s-commerce:

The intersection of social computing and the transactional web

October 12, 2006

Stephen DiMarco, Vice President of Marketing and Client Services, Compete, Inc.

Charlene Li, Principle Analyst, Forrester Research Inc.

1
How Marketing Is Changed By
Social Media
Charlene Li
Principal Analyst
Forrester Research
Social networking has matured over the past five
years
• Friendster opened up networks to connect friends of
friends
• MySpace built a portal on top of its portal
» Brilliant move was adding “comments” which have become
“slow IM”
• But niche and private social networks gain traction
» Piczo, Multiply.com counter the “night club” feel of MySpace
• Buddy lists and address books get socialized
» “s”ocial “n”etworking goes mainstream with AIM Pages and
MSN Spaces/MSN Messenger
• Social networking components will be built into the best
services
2 Entire contents © 2006 Forrester Research, Inc. All rights reserved.
What drives participation?

• The need to help myself – new info sources that inform,

entertain, save money, or make life easier for myself
• The need for social currency – to be “in the know”
• The need for validation and self-expression
• The need to connect
• The need to be in control
• The culture of generosity

3 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

Consumers participate in different ways

Creators
The Participation
Pyramid
Critics

Collectors

Couch Potatoes

4 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

YouTube succeeds because of the social network it
builds around the videos

5 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

 Social computing is biggest with young people
Activities done at least Adults Youth
monthly
Creators Publish a blog 11% 35%
Publish Web pages 8% 15%
Critics Write a product review 26% 16%
Comment on a blog* 13% 27%

Collectors Use RSS feeds 10% 8%

Use social networking 21% 57%
Tag content/photos 7% 33%

Couch Potatoes Look at a review* 37% 35%

Read a blog 29% 49%
Listen to podcasts 10% 18%

Source: Forrester’s NACTAS Q3 2006 Devices & Access Online Survey and Q1 2006 Youth Devices
& Access And Retail Online Survey
*Source: Consumer Technographics Q3 2005 North American Media & Marketing Online Survey and
Q4 2005 North American Youth Media & Marketing And Retail Online Survey
6 Entire contents © 2006 Forrester Research, Inc. All rights reserved.
 Age is a major driver
Does this activity Young Older
Gen Y Gen X Seniors
at least once a Boomers Boomers
(18-26) (27-40) (62+)
week (41-50) (51-61)
Read blogs 28% 14% 9% 8% 6%
Use social
38% 12% 6% 4% 3%
networking sites
Publish your own
23% 12% 8% 6% 4%
Web pages
Listen to podcasts 9% 7% 5% 4% 3%
Publish/maintain a
16% 5% 2% 1% 1%
Weblog
Use RSS feeds 4% 3% 2% 1% 1%

Base: North American online households

Source: Forrester’s 2006 NACTAS Benchmark survey

7 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

 Social shoppers use social computing tools heavily

8 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

Social computing will be like air – you can’t imagine
life without it
• Blogs will become just another type of Web page
• Social computing will be built into every meaningful
online interaction
• RSS and podcasting will be built into email, browsers,
MP3 players, and TVs
» MP3 players automatically updated
» Videos from family appear in your TiVo playlist

9 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

 Rules for advertising in a social computing world

• Respect the user by not imposing interruptive

advertising on the experience
• Engage the user with helpful, entertaining content
• Build a relationship over time – it’s not a “30 second
stand”
• Personalize the marketing experience for each user
– and her social network

10 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

 Google + YouTube: What it means for marketers

• YouTube will develop a way to identify offensive/questionable

content
» Allows marketers to opt-out of ads around those videos
• Google will leverage its advertising base into video
» Expands existing online and (potential) radio base
• YouTube must manage viewer backlash to ads that interrupt
the video viewing experience
» Marketers/agencies should act more like content providers than
advertisers
» Agency video production should link up with word-of-mouth
experts to invent new Web experiences

11 Entire contents © 2006 Forrester Research, Inc. All rights reserved.

s-commerce:
An opportunity for marketers to reach beyond MySpace and YouTube
October 12, 2006

1
 What we’ll cover today

z State of social networking

z Marketing challenges

z Social Commerce as a solution

z Getting off to a smart start

Confidential © 2006 Compete, Inc. All Rights Reserved. 2 2

 The MySpace phenomenon

snapshot:

