Despite being a relatively new and unstudied paradigm, several lessons have already emerged from social media. These lessons come in two forms: (a) lessons on ethics and (b) lessons on society’s desire for democratic business practices.

a. LESSONS ON ETHICS IN SOCIAL MEDIA

Many businesses have thought about ways in which to capitalize on the tremendous power of social media. Wal-Mart is one of those businesses. In late September 2006, Wal-Mart launched a blog entitled “Wal-Marting Across America.” The blog featured the writings of a couple, Jim and Laura, who was traveling across America in an RV. Jim and Laura spent each night parked in front of Wal-Mart stores. They wrote about their trip and their positive experiences with the Wal-Mart employees. One such entry described an employee “going the extra mile” (qtd. in Siebert, “Pro-Wal-Mart Travel Blog Screeches to a Halt,” par. 4). Everything about the blog seemed reasonable. However, there was one major problem. Jim and Laura were being paid by Wal-Mart and that information was not disclosed to the public. Instead, the public was led to believe that Jim and Laura were satisfied customers acting on their own.

Shortly after the launch of the blog, or “flog” (fake blog) as it has come to be known, Business Week exposed the scam. What had been intended to improve Wal-Mart’s brand reputation had now become one of the biggest brand damagers in the company’s history. News headlines and bloggers from across the blogosphere ripped into Wal-Mart and Edelman – the public relations firm responsible for the flog. Bloggers sent a clear message: transparency is absolutely necessary for participation in the social media sphere. No company, not even Wal-Mart, is immune to this expectation. Consumers did and will react negatively to any public organization that attempts to deceive.

b. Society’s Desire for Democratic Business Practices

Another lesson that has shown up on multiple occasions but is less obvious is that consumers are beginning to expect businesses to adopt more democratic practices. Consumers expect businesses to act on what is important to the consumer rather than on what is in the best interest of the business itself.

MySpace.com was the undisputed leader in social networking only a few months ago. The Web site occupied the fourth spot on the list of global Internet user reach. However, overnight it seemed, MySpace plummeted while Facebook saw enormous growth. What was it that caused the drastic shift? According to a source closely tied to co-founder and former CEO of MySpace, Chris DeWolfe, “DeWolfe was out there for his own name” rather than out there to improve the services and community of MySpace (qtd. in Bruno 5). In the meantime, Facebook was implementing more and more democratic and open policies. Facebook opened its databases and code for third-party developers, Facebook Connect made it possible for external Web sites to share the user data of Facebook, and in response to the terms of service fiasco, Facebook shocked the world by allowing its users to determine the new terms of service. Each of these policies contributed to the trend shown in Figure 3.2, which illustrates the widening gap between Facebook and MySpace. Failure to adapt to the new expectations of society caused MySpace to lose enormous amounts of traffic to Facebook. As MySpace was punished for their inability to adapt, so too will businesses from other fields if they fail to be as flexible as their competitors.

CONCLUSION

Social media and the new business paradigm are here to stay. While some businesses debate the value of social media and cut their budgets for social projects, others are enjoying the benefits of pursuing active social media policies. It is absolutely necessary for businesses to understand the changing landscape of modern business, the emerging trends of that landscape, and the lessons learned from this new business paradigm.

The landscape of modern business has been completely reshaped by the tools, trends, and concepts of social media. A clear understanding of the trends allows businesses to efficiently and effectively communicate with their customers. It is vital that businesses learn from the mistakes that have already been made and remember that transparency and honesty are crucial to success in this new paradigm.

As social media has become increasingly popular, several trends have emerged that change the way businesses should interact with consumers. These trends can be placed into three major categories: (a) Changes in Consumer-Business Relationships, (b) Changes in Market Research Practices, and (c) Changes in Consumer Expectations.

a. CHANGES IN CONSUMER-BUSINESS RELATIONSHIPS

With the advent of social media, consumers are increasingly affected by the opinions and reviews of their peers. A poor review of a product on a friend’s blog is more than enough to dissuade a purchase. On the other hand, the praising of a product through a tweet might be enough to convince a teetering customer to finally buy a product. This personalization of the decision-making process has devalued the opinions of professional product reviewers and has made it vital for businesses to interact with consumers on a personal level (Godara 146). Social media and marketing consultant Deborah Schultz, phrased it well: “it’s all about a new attitude: a behavioral and cultural shift” (Molander 39).

Understanding the new “attitude” is absolutely key for businesses. Consumers are turning to mediums like Twitter and Facebook to find out what their peers are saying about various products. Armed with that knowledge, businesses must enter the social media realm as well. Through social media, businesses have the opportunity to effect the opinions of their customers on a personal level. They are able to have one-on-one interactions with consumers in a way that was not previously possible.

b. CHANGES IN MARKET RESEARCH PRACTICES

Another benefit of social media for businesses is the tremendous power they are given when it comes to market research. Facebook provides businesses with a series of tools that can be capitalized on to understand market trends and individual preferences. Facebook Lexicon is a feature that allows businesses to track the frequency of certain keywords on users’ profiles. “Lexicon aggregates and analyzes millions of Facebook Wall posts every day to provide a searchable database of trends over time” (Facebook Lexicon). This allows businesses to monitor their brands among various demographics within Facebook. Lexicon also allows users to compare keywords against others. This is also beneficial to businesses because it allows them to track their relative performance compared to competitors. For example, a comparison of the keywords “Coke” and “Pepsi” suggests Coke is greatly outperforming Pepsi (Klaassen 25).

