Bachelor of Arts (Honours) in Business Administration A332BUS Business Research Created by Godfrey Ryan Uttanwalla Student ID: 09063018

August 2009

Social Media: A fad or the next generation e-Marketing tool? Table of content 1. Introduction 2. Literature review
2.1. Research

question

Objective of the research

2.2. Introduction

to e-Marketing

2.2.1. 2.2.2.
2.3. The

e-Marketing channels Traditional marketing vs. e-Marketing

Internet History of the internet Global internet statistics

2.3.1. 2.3.2. 2.4.

Social media Introduction to social media Types of social media Social media statistics Revenue and ad spends

2.4.1. 2.4.2. 2.4.3. 2.4.4. 3. Conclusion

1. Introduction Since the early ages, when man began to trade, marketing functions have been around; they have changed and evolved over time, however the essence of the process has remained the same, marketing deals with identifying and meeting human and social needs (Kotler 2005:5). Marketing is about conversation and the internet is the hub of conversations, e-Marketing is the product of that evolution (Stokes 2009:5). It is the process of applying and implementing marketing techniques via the internet (Chaffey 2008). The early social networking process started with postcards, letters and pen-pals, eventually with progress and technology at our fingertips, dialog between our peers is being delivered over the internet. Facebook, twitter, MySpace, etc are these platforms where users profile themselves, network and meet people that are interesting and attuned to their lifestyle and mindset (Boyd & Ellison 2007). All of this is only possible due to the internet, virtually unheard of just over a decade ago, is today a vital daily part of most of our lives! (Bruner 2005:2) The web is one of the many services connected via the internet, as are email clients, instant messaging clients, web telephony, etc. One of the many services on the web are social networking sites connecting people from all around the world in real-time, bringing the world closer and truly making it a small world after all.

2. Literature review The next three paragraphs briefly summarizes the book by Eric Qualman; Socialnomics: How social media transforms the way we live and do business (2009). Since the dawn of social media online users would rather terminate their email than their social account, Qualmans book enumerates the diverse changes affecting this media and the influence it has. Consumers will no longer look for the news, products or services they will find us via this revolutionary media. It elaborates on the opportunities small businesses can benefit from using it as a key business tool. Through statistical research it divulges in the existent trends and shifts over our personal live and business decisions, it helps to share insights on how to nurture the influence of the social structure to generate sales, reduce marketing spends and reach out to customers. It discusses the need for social media and how word of mouth can manipulate lifestyle choices and media content. Preventative behaviourism is a social change man has seen over the ages, this too applies to companies who need to evaluate their actions so as not to cause a negative ripple in the social graph. Micro-blogging and status updates have become key indicators how the social structure is constantly changing, opinions and suggestions effect the behavioural changes in people, it is these changes companies need to adhere to, creating products that people will endorse. Social networks will display hundreds of user reviews for other consumers to research, evaluate, decide, purchase and comment; this confluence should be critically evaluated by corporations in the business process to evolve effectively. People in general are social

chameleons with ever changing behavioural patterns at different stages of their social lives this can be transparently seen over a social media, companies have the same patterns although the more undesirable deeds might have been concealed in the past, the sheer pace of information shared over these networks dont allow these deeds to go unnoticed which will adversely effect the credibility of the brand or company. 2.1. Research question Social media A fad or the next generation e-Marketing tool? E-Marketing has many facets and possibilities and one of them is Social media, is social media the future of consumer platforms can it dramatically change the consumers evaluation process, decision making and buying trends. Objective of this paper This paper divulges into the realities of the modern times with respect to social media and its potential influence over consumers and businesses, how it will influence our decision making and the importance of its application will become a vital e-marketing tool. 2.2. Introduction to e-Marketing The internet and the web have efficient business tools offering several applications and interfaces that augment services, advertising and marketing efforts with cost effectiveness (Deion 2006). Internet marketing should be used with traditional marketing and its strategies to create the most effective corporate marketing strategy. It utilizes various channels over the internet to communicate messages to customers, each of the channels have

specific uses and can prove to be very efficient if exploited correctly. Online marketing, e-marketing and internet marketing are synonymous often blurring the boundaries of clear distinction (Stokes 2009).