Seventh largest site

56 million visitors
18 visits each month
1000+ page views per person
30 minutes per stay
Refers 35% of visits to Facebook
and 13% to Google
myspace backgrounds, myspace
layouts top searches on eBay

Confidential © 2006 Compete, Inc. All Rights Reserved. 3 3

 The web is becoming more social

Two out of three online consumers have visited a social networking site
Fastest growing online category: 109% growth in people, 414% growth in
usage (pages viewed) since January 2004

Confidential © 2006 Compete, Inc. All Rights Reserved. 4 4

 Social networking motivations

Meet people 78% join to communicate with existing colleagues

or develop new acquaintances

Be entertained 47% join in order to find entertaining content

such as photos, music or videos

Learn something 38% join to get information from other people

about topics that hold particular interest to them

Influence others 23% join to express their opinions in a forum

where their ideas could be discussed or acted upon

Confidential © 2006 Compete, Inc. All Rights Reserved. 5 5

 Characteristics of online socialites

Attractive demographics

Younger: 37 years old

Higher household income: $78,000
Greater discretionary income: $8,000

Media & buying habits

35% spend less time with traditional media

75% seek input from peers before buying
25% of total purchases made online

Marketers’ equals

Early adopters: 40% are the first to buy

Influential: 37% influence others’ opinions
Credible: 63% trust reviews from other
consumers as much as experts

Confidential © 2006 Compete, Inc. All Rights Reserved. 6 6

 Social saturation tempers growth
Average online socialite already frequents three sites, only has enough
bandwidth to join one additional site
Marketers’ demand for new advertising outlets exceeds supply of
consumers’ time

How many social networking sites would you consider being a part of?

24%

20%
18%

14%
12%

7%
average

3%
2%
1%
0%

1 2 3 4 5 6 7 8 9 10+

Total number of social networks online socialites are willing to join

Confidential © 2006 Compete, Inc. All Rights Reserved. 7 7

 s-commerce offers marketers a new approach

“s-commerce” goes beyond advertising on social networking sites

Links transactions and online communities

Broadens benefits of social networking

Thrives on consumer participation

Incorporates best practices from

• e-commerce: online sales & marketing performance
• social networking: fast growth, deep engagement

Confidential © 2006 Compete, Inc. All Rights Reserved. 8 8

 Emerging s-commerce models

Corporate brands grow social New brands create mash-ups

z Branded micro-sites z Peer-to-Peer selling
z Customer Forums z Community-created products
z Ratings & Reviews z Product blogs/forums

Confidential © 2006 Compete, Inc. All Rights Reserved. 9 9

 “When it comes to beer, sharing is caring.”

Miller Lite becomes the voice of men

In concert with a new television campaign, Miller
Lite launched ManLaws.com to develop a new code
of conduct by men for men. Customers that go to
the site can view each ad as well as contribute and
vote on new entries to the Manlawpedia – the
official book of laws that governs all men.

z Adoption: 50,000 visitors spend over 10 minutes

interacting with the microsite each month
z Engagement: Customers submit video auditions
to appear alongside “men of the square table”
100,000 1,600
z Influence: Over 50,000 new laws have been
Accumulated
submitted to the Manlawpedia by customers
75,000 minutes 1,200
viewed (000’s)
z Positioning: 750+ daily blog posts containing
ManLaws enhances Miller Lite’s brand among
male beer drinkers
50,000 800

25,000 400
Other examples of microsites to study:
Boldmoves; Seventeen & Aquafina MySpace profiles
0 0
May-06 Jun-06 Jul-06 Aug-06 Sep-06

Manlaws.com Unique Visitors

Confidential © 2006 Compete, Inc. All Rights Reserved. 10 10

 “What security software do I need?”

Dell forum helps customers help each other

Dell’s active community forum consists of threaded

discussions among Dell employees and community
members. Participants create profiles to personalize
their posts and add credibility. Dell rewards
participants with exclusive promotions & offers for
community members.

z Community: 52% of visitors surveyed said they

feel like a part of a Dell community
z Service: 75% trust the content within the
300,000 community and do not require support from Dell

250,000
z Loyalty: 68% of members are likely to purchase
their next computer through Dell
200,000
z Advocacy: 90% of members will recommend the
150,000 online forum to friends and/or family
100,000

50,000
Other examples of online customer forums to study:
0 Cingular, Samsung, Microsoft
Sep-05 Dec-05 Mar-06 Jun-06 Sep-06

Dell Online Forum Unique Visitors

Confidential © 2006 Compete, Inc. All Rights Reserved. 11 11

 “Getting out of two mortgage payments after condo fire.”

