly great man and therefore a good subject for word of mouth to flourish about.  Andy Sernovitz, the founder of WOMMA and Bazaarvoice Advisory Board member, has taught us – great subjects (products, people, services, etc.) easily generate word of mouth by just asking people to help and share.

On a personal note, I took a short vacation this weekend in Laguna Beach to recharge after my week in Amsterdam to speak at Shop.org's first Global E-Commerce Summit, then back to Austin for Halloween (I couldn't miss it with our 4-year old daughter), followed by a week in London for our own sold-out Summit (recap here).  I'm here for the Piper Jaffray Global Internet Summit kicking off on Monday night.  And vacation allowed me catch up on reading some great opinion pieces in the NY Times.  This is a truly historic period that we are living in, and I encourage you to read a few of these if you have the time – they are well worth it:

• It Still Felt Good the Morning After by Frank Rich
• Show Me the Money by The World Is Flat author Tom Friedman
• Obama and the War on Brains by Nicholas Kristof
• The Climate for Change by Al Gore

We started answering that question today with the launch of our newest feature, called ShareThis(tm). It is a FREE feature for our clients allowing their shoppers and customers to share a review, profile or product to their favorite social networking or bookmarking site. And because we’re already hosted in their site, we can turn this live within days without IT involvement.

Dow Jones covered the launch, including commentary from Dell. Here’s a snippet from the article:

The feature enables a person who is, say, excited about the Dell monitor he just bought to share the news by posting on his Facebook profile a link to a review that he or someone else wrote. The post, which can also include an image of the monitor or the Dell logo and brief comment from him, will show up on his profile mini feed and in the news feed his Facebook friends see. Bazaarvoice says no money will change hands; shoppers won't be paid for posting reviews and Facebook won't get fees.

"It's making (consumers) an advocate" for brands on sites where the audiences are highly desirable to marketers, yet tend to be skeptical of online marketing, says Greg Sterling, of Oakland, Calif., consulting firm Sterling Market Intelligence. "It's trying to leverage a more trusted environment" and a form of marketing — word-of-mouth — that is particularly trusted by consumers.

It is also an effort to engage people who online-marketers have come to call "influencers" — people who through their expertise and efforts to share that expertise in online forums have gained outsized influence over other consumers. Sites like Facebook, del.icio.us and Digg are places where these people, and other less-active Web users, love to express themselves and have access to large numbers of other people.

"Now, for the first time ever, whenever (consumers) see a product they like, they can post it as a representation of who they are and what they like," says Sam Decker, chief marketing officer at Bazaarvoice.

I couldn’t have said it better myself!

You can see it live on these sample product pages from Dell, Toshiba and Jewelry Television.

We have future plans for this functionality, plus other ideas on social network integration with user generated content. Drop me a note if you’re interested in discussing them (sam at bazaarvoice.com).

If you’re a client interested in adding this to your site, it just takes a call or email to your Community Manager…otherwise you’ll be hearing from them! Remember, it's free! I mean FREE!

But you probably haven't heard about this: today, Google's valuation surpassed Wal-Mart's for the first time.  Wal-Mart is the largest company in the world as the Fortune and Global 1.  As of today's market close, Google is worth $177.6 billion while Wal-Mart is worth $175.58 billion.  Wal-Mart has a P/E ratio of 14.46 while Google's is 46.24.  The high relative P/E is a reflection of Google's insane growth (and projected growth) and margins since their founding (that may seem like a high P/E overall but note that Yahoo!'s is 51.75 and the only explanation is that the market must value a more diversified and theoretically more stable revenue stream).

And talk about a young company.  While Facebook was founded in 2004, Google was founded in 1998 (that's around $20 billion of value created every year since their founding).  It's amazing to think that only around 10% of all advertising is spent online today.  The revenue shift from offline to online advertising is mindboggling.  We are witnessing the creation of the most valuable company in the history of the world.