Using

wide

range

of

technologies,

e-Marketing

aids

connecting business to customers, customers to products and business to business. Traditional marketers often dismiss the virility of online reach to the target audience; properly implemented the ROI can be forecasted with near accuracy (Stokes 2009:2). 2.2.1. e-Marketing channels Search engine optimization (SEO) is the process of increasing web site traffic from search engines because of organic keyword searches (Wikipedia 2009). The higher in the list a site appears on a search engine the more visitors it will get that could lead to higher sales. Search engine marketing, or SEM, the process that promotes websites by increasing their visibility in search engine result pages by the use of paid placement, contextual advertising, and paid inclusion (Sherman 2006). Banner ads are displays on various types of community websites, this usually lead to micro sites or the authors websites for further information (Wikipedia 2009). Ad-Sense are programs employed by search engines like google.com that allows people to generate revenues by placing ad on their blogs or webpages, the revenues are generated as the page gets more visitors (Google 2009). Text link, subscriptions and mailing list marketing are direct marketing efforts where users receive emails listing products, features and news updates.

Viral marketing is a free advertising relying on the power of the social media to promote websites and products through emails and shared stories and links (Johnson 2009). 2.2.2. Traditional marketing vs. e-Marketing Traditional marketing and advertising efforts are a paid for avenue and the exposure, growth and measure can be effectively controlled. Unfortunately these efforts might be regionalised due to the lack of funding by the advertiser as most traditional channels demand very high costs and are not viable to reach a global audience. However with e-Marketing you have access to a massive audience you can reach in a relatively short period of time by creating a cost effective consistent marketing strategy (Groupmail 2005). Business of all sizes need online presence as it is imperative for online advertising, so consumers can visit websites for further information; all of this is cheap, traceable and profitable. Almost all e-Marketing is designed to get users to a website; websites are the first thing we think of when think of all things Internet! (Stokes 2009:217). 2.3. The Internet The internet is a global communications system powered by hardware and software distributing documents, information and resources in real-time made accessible to anyone with a communication device and connectivity (Livinginternet n.d.). The global communication network that allows almost all computers worldwide to connect and exchange information (APA 2009), is the purest definition of the Internet. Since its conception it has become the foremost medium of information sharing, more people trust internet resources than any other for accuracy (Zogby 2009). 2.3.1. The history of the internet

Starting in 1958 as a military communication network, to the release of the World Wide Web by Tim Berners-Lee in 1991 (Zakon 2006), the internet has developed numerous communication channels and usages. While the Internet was developed in order for academic and military institutions to share data, it has become a sharing tool for anyone with an Internet connection the world over (Stokes 2009:3). Estimated internet users are 1,596,270,108 for March 31, 2009, with a penetration of over 24% of the worlds population at a growth rate of 362.2% over the last decade the internet (Internet world stats 2009). Its usability will grow at an exponentially until every working person in connected areas will have access to information, products and services. Internet developments a brief timeline

1958 US ARPA (advanced research projects agenc 1961 MIT research paper of Packet Switching Theo 1961-69 Ongoing research into inter-computer com 1969 ARPANET, commissioned by US Defense De US universities connect up network facilities for the 1971 Ray Tomlinson creates first network email app 1973 Development of protocols to enable multi-netw First international ARPANET connections made. 1976 HM Queen Elizabeth II sends an email. 1978 First spam email is recorded. 1980 Tim Berners-Lee develops rules for the World Alan Emtage develops the first search tool known a 1982 Standard network protocols are established: T Protocol (IP), commonly referred to as TCIP/IP. 1984 Joint Academic Network (JANET) is establishe Domain Name System (DNS) is introduced. 19851 A company named Symbolics becomes the fir Figure Internet history (Stokes 2009) 1987 National Science Foundation (US) is the catal 2.3.2. Global internet statistics Number of Internet hosts increases significantly in th 1988-90 28 countries sign up to hook up to the NSF 1990 Senator Al Gore coins the term information su 1991 Web Father, Tim Berners-Lee releases World 1992 America Online (AOL) is launched and raises The term surfing the net is introduced by Jean Arm The World Bank goes online. 1993 Mainstream media attention increases awaren First Internet publication. Wired, goes on sale. Mosaic introduces the first web browser with graphic First online shopping malls and virtual banks emerg 9 First clickable banner advert is sold by Global Netwo 1995 Amazon is launched by Jeff Bezos.

(Figure 2 Internet world stats 2009)

Internet users in the world by Geographic Regions

(Figure 3 Internet users by geographic regions: Internet world stats 2009)

2.4. Social media Distribution of media through social interaction using

accessible and measurable technologies can be defined as social media (Wikipedia 2009). A highly interactive community with constant discourse between the writer and the reader, exchanges of ideas, opinions and thoughts that may be influential. People or organisations interconnected by an online community platform sharing interest and activities can be defined as social networking; this process is enabled by social networking sites (SNS) the dawn of a civilization influenced by opinions and thoughts of our peers (Whatissocialnetworking 2009). 2.4.1. Introduction to social media Social networking sites (SNS) are the ubiquitous connection of people in the modern world, primarily allowing users to profile

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themselves creating a virtual world in which they connect, meet, discuss and transact with others. Its entertaining, fun and virtual, it keeps people updated about others lives and progress in a multicultural society. SNS are web based services, implementing key technological features, varying in user interfaces making connections with friends or friends of friends via sites, forums, blogs, groups or pages (Boyd & Ellison 2007). The virtual world has become the reality of our existence, we constantly seek approvals, validation, opinions and advices from people, since face to face interactions with all our friends and families are impossible due to the lack of proximity, SNS brings us closer (Digizen n.d.). Consumer generated media has become the most trusted form of advertising; people trust opinions and recommendations posted by users more than any other (Neilson wire 2009).