Borrowers bond with lenders at Prosper

Inspired by eBay, Prosper is building a new social-

financial marketplace. Borrowers use Prosper’s
online platform to create loan listings; lenders then
bid down the interest rate to compete for the loan.
Borrower profiles, bid histories and “groups” make
the process straightforward, transparent and safe.

z Adoption: 145,000 visitors each month, 50% are

registered Prosper users
z Engagement: Users visit the site 3.6 times each
250,000
month and view nearly over 65 pages per visit
200,000 z Community: Approximately 3,800 active loans
totaling $18.1 million (loans in default: 4)
150,000
z Affinity: 3,250 borrower groups have formed to
pool like people, mitigate risk and lower the
100,000
interest rates offered by lenders
50,000
Other examples of peer-to-peer sites to study:
0 Zopa, Lala, Peerflix
Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06

Prosper Unique Visitors

Confidential © 2006 Compete, Inc. All Rights Reserved. 12 12

 “California-style burger joints in Boston?”
Local businesses & opinionated reviews at Yelp

Yelp is quickly becoming the definitive city guide

by offering community-generated reviews on
local businesses from restaurants to dentists.
Consumers post reviews to Yelp, and can collect
and organize recommendations from peers.
Advertisers participate via email ads, enhanced
business listings and sponsored search results.

z Adoption: 500,000 monthly users: 15% submit at

least one review each month
800,000 z Community: Yelp members are very active
contributors; in San Francisco, the average
600,000
Mexican restaurant has 50 reviews, and the
average member has contributed over 100 posts
400,000 z Influential: 80% of Yelp members consider
community reviews as trustworthy as advice from
200,000
family member or friend

Other examples of product-focused forums to study:

0
Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Woot, Insiderpages, Judy’sBook
Yelp Unique Visitors

Confidential © 2006 Compete, Inc. All Rights Reserved. 13 13

 Roadmap for launching s-commerce initiatives

Research consumers, while they research you and your rivals.

Research • Develop new online research program
• Benchmark usage and adoption of social sites
• Survey consumers to understand motivations

Create a channel to connect consumers and your brand.

Channel • Design, launch and iterate s-commerce site
• Focus on sales, service, or positioning brand
• Seek customer input into site features

Engage consumers in conversation: listen, learn & leverage.

Engage • Contribute to the dialog and reinforce your value
• Participate via questions, discussions, offers
• Apply learning throughout sales and marketing

Confidential © 2006 Compete, Inc. All Rights Reserved. 14 14

 Taking our own medicine – compete.com

Launching compete.com as a consumer service on November 1

Consumers benefit directly from sharing their clicks with each other,
Compete and marketers

compete.com – clickstreams as consumer-generated content

Site profiles: Trust:

Timely, accurate Detects dangerous
website analytics phishing sites and
including visitors, spyware offenders
rank, pageviews,
time spent, etc.
Deals:
Promotions and
discount codes across
more than 2,000
online retailers

Confidential © 2006 Compete, Inc. All Rights Reserved. 15 15

 Questions from registrants
• How does s-commerce relate to my market (travel, auto, financial services)?
• What are the issues around privacy and hosting consumer-generated content?
• What are cost effective ways to incorporate s-commerce into a consumer website?
• How viable an advertising channel are social sites for high-consideration products?
• How effective are profile and sponsored pages on social networking sites?
• What impact are communities having on sales, marketing and/or customer service?
• What specific tools or features impact conversion rates?
• What are online communities three most pressing issues?
• How should marketers partner with social networking sites?
• Do consumers really pay attention to ads on these social networking sites?

For copies of both presentations, please email Max Freiert at

mfreiert@compete.com

Confidential © 2006 Compete, Inc. All Rights Reserved. 16 16

Confidential © 2006 Compete, Inc. All Rights Reserved. 17 17