Another feature Facebook provides that essentially eliminates much of the necessity for independent market research is the Facebook Ads feature. In practice, there is very little that is different about Facebook’s ad features and those of Facebook’s competitors. However, the technology behind those advertisements changes everything. Instead of advertising to any random user that comes along (as most ad programs do), Facebook allows businesses to target specific demographics. When creating an advertisement, businesses can target select age groups, specific networks, and/or people with specific interests or hobbies. By utilizing Facebook’s features, advertisements are only sent to those individuals who are likely to be interested in the products or services of the business. This drastically reduces costs, increases efficiency, and improves brand reputation by reducing the frequency of irrelevant and often irritating advertisements.

As can be done with Lexicon, it is possible to monitor brand “buzz” through features on Twitter as well. Twitter’s search feature allows users to search keywords or phrases and display the most recent tweets containing those words or phrases. Third-party tools are also available to expand on this capability. Monitter.com is a great tool for monitoring keywords in real-time. Users select the words they want to monitor, the geographical region they wish to review, and then watch as the “Twitterverse” tweets about their selected keywords. This allows users to compare the frequency of various terms and monitor the positive or negative things that are being said in relation to those terms. Businesses can track what is being said about their brand and products and then quickly respond with appropriate messages.

c. CHANGES IN CONSUMER EXPECTATIONS

The addition of so many tools has also increased the expectations of consumers. While consumers may not expect a personal message from a company’s CEO, they are starting to expect some sort of personal communication with a company representative. Social media has also focused a lot of attention on privacy and the protection of personal information.

A recent change to Facebook’s terms of service sparked great controversy when users of the popular site felt their personal information and property were being violated. Consumers expect their information to be protected and so the changes to the terms of service, although small, were enough to excite debate. The changes were, in most ways insignificant, but since they were not heavily publicized, “[Facebook] appeared to be sneaking an unpopular change into its terms of service in the dead of night” (Stylman 14). Facebook failed to recognize the new consumer expectations and received heavy reprisal from its users for the poor judgment. Facebook did learn from the mistake and instituted some revolutionary changes. This will be discussed later.

Continue reading Part 3.

1. THE CHANGING LANDSCAPE OF MODERN BUSINESS

Five years ago, few had ever heard the term “social media.” However, things were about to change; Facebook was introducing itself to a Harvard University community, YouTube was brewing in the minds of its creators, blogging was starting to catch on, and the practices and principals of Web 2.0 were dictating how new Web sites and communities were being built (Blood).  The paradigm shift toward social media had begun and the world was taking notice.

Two driving factors identify the shift: (a) the diversification of information authors and (b) the reconsolidation of information mediums.

a. THE DIVERSIFICATION OF INFORMATION AUTHORS

Traditionally, information has been funneled through major media organizations like CNN, Fox News, and The New York Times.  These organizations act as gatekeepers through which information must pass before it is received by society at large.  The gatekeepers decide the relevance and importance of information.

Social media has restructured this process.  Instead of funneling information through the gatekeepers, social media acts as a bridge that connects information directly to society.  Individuals can then decide for themselves what information is relevant and important and what is not.  Figure 1.2 illustrates the difference between the traditional approach and the social approach.

Social media facilitates individuals’ abilities to be authors, influencers, and contributors to the flow of information.  A 12-year-old boy has the same influence on the flow of information as does a 20-year veteran of The Wall Street Journal.  Regardless of their background, people now have the ability to influence the opinions of thousands.  Individuals (and businesses) are blogging about what is important to them and tweeting about what they are doing.  The consolidation of this information allows people to identify for themselves what is important, what is significant, and what is relevant.

b. THE RECONSOLIDATION OF INFORMATION MEDIUMS

In its early stages, social media struggled to gain mainstream acceptance because it lacked one important quality – a way to present information efficiently.  As more and more people became authors, it became harder and harder to sift through the massive collection of authors to find the ones that matched an individual’s wants and needs.  The solution was found in a slightly dated, yet relatively untapped technology called Really Simple Syndication, or simply, RSS.

RSS was originally developed by Netscape and through a series of events, was eventually taken over by Harvard Law School and released under a creative commons license (RSS-Specifications).  The technology allowed individuals to “plug-in” to various Web sites and feed the content of those Web sites to one consolidated location.  This is illustrated in Figure 1.3.

The introduction of RSS sparked huge growth for social media, primarily blogging.  Not only was information being created at a faster rate than ever before, but now the information was also organized.  Information was being reconsolidated to fewer mediums.  This trend culminated in the tremendous success of Twitter.com.

Essentially a compilation of millions of micro-blogs, Twitter offers users the ability to watch, in real-time, the relevant news of the day.  Again, individuals are able to decide for themselves what information is relevant.  From users’ profile pages, they can get information from all of their friends, family, co-workers, news sources, and anyone (or anything) else they decide they are interested in following.  All of the information has been consolidated into one easy-to-follow location and has been tailored to the user’s preferences.  As a business, the tailoring of information is an important fact to understand.  When someone receives information from a business’ profile, it is because that individual is genuinely interested in what the business has to offer and is therefore more likely to invest in the business’ products or services.  Twitter is a free service and therefore it allows businesses to advertise to their target audiences for free as well.  Compare that to a traditional paper mailer that can cost thousands of dollars, is incredibly inefficient, and has a slow response rate.

The paradigm shift that occurred with the introduction of social media has created a completely new landscape on which businesses must learn to operate.  The businesses that fail to understand this landscape will quickly fall behind the ones that do.

Continue reading Part 2.