(Figure 4: Degrees of trust in advertising. Nielsen 2009)

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2.4.2. Types of social media The social media landscape can be divided into four main areas of usage; networking, expression, sharing and playing. The first generation social platforms incorporate all of the user functionalities provided by specialised media; Facebook, twitter, MySpace and LinkedIn are the most widely used globally while there are many other regional sites distinguished by languages and social structures. YouTube, Blogger, etc are content sharing sites where users upload videos on YouTube and viewers can further share or comment on the same, a similar concept applies to blogging sites, although these are more dedicated towards written content but can also include multimedia resources (Cavazza 2009).

SOCIAL MEDIA LANDSCAPE

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Figure 5: Social media landscape Cavazza 2009

2.4.3. Social media statistics Community platforms have become a global phenomenon, accounting in excess of over 10% of internet time, 65% of the worlds internet population visit social networking sites and emailing has receded popularity over member communities coming in fourth after portals, searches and PC applications in online activity (Nielsen 2009).

(Figure 6: Global internet usage trends. Nielsen 2009.)

Facebook holds pole position, followed by MySpace, twitter, Flixter and LinkedIn, in the most monthly visits with over 1.1 billion page views. The relatively unheard of SNS is Chinas QZone and their largely popular instant messenger QQ, estimating in excess of 200 million active subscriptions and over 50 million QQ users. They have surpassed blogging sites like windows live space, blogger and MySpace with their blogging service (Wauters 2009).

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(Figure 7: Worldwide stats, unique visitors. Wauters 2009)

YouTube one of the revolutionary networking and video sharing has an estimated 375 million unique visitors and will serve a staggering 75 billion video feeds (Schroeder 2009), Hulu its closest rival has over 21 million visitors a month. It took 38 years for radio, 13 years for television and just four years for the internet to reach an audience of 50 million (United Nations Cyberschoolbus n.d.). Facebook is one of the fastest growing networking sites since it opened its doors to the general public, with over 250 million active users, 120 million logon daily (Facebook 2009).

2.4.4. Social media revenues and ad spending Facebook, in 09 so far has generated over USD $600 Million and is expected to hit the 1 Billion mark later this year end if the efforts on selling advertising space is pushed harder. (Reuters 2009). MySpace with a close second at USD $520 Million after a decline in revenue by 14%, is expected to drop further this year due

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to the economic downturn, however the company is positive for the next two years and expect a revenue rise by 2011. (Softpedia 2009) It is estimated the global ad spending on social networks will increase by 17% to an estimated $2.3 billion in 2009 (Steele 2009). The top two firms Facebook and MySpace account for 40% of the world wide ad spending on social networks globally, with the increasing ad sales and newer evolved advertising models this slope is going to get steeper in the coming years. YouTube is expected to generate in excess of $350 Million this alone, with a market share of 38% of video streamed on the web; the web video ad spending is expected to grow to 1.35 billion this year (Hardy, Q and Hassel, 2008).

(Figure 8: Share of ad spending by medium 2009 Marketingcharts.com)

8. Conclusion The internet has grown exponentially over the last decade, from being a business tool it has become a personal necessity to the general public, using it to communicate, interact and transact. Once technologies become more streamlined and accessibility to the

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internet will be prevalent, more users will explore the plethora of features available over the Internet. It will not only remain as a communication tool, but will become lifestyle catalyst influencing our daily personal decisions. Social networking sites are the future of consumerism and globalisation, people will soon depend on these networks for news, products, reviews and contact. The sheer lack of time in our crazy fast paced world seeds the need for information at our fingertips and the most trusted opinions are made by society in general and not by advertisers. This will impact on how we see products and how the products are shown to us, how we spend our time and money and how we choose to do it. Companies and advertisers have started paying serious attention to networking sites as they provide with clearly defined demographics, making it easier for the advertiser to target their audience. The viability and effectiveness will bring the consumer directly to the advertiser or products as this will be a pro-choice decision, no longer will the need to convince be the ultimate objective but the need to be validated will prove to be enough. Due to the immense growth and online visibility marketers have to strategically include e-marketing in their marketing mix, its sheer growth and visibility, not to mention the cost effectiveness makes online advertising a very lucrative venue for brand placement. The virtuality of its features allows companies to gain further recognition and equity in the mind of the consumer by initiating simple campaigns like word-of-mouth where user reviews can make or break the bank. More advertisers see the feasibility of e-Marketing weather it be a small or medium business or Fortune Global 500 Companies,

