During a little downtime this week, I have seen three profound examples of user-generated content in action:

1. Today, MarketingSherpa released a new case study on how President's Choice (large Canadian grocer) is leveraging online customer reviews of their private-label products in their stores, circulars, loyalty program, and product lab.  It is well worth the read; it is one of the most powerful multichannel examples that we have worked on with any client to date.  I also encourage you to look at the creative samples they provided.  Note that free access is only available for seven days from the publish date.

2. Yesterday (and again tonight), I saw a new Ford Fusion commercial that uses customer review content from Yahoo! Autos in the ad as the primary selling message.  I think this may be an industry first.  I have seen user-generated content used in many forms, but not actual customer review content on a major television advertisement (it ran on American Idol's session finale tonight – that can't be cheap).  The commercials are branded with Ford's new website: Ford Challenge.  I wrote about General Motors doing something similar last year, but not quite as profound.

3. On Monday, I read an article on Yahoo! about 45 million people globally voting on the new Seven Wonders of the World.   Quick – can you name the historical Seven?  I couldn't, and only one of them survives today.  This is notable news to me for two reasons.  First, 45 million (and one) people globally are now engaged in caring about important historical places in the world (although it somewhat saddens me that, by comparison, 74 million people voted on the new American Idol winner).  Second, it taps into three trends that I have been following: the wisdom of crowds (and crowdsourcing), the power of the new globally connected individual (see Kryptonite mention), and the upheaval of traditional power structures (this one being the intellectuals in 200 BC that selected the historical Seven). 

On that last trend, I am reading David Weinberger's new book, Everything is Miscellaneous: The Power of the New Digital Disorder, which covers this trend extensively.  It is a pretty good read by one of the ingenious authors of The Cluetrain Manifesto (one of my favorite books – I consider Chapter 4 a must-read for marketers).  The basic theme of the book is that the laws of the physical world have constrained the desires of individuals for the purpose of organizing the masses.  For example, you can't dynamically rearrange a physical retail store for a specific niche shopper to make it easy for them, but you can do that online.  This may be obvious to many of you by now, but Mr. Weinberger has a unique style and writes of the history behind (including such topics as the invention of alphabetized lists) and the implications of this very important trend.

I think it is very cool that the Internet has enabled projects that would have never been possible before – like the new seven wonders voting.  Frankly, most would trust the opinion of 45 million people globally than a few intellectuals anyway.

And I was also very happy to see Shop.org announce this week that David Weinberger is one of the four keynotes at the Annual Summit this year in Las Vegas.  I hope to see you there!

He also knows a thing or two about word-of-mouth marketing.  Outside of the fact that he has made many investments that have to do with the subject, you may remember that Half.com bought the naming rights to a city in Oregon and renamed it Half.com.  This was a seemingly silly PR stunt (as I remember how the media initially reported the story at the time), but it paid off in spades.  Read Mark Hughes bio (a past speaker at a Word of Mouth Marketing Association conference) and you'll see what I mean.

1. In December, Time Magazine announced that their “Person of the Year” is “you”.  As in the “prosumer”, or consumer-turned-producer.  Do you agree that the power of the “crowd” was the biggest trend of 2006?

Yes.  I think we’re seeing a major shift in the online value chain.  The initial killer application of the Internet was email (one-to-one), followed by websites (one-to-many).  We’re now seeing the creation of a whole class of tools that easily allow people to create, organize and publicize content (many-to-many).  With so much content being put online every day, the big challenge (and opportunity) is to find ways to help people discover the stuff that is relevant to them.  Leveraging the “wisdom of crowds” to intelligently filter/recommend content is a very large and meaningful opportunity.  

Other than Bazaarvoice (of course), other “social media” companies in our portfolio include:

VideoEgg has built a very powerful distributed video network – and currently power the user-generated video of 5 of the top 20 social networks (AOL, Bebo, Hi5, Tagged, and MyYearbook).

StumbleUpon has developed an innovative (and addicting) way to harness the wisdom of crowds for website discovery.

Aggregate Knowledge uses the behavior of previous visitors to a web page to automatically generate product and content recommendations.

Wikia was founded by Jimmy Wales, the founder of Wikipedia.  The company leverages people's innate need to create, share, and contribute to the subject areas that they are most passionate about.

3. How do you think consumer-generated content will impact the world of advertising?

I see it having an impact in a couple of ways.  First, advertising goes where the eyeballs are.  Consumers are spending far more time consuming consumer-generated content so over time advertising budgets will increasingly move towards that space.  Second, it increasingly allows consumers to participate in the advertising process itself.  The traditional one-way advertising broadcast model is now evolving towards more of a dialog between advertisers and consumers.  Forward thinking advertisers are using the collective intelligence and creativity of their consumers to help them craft their messages and even create their advertising.  This will result in advertising that is much more personal and relevant.

4. Do you think Google overpaid for YouTube?

No.  With its massive user base and powerful community, YouTube has clearly emerged as the leader in the online video sharing space.  With online video advertising set to exceed $1BB by the end of next year, and Google's ability to extract the most value out of any given online inventory, the acquisition seems like a very savvy move on Google's part.  This is especially true when you think about the fact that we are only beginning to see the potential of video on the Web, and the opportunities that lie ahead in this space.