The only explanation for Facebook's incredible valuation is the average (very long) dwell time of the user (especially Millennials, as Kelly Mooney would call them) and the theoretical future value of their advertising stream.  I presented at a local high school recently and learned, not surprisingly, that the students were communicating (i.e., living) in Facebook more than IM or email.  But it's not just for kids.  Our CMO, Sam Decker, wrote about Facebook taking off for business users in his blog.  I have certainly seen that.  The CEO of Ice.com just sent me an invite to connect on Facebook today (I had the pleasure of presenting with his brother, Pinny, at last week's awesome Shop.org Annual Summit in Vegas).  I am getting 5-6 invites per week now and am spending more time on Facebook than LinkedIn now.  And everyone, including Bazaarvoice, is rushing in to integrate with Facebook. 

I wrote about how the Web browser and social networks are becoming increasingly more integrated in April.  Hang on to your hat – if Microsoft invests in Facebook, it is going to get really interesting really quickly.  How consumer-generated content becomes more integrated in social networks is going to create some very interesting (viral) opportunities.  We're gearing up for that here.

By the way, I would be remiss if I didn't mention that Google never advertised.  Neither did Facebook.  Both brands were built entirely by word of mouth.  And both brands are very young but obviously very established.  That's just how valuable of a service they created.  They're worth talking about… really worth talking about.  Now, Facebook me.

The credibility that underlies word-of-mouth and it's endorsement is nothing new. We've all been communicating person to person since the dawn of time. If anything we are returning to our roots, preferring relationships with people, that are meaningful and rewarding to the cold mass automation of the factory mindset.

We can look at numbers endlessly and try to determine where the eye-balls are and what spaces they have left and perhaps, where they might go. But here you are still just estimating and acting in a broadcast manner. That may have been the way offline, but its not utilizing what is most precious and unique online. The web is personalised and on demand. It is person to person services and conversations, and it should reduce barriers and bring people together. If a brand can meet people at this level and utilize technology that is effective and efficient, and a manner that is genuine and authentic – then it is surely potent to explode onto the scene garnering trust and loyalty. In such a way social networks are useful to brands, but there is something more.

The real holy grail of social networks lies in the power of the enthusiasts themselves. They are the ones, usually only making up 1% of the crowd who are the initiators and the influencers. They are the ones who propogate messages on their own time, with their own energy, and spread it out, innovate on it and creates fresh ideas. They can do it because their relationships are credible and authentic and their motives for involvement are situated in an inate core enthusiasm that they share with the brand or product.

I don't think social recommendation is a 'new' social currency, but rather something we've always had. What is new today is the unprecedented access to free online tools that make communication, networking and sharing easy enough that anyone can do it who wants to do it. Consumers today usually know more about a brand's product than most people working within the brand. If they don't know it, they soon will. And when they do, they'll share it.

Get in with your core 1%. Do the ground work and use the technology at hand to make people connections, encourage conversation and be honest. Theory behind word-of-mouth marketing, engaging enthusiasms and utilizing the platform of social networks is all meaningless if the brand itself continues to build billboards online and hope that 'if you build it, they will come'

Pete is well known on many levels.  He was helping CDnow run analysis back in the pre-boom times.  He has been very outspoken in the age of digital music, advising music companies on how to market in these rapidly changing times.  I remember him best as my Markstrat professor, one of the better MBA classes I had the pleasure of taking.

Dave is also very well known.  He consults for companies all over the world.  He served as the Executive Director of the Marketing Science Institute.  And few know him as the co-founder of BizRate, where he served on their Board of Directors from its inception to when Scripps bought the company for $525 million in cash almost two years ago.

So begins our interview…

1. You two have studied and taught marketing for your entire academic career and now teach at my favorite business school.  What do you think about the recent trend of user-generated content?  Will it change the world of qualitative and quantitative marketing analysis?