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the sheer worldwide reach of social media will make it the ultimate pinnacle of advertising mediums. It statistically shows the exponential growth of social media, television took 13 years to reach 50 million users, and is the most expensive advertising avenue, while Facebook alone added 100 million users in 9 months, if this is the sign of times in the years to come the future of social media will be regarded as the industrial revolution of the 21st Century.

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http://www.techcrunch.com/2009/02/24/chinas-social-networkqzone-is-big-but-is-it-really-the-biggest/> (13 August 2009) Nielsen wire 2009. Global Advertising: Consumers Trust Real Friends and Virtual Strangers the Most. [online] Available from < http://blog.nielsen.com/nielsenwire/consumer/global-advertisingconsumers-trust-real-friends-and-virtual-strangers-the-most/> (15 August 2009) Nielsen (2009) Global faces and networked place: A Nielsen report on Social Networkings new Global footprint. Available from <http://serveruk.imrworldwide.com/pdcimages/Global_Faces_and_Networked_Plac es_Nielsen_Report_on_Social_Networkings_New_Global_Footprint.pdf> (15 August 2009) Stokes, R. (2009) Emarketing; The essential guide to online marketing. [online] 2nd Edition. Cape Town. Available from < http://www.quirk.biz/emarketingtextbook/> (21 August 2009) Stokes, R. (2009) Emarketing; The essential guide to online marketing. [online] 2nd Edition. Cape Town. Available from < http://www.quirk.biz/emarketingtextbook/> (26 August 2009) Stokes, R. (2009) Emarketing; The essential guide to online marketing. [online] 2nd Edition. Cape Town. Available from < http://www.quirk.biz/emarketingtextbook/> (27 August 2009) Stokes, R. (2009) Emarketing; The essential guide to online marketing. [online] 2nd Edition. Cape Town. Available from < http://www.quirk.biz/emarketingtextbook/> (12 August 2009)

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Stokes, R. (2009) Emarketing; The essential guide to online marketing. [online] 2nd Edition. Cape Town. Available from < http://www.quirk.biz/emarketingtextbook/> (25 August 2009) Stokes, R. (2009) Emarketing; The essential guide to online marketing. [online] 2nd Edition. Cape Town. Available from < http://www.quirk.biz/emarketingtextbook/> (25 August 2009) Figure 1 Internet history (Stokes 2009) Emarketing; The essential guide to online marketing. [online] 2nd Edition. Cape Town. Available from < http://www.quirk.biz/emarketingtextbook/> (25 August 2009) Figure 2: Internet world stats 2009. Internetworldstats (2009) The Internet Big Picture: World Internet Users and Population Stats. [online] Available from < http://www.internetworldstats.com/stats.htm> (3 August 2009) Figure 3: Internet users by geographic regions: Internet world stats 2009. Internetworldstats (2009) The Internet Big Picture: World Internet Users and Population Stats. [online] Available from < http://www.internetworldstats.com/stats.htm> (3 August 2009) Figure 4: Degrees of trust in advertising. Nielsen 2009. Nielsen wire 2009. Global Advertising: Consumers Trust Real Friends and Virtual Strangers the Most. [online] Available from < http://blog.nielsen.com/nielsenwire/consumer/global-advertisingconsumers-trust-real-friends-and-virtual-strangers-the-most/> (15 August 2009) Figure 5: Social media landscape Cavazza 2009. Cavazza, F. (2009) Social media landscape redux. [online] Available from <http://www.fredcavazza.net/2009/04/10/social-media-landscaperedux/> (6 August 2009)

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Figure 6: Global internet usage trends. Nielsen 2009. Nielsen (2009) Global faces and networked place: A Nielsen report on Social Networkings new Global footprint. Available from <http://serveruk.imrworldwide.com/pdcimages/Global_Faces_and_Networked_Plac esA_Nielsen_Report_on_Social_Networkings_New_Global_Footprint.pdf > (15 August 2009) Figure 7: Worldwide stats, unique visitors. Wauters 2009. Wauters, R (2009) Chinas social network QZone is big, but is it really the biggest? Techcrunch.com [online] Available from < http://www.techcrunch.com/2009/02/24/chinas-social-networkqzone-is-big-but-is-it-really-the-biggest/> (13 August 2009)

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