5. Given your experience at Half.com, what advice would you give our clients in leveraging their consumer-generated content?

I think it's important to understand the impact that consumer-generated content such as ratings and reviews can have on a business.  In addition to allowing your consumers to communicate with each other, they also allow online merchants to begin tapping into the wisdom inherent in their current consumer base, and leverage that to create a better shopping experience for everyone who comes after them.  Companies can no longer afford to not participate in the dialog that their customers are having about them and the products/service that they provide.

6. What is the future of consumer-generated content?  Where does all of this lead us 5 years from now?  10 years?

Consumers today are more empowered than ever. It is now cheaper and easier than ever to create content, share your opinion, and distribute it over the Web. While this will inevitably create an overabundance of content, it will make finding the content that is most relevant to you increasingly difficult.  Over time I think there will be less reliance on traditional “editors” (e.g. newspapers) and “packagers” (e.g. music labels, publishers and studios) and more reliance on automated discovery tools that harness the "implicit web" to allow people to find the content that is most interesting to them.

7. What do you think the biggest trend of 2007 will be?

Online video has reached a tipping point. Given the amount of innovation, new developments, and widespread consumer adoption in this space, I think video will continue to be the biggest trend of 2007.

I'm sure Josh would love to hear your comments, so please write in. 

- from Wired Magazine, "The Rise of Crowdsourcing", pages 177-183, June 2006

As I was reading my latest Wired magazine, I was really struck by this article.  The Internet has revolutionized business in so many ways, but "crowdsourcing" may be the most revolutionary application to date.  Think of Wikipedia, Linux, eBay, YouTube, Google's ads, and the many other businesses that have been created by connecting the power of the crowd via the Internet.

So how does crowdsourcing apply to eCommerce?  Well, it is leading to the creation of entirely new businesses.  For example, look at Threadless.com.  It is on track to earn more than $20 million in revenue this year by crowdsourcing designs for t-shirts.  They sell one-of-a-kind shirts that are vetted by the crowd as the best.  You can see something similar happening on Zazzle, which has a more professional feel (not as much of a MySpace community feel as Threadless.com).  In addition to t-shirts, Zazzle lets you apply the crowdsourced designs on posters, mugs, postage, and cards.  Although you could dismiss these businesses as too niche or fringe to matter, it would be a mistake to do so.  They are revolutionizing merchandising by crowdsourcing. 

Crowdsourcing may be best put in context by James Surowiecki's book, "The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations".  The book title is self-explanatory and describes how businesses can be revolutionized by "the crowd".  Add the Internet and the shift to consumer-generated content, and you create some very exciting business potential.

Think about JCPenney's launch of their new ana line.  The idea for the new private-label line for women came to JCPenney directly from customer feedback.  How does JCPenney evolve this line quickly?  They listen to the customer feedback carefully.  And online product ratings and reviews would enable JCPenney to do this in an archived fashion.  Although word of mouth primarily occurs offline, it is only in the online channel that it is archived for thorough analysis.

Remember the movie "Big" staring Tom Hanks?  What made his character, Josh, so successful?  He could think like a kid and spent his time around kids while designing toys.  The toy executives scratched their heads on how his seemingly absurd approach to his job was actually working, and there is some truth in this movie to today's modern merchandising world.

The fact is that a lot of merchandising research is done with traditional focus groups.  Put a toy in the middle of the table and watch how the kids interact with it while you stand behind one-way mirrors observing.  While this is insightful, it only tells a part of the story and is subject to group think, the personalities of the participants, and the environment that the subjects are placed in.  Do the same type of research by analyzing "the crowd's" opinion of the product, and you will learn far more.  Other techniques include executives doing store tours and speaking with the merchandising managers, which certainly help as well.  But they are also flawed by limited information.  Surowiecki says that the most intelligent decisions are made by the crowd when they are in conflict or disagreement.  And we see this happen frequently with product ratings and reviews.  One reviewer will correct the other with their "better" opinion.  How else do you explain the social phenomenon of over 2,600 reviews of "The Catcher in the Rye" on Amazon.com?

Here are some other interesting examples:

1. At WOMMA's first "Word of Mouth Basic Training" event, I learned about Kettle Chips People's Choice campaign to select a new potato chip flavor to produce based on the input of tens of thousands of customers via their website.  The public relations results from this campaign were unreal, with the media covering this from coast to coast.  And, as importantly, Kettle Chips got hundreds of legitimate ideas (cotton candy flavored potato chips not being one of them) and produced two new flavors (Thai Spice and Cheddar Beer).  They honored those customers that participated with their names printed on the bags, which you can find at your local grocery store (Whole Foods being a major carrier of Kettle Chips).

2. I already beat this example to death in the past, but it is worth linking to again.  Kryptonite is an example of a company that didn't listen to the crowd (see the Fortune article link). 

This is only the beginning.  Source your own crowd and reap the rewards.