Dr. Fader:
First, it’s extremely important to distinguish amount different types of “user-generated content.”  There’s a huge difference between a daily blog entry versus posting some comments on an open-ended discussion board versus a customer filling in a feedback form on a commerce firm’s website.  And this doesn’t even get into “real” content such as a homemade video.  It’s a big mistake to treat all of these sources of customer input as interchangeable with each other.

Second, yeah, there’s a ton of new stuff being created every day, but the big question is whether customer behavior is fundamentally different than before, or are we just getting a new window to help see the behavioral process in a way that we could never see it previously?  I tend to be relatively conservative about this (i.e., I believe more in the latter than the former) and this has important implications for model-building and analysis.  Too many people are saying that it’s a “whole new world” and are throwing out the old models/metrics.  This was an enormous mistake for many firms at the dawn of the Dot-Com era, and I think history is repeating itself again.  As a specific example, most of today’s research on social networks is inferior to work that was initiated back in the 1960’s.  The available data are way better today, but firms are drowning in it and not being very thoughtful about how they use it.  Too many firms are coming up with “fun facts” to impress senior management or investors, and not drawing specific, meaningful insights that really add value to the data-collection process.  It’s important to do some serious thinking before looking at any data.  Come up with some specific hypotheses, or guesses, about the relationships you expect to see, then test them.  The complete opposite of this is “data mining,” which is what most companies tend to do.

Dr. Reibstein:
First, I agree there are different types of “user-generated content,” and they should be treated differently. 

Let me add that there is a reflection that there is significant bottled-up sentiment that many people have to share.  Let me start with a caution about some of this content, however.  As with survey research, and the same holds for user-generated content, beware of non-contributors.  In survey research, we would refer to this as non-response bias.  Nixon (I am dating myself) referred to it as the “silent majority”.  The question is what are the feelings of those that didn’t reply or generate any content.  Were they more satisfied and didn’t feel a need to comment?  Dissatisfied customers, experiences, generate many more comments than satisfied.  Mediocre experiences generate the least.  The assumption with survey research, customer satisfaction surveys, and beyond is the non-respondents are not any different than the respondents.  And, in many cases, that is correct.

All of that being said, there is the common belief that consumers trust other people’s opinions and content more than they trust that of advertisers.  Advertisers’ motivations are to represent their products/services in the best light.  Other consumers are less biased.  Of course, this is a universal statement that should be challenged.  It would be safer to assume that some consumers are more willing to rely on other users’ input.  The question is what proportion.  I am sure this percentage will differ by category.

It is the case that consumers can probe and interact with other consumers in a way they never have previously been able to with companies.  Companies, in general, have not been able to figure out how to deal with the multitude of customers and address each of their questions, yet given a large number of customers, it is likely that customers could ask very specific questions and find user-generated answers.  Some companies have been able to harness this “community of users” to help address such individual questions.  For example, P&G has a user group for detergent where people can ask and get responses about how to launder and so forth and get responses from other consumers.  This has proven very powerful.

As for the impact on research, my suspicion is no.  The type of “user-generated” data does not fit traditional modeling and it is coming in such mixed forms, people have yet to fully figure out a systematic way to analyze it.  Let the fun begin, but as Pete says, don’t throw out all the good we have learned to this date about how to analyze problems.

2. What does this consumer-as-producer trend remind you of most from your background?  In other words, is there a previous marketing framework or trend that you relate this to?  [I am a believer that most trends are cyclical – and that is part of the reason I chose the word “bazaar” as the first part of our company name].

Dr. Reibstein:
I believe the “consumer-as-producer” trend is a recycling of all the old research from the 60’s of “word-of-mouth” communications.  We saw it resurface recently in such things as “buzz marketing,” “guerilla marketing,” “coolhunting” (the article), or even Gladwell’s The Tipping Point.  None of these were looking at the electronic world, but all were looking at how some consumers were influencing others.  We can even take this back to Veblen’s The Conspicuous Consumer from the 1890’s to see how far this really dates back.  No, I do not date back that far!  All the trend setting from the fashion world has been based on this understanding.

