Friday, November 30, 2007

Viral Marketing, Facebook and some new research

Since I posted about FB's Beacon service - where you can have your purchases from selected sites listed in your FB news feed - there has been lots of talk over the merits of the system.

I personally don't believe it's useful. At least not for me. I have many friends with many different tastes and would prefer an actual recommendation from one of them than a link to everything they purchase.

Of course, that's not to say the system has no merit. Exposing your product this way has to be better than basic display (banner) advertising. How much better is the question.

Surprisingly, there was some recent research done that the FB guys and gals could look to for a bit of insight into this area. The Dynamics of Viral Marketing is a research paper that was written this year on data collected from a large online retailer of books, music and video between 2001-2003.

The data they looked at was recommendations (15million in all) made by purchasers on the site. It was actually a referral program. Which means when you bought something, if you emailed it to a friend and they ended up buying it as well, they got a 10% discount on their purchase and you got a 10% credit.

Compare that to the FB program where there is no real incentive and no real recommendation (you're not targeting an individual friend with it), all things being equal the FB program results are probably going to be worse. The problem is that 'worse' results than the referral program are probably 'no' results.

A few of the things they discovered looking at almost 15million referrals were:

  • The probability of a recommendation working decreased with repeated interaction - so we tend to ignore people who spam us with product recommendations. I am sure the same is true for multiple purchases on FB news feeds.
  • The probability of a recommendation working if we receive it from multiple sources quickly reaches a (relatively low) threshold - the verbatim conclusion from this one was "...individuals are often impervious to the recommendations of their friends, and resist buying items they do not want". Couldn't agree more.
  • Highly connected people who recommend a lot ('spreaders', 'mavens', 'sneezers') tend to have significant diminishing returns - they seem to have an influence over their immediate friends, but the wider network discounts their recommendations the more often they receive them (point 1).
  • Smaller, more tight-knit communities coalescing around a single interest were more conducive to viral effects - that's definitely not FB. That's more like EBay where small groups of collectors and such show a strong interest in certain product areas.

I think the key point for FB is that last one. Viral effects are more pronounced in 'communities of interest'. What I would like to be able to do is actually HAVE a newsfeed from my friends that I can specify exactly what I am interested in at the time.

For instance, if I need a new laptop, let me look at all laptop purchases from my friends in the past 6 months? Or a new phone? New summer clothes?

The key is I have control. I don't feel like I am being spammed. And I am looking for products that I have an interest in. Seems much more useful.

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1 comment:

TW said...

Excellent Post!!,