But the social network’s advertising revenue grew 18.4% during the quarter.
From harnessing the power of online social networking to create marketing programs to using web-based technology to track customers` behavior across all channels, tech developers are coming up with new ways for retailers to get their merchandise in front of customers.
The dot-com investment bomb of a few years ago has turned into a dot-com technology bloom. With retail and event ticket sales leaping 37% last year to $72.6 billion, many retailers who had been cautious about new approaches and new technology-especially as it relates to spending-are changing their attitudes.
Here’s one example: “We’re seeing a general resurgence in e-commerce,” says Katie Keane, vice president of IBM Corp.’s Websphere Commerce. “More companies are allocating more budget to it-and that is not just at large customers. We are seeing a lot of interest in smaller companies as e-commerce becomes a strategic priority for more people.”
Here’s another: Retailers’ interest in the marketing potential of a relatively new phenomenon known as online social networking has soared in just the last three months at technology consulting firm Molecular Inc., according to vice president Darryl Gehly. “It’s indicative of the climate,” says Gehly. “For the past two and a half years, people have not been interested in anything new-they have been concentrating on saving their careers. But things are starting to change. They are starting to explore new concepts that would give them a competitive edge.”
The openness to new technology is reflected in the latest IT spending figures from researchers and consultants Gartner Inc. Gartner’s Technology Demand Index shows that companies overspent their IT budgets in February by 5%, the first time that has happened since Gartner created the index a year ago. Companies surveyed for the index report that they are expecting to increase their IT spending by 10% this year over last. The February results indicate that that expected 10% increase will hold over the year, Gartner says.
The increase in tech spending as well as the focus on using technology to gain a competitive edge are driving what’s new in the marketplace today and even more, what’s still in the labs of technology developers focused on e-commerce. And though new developments range all the way from applications like e-mail that launches images and video dynamically to analytics that track online customer behavior to new levels, they’re generally focused on one thing. And that’s how to get even closer to whatever it is that makes the individual shopper push the buy button.
Where ‘network’ means people, not machines
Search engine marketing is in full flower, but forward-looking retailers casting about for something to augment search marketing might keep an eye on the fast-growing phenomenon of online social networking, based on Gehly’s experience at Molecular. “It’s could be a powerful medium that gives retailers another avenue besides search engine marketing. It’s a concept that leverages many of the technologies that are already out there, and it’s growing quickly,” he says.
Offline networking is nothing new, and social networking online works in much the same way. The concept is that a participant in a social network is a member of an online community to which he or she discloses personal information of potential interest to others in the network: job, interests, activities, background. A handful of technology development companies are working on or already offer software that accelerates the process of collecting that personal information online. Community members can view the profiles and contact each other over data points of mutual interest-for instance, seeking a resort recommendation from someone in the network whose profile indicates he’s a frequent traveler to Hawaii.
Typically, participants are invited into the network by someone they know and they, in turn, invite others in. That means community members seeking recommendations or information from anyone in the network are in theory only a connection or two away from actually knowing that person personally.
“The idea is that if I know you and you know someone who could provide a service or a recommendation, I’m more likely to trust your judgment than that of a complete stranger,” says Gehly. Move that into the realm of shopping-and the idea that one also may be more likely to make a purchase based on the recommendation of a friend of a friend than a stranger or an impersonal marketing approach-and the commercial potential becomes apparent.
Gehly’s own company has an internal message board on which employee users can seek or post information and recommendations. “People are turning to their friends or their social network before they turn to the yellow pages or traditional marketing,” he says. “Our feeling is this is a powerful mechanism that retailers and consumer goods manufacturers could use to help accelerate adoption of their products.”
Just how online social networks could be leveraged for that purpose is still in the conceptual stage. One Molecular client is considering aligning its classified ad program within a social network. What’s clear is that any solution would have to strike the right balance between commercial positioning and the unedited information exchange at the core of online social networks.
“Think of the reviews on eBay,” says Gehly. “If you ever use unfair selling practices, it doesn’t take long for you to be discounted.”
The new, ‘made-for-me’ market
Online retailers with the basics of product presentation in place already are looking to the next generation of imaging