3. What do you think about the current trend of user-generated advertisements?  Do you think this is a fad, or a permanent change in the way ads will be constructed?  Will we see more of less of this in the future, and how will it evolve?  Some recent examples: Doritos, Oscar Meyer, GM Tahoe, and Yahoo!.

Dr. Reibstein:
In some sense user-generated advertisements are not as unique as they might seem.  Companies have previously tried to harness these consumer-initiated responses by showing ads which were interviews of “customers on the street”.  In these cases, it was sponsored by the companies, but they were selecting real people and getting authentic reactions.

Today, there are major differences—first of all, in the company-sponsored ads, they were able to be very selective and only show the ones that were positive for their company.  Today, it is out of their control.  Secondly, the technology is so much better, accessible, and less expensive, that people can develop their own ads.  The examples you gave are all very energizing and giving the power to the consumer, yet, once again, we have the companies selectively editing the ones to be shown.  So, this is no different.  Nonetheless, the approach has now got some customers energized to create very clever ads.  The agencies should be worried.  (I might note, this is consistent with the notion of reality TV.)

Another comparison is companies putting their name on apparel for customers to wear around.  This is a little different, but to a very large degree, it is having individuals electing to be walking billboards for their products.  It is one thing for Polo to put their brand on shirts and everyone can see who is wearing them.  It is another step forward for Budweiser or Harley to have their name on t-shirts and have people wearing them around.  This has been a long-time strategy of having users influencing other users and a form of pre-Internet social network marketing.

If this approach grows much, we can anticipate the novelty to wear off pretty quickly.

3b. I remember how often companies used video testimonials in ads; that is a good historical point.  The difference now is that consumers are creating the ads themselves.  And the main incentive for consumers to do so is social recognition.  That feels like a major shift to me and another unforeseen benefit of the Internet as a low-cost, easily-accessible, globally-connected form of communication.  Isn’t this the start of a permanent shift for agencies?  How do you think they will adapt?

Dr. Reibstein:
I agree that self-created is a shift, but the ones we cited are not truly self-motivated.  In each case, the action was initiated by the firm.  To the degree there are ones that are self-developed, like when people tattoo a brand on themselves, as has often happened with Harley, that is a real shift, but didn’t just start now.  It is a true sign, though, of consumer commitment.

Dr. Fader:
As Dave suggested, right now it’s a pure novelty, kind of like e-mail marketing back in 1999.  I can assure you that there will be no fuss about user-generated ads in the 2012 Super Bowl.  That doesn’t mean that such ads won’t exist, but no one will care.  This is my main point here: customers do not care about the origins of ads (how many consumers can name even one ad agency?).  They only care if the ad moves, entertains, or persuades them in a meaningful way.  If consumers can do a better job of this than advertising professionals (which, in general, I doubt they can do), then that’s great.

There is a huge difference between user-generated ads and user-generated comments.  Yes, consumers often want to see opinions from other regular people.  In that case, the source of the content really does matter.  But this is entirely different from advertising, and when the two come together, bad things happen…

3c. Pete, will you elaborate on what you mean by “bad things happen…”

Dr. Fader:
I’m sure you’re familiar with the growing list of stories that involve a firm posing as a regular user and “seeding” comments in a user forum.  And surely, for every firm that’s been caught with their hand in the cookie jar like this, there are a hundred others who have gotten away with it.  Not only do these episodes harm the credibility of the firm but they also harm the credibility of the forum itself (even if it’s not necessarily their fault for letting the fraudulent comments get through).  Anyway, this is the red zone between user-generated advertising and user-generated comments, and firms will continue to find ways to toe the line…

4. How do you think brands will figure out how to advertise in social networks?  Obviously the “eyeballs” there are enormous as MySpace is now one of the top-ten sites of the Internet.  And eMarketer predicts that social network advertising will top $1 billion this year (5% of what eMarketer projects will be spent on online advertising overall).  But are these mediums the right place for a brand to reach a customer?  MySpace users seem to fight “the intrusion” often.

Dr. Reibstein:
If you have people going to MySpace or YouTube or other social network sites and searching for keywords, they become primary venues for firms to do their advertising.  The risk is alienating potential customers by invading their space.  I suspect customers will be ready to adapt and not be too offended as ads start to appear more and more often.  For some customers, it will even have appeal as they are interested in certain topics and finding links to products/services might be of interest or ease for them.

An interesting phenomenon I am aware of is some companies, particularly start-ups, are producing their own video’s and rather than buying airtime or webspace are putting up these ads on YouTube and encouraging some individuals to go there and to “forward to a friend”.  So, these social networks are being used directly as an advertising medium.

[Note from Brett: see Wayne's post on Blendtec for an example.]

Dr. Fader:
RetailWire ran a discussion about this recently, and here’s what I had to say:
“I frequently use Facebook to snoop around on my students and I see many of these commercial-related groups there.  People gladly align themselves with brands that they favor, but this by itself doesn't mean anything.  No one really does anything there, and they can't compare to more socially oriented user-driven groups such as "So-and-so was incredibly drunk last weekend and I have the photos"!  So it might seem like a "competitive necessity" for brands to stake out some turf in these new worlds, but I don't really see why.  Many of these networks will collapse under their own weight due to excessive meaningless links (I think MySpace is in great danger of that right now), and serious investments that some brands may make in this arena will be largely wasted (albeit in a different way than the students they are trying to appeal to)”.  The full discussion is here.

And then there’s the use of these networks for “viral” advertising.  See my comment about e-mail marketing above…  much of it will diminish as the novelty wears off, but there will always be room for really good ads to be accessed and shared on YouTube, etc.  But the metrics that firms use to gauge the success of these ads needs to change.  I’m a firm believer that the Subservient Chicken campaign, for instance, was useless, regardless of how many people (including me!) wasted time on it.

4b. Dave, I hear what you are saying about YouTube and the viral effect of some video ads online.  Philips took a risk with the “Shave Anywhere” campaign and it paid off.  But it seems to me like it is going to be hard for YouTube to monetize their traffic unless they add a pre-roll or post-roll ad to each video.  And won’t that hurt the pass-along effect?  I can see how a company can produce a “made for YouTube” ad as a standalone “unit”.  But a pre-roll or post-roll seems much more difficult to me (yes, Yahoo! has these for their videos, but they don’t have near the video traffic that YouTube has).

Dr. Reibstein:
I think we will easily adapt to pre-roll and post-roll ads and learn to skip them.  Look at CD’s, videos, and DVD’s that have all added pre- and post-promotions.  We have learned to accept this, and in some cases, because of the capability of the targeting, have even appreciated the ads because they are relevant to us.  Certainly, when we go to movie theatres we now see the bevy of ads before the feature, not just trailers, but also for other products.  We have accepted these, and as I suggest, even enjoy them in some cases.

4c. Pete, doesn’t your response contradict one of the goals of branding?  If it is about mind-share, doesn’t it matter that PINK Victoria’s Secret has 210,620 fans?

Dr. Fader:
Sure, any PR is good PR and all that.  But the value of these connections is minuscule.  I suspect there is no discernable difference in the collective lifetime value for these V-S customers with or without these connections.

Likewise, I’m not saying that Subservient Chicken, et al, are bad ideas – I’m just saying that they don’t generate nearly as much in the way of sales as these firms would like to believe.

So it’s great for firms to jam a stake in the ground and say “we’re here!”, but they shouldn’t expect much economic reward from it.  The same is true of most branding efforts, even in traditional media.

5. Dave, you served on the Board of BizRate (now Shopzilla) since its founding.  Obviously that business was based on consumer-generated ratings of retail businesses, which powers their shopping search results.  Now new shopping search engines like Wize.com and Become.com are popping up frequently.  How do you think customer ratings and reviews will help evolve shopping search?  What opportunities does this pose for marketers?

Dr. Reibstein:
As a co-founder and board member of BizRate/Shopzilla, I, from the beginning, have believed that consumers want to hear from other consumers about their product and merchant experiences.  It is an unbiased (or less biased) view that has some greater degree of trust.  The first opportunity this provides to the marketer is the feedback from the marketplace about how consumers perceive the offerings.  In some sense, the marketing research is being done for them.  The opportunity is to listen to it, not just to cringe from the bad ratings.  It will also be the opportunity to observe what seems to matter.  Is something poorly rated on certain dimension, yet still captures sales?  There is information in these ratings.

6. We started this interview with how the world of marketing analysis is changing.  I would like to revisit that in two ways.  First, what are academics doing to evolve that, given that both of you agree that companies are drowning in data and the methodologies being used are not advanced enough?  And, second, what would you recommend to companies that are planning to embark on a user-generated content future in their marketing so that they ground themselves properly? 

Dr. Fader:
Unfortunately, the gap between academics and practitioners in marketing is widening further than ever.  We teach the same old stuff as we’ve taught forever (albeit with fancier technology), and much of the content and methods we teach are far removed from the needs of managers.  This is particularly true in data intensive businesses such as e-commerce.  So we deserve most of the blame, but managers bear some responsibility as well.  The 24/7 crisis mentality of today’s executives makes it impossible to be thoughtful and deliberate in approaching data.  Quick and dirty solutions are not only tolerated but they are rewarded, while doing things the right way is not a popular path to follow.  So overall, it’s a pretty grim situation, which is very disappointing considering the coolness of all the new data that are coming out of companies like Bazaarvoice and its clients.  And there’s no indication that things will get substantially better in the near future – both sides will continue to drift further apart…
 
Dr. Reibstein:
I believe there have been several academics that have been making some good strides in understanding the wealth of data we now face.  One of them is my colleague and co-responder in this blog interview who has been too modest, Pete Fader.  He and some of his former doctoral students such as Bruce Hardie (London Business School) and Wendy Moe (University of Maryland) have been leading the front in how to analyze the onslaught of data.  Others such as Alan Montgomery at Carnegie and Florian Zettelmeyer at Berkeley have also been making major strides.  The outlook is not nearly as dismal as Pete paints it.
 
There are some companies as MarketingNPV and others that have been groundbreaking in helping firms organize their data and connect it to marketing outcomes.

Dr. Fader:
Too many people in the “user-generated content” area (as well as its cousin, social networking) think that everything is totally new and there’s nothing to learn from the past.  They would be amazed at some of the work that was done in sociology and other related social science disciplines years ago.  Likewise, they would be amazed at the power of the statistical methods that were developed back then (and unfortunately long since forgotten by marketing types).

I can suggest a few readings – a couple of classics are listed below.  But note that both are out of print, which speaks volumes about the state of affairs in this area.  Both require a bit more than the usual MBA statistical training.  It is essential for an advanced manager to have such skills.  In fact, I go further to suggest that any CMO (or CMO wannabe) should be able to read and appreciate this kind of work.
 
Greene, Jerome D. (1982), Consumer Behavior Models for Non-Statisticians, New York:Praeger.
 
Massy, William F., David B. Montgomery, and Donald G. Morrison (1970), Stochastic Models of Buying Behavior, Cambridge. MA: MIT Press.

My hope is that Bazaarvoice, with its deep grounding in fact-based management, will be able to escape the morass of today’s custom analytics, and I am eager to help them on this important mission.

Thanks again to both Pete and Dave for doing this interview.  They encourage you, the readers, to ask further questions or make comments via the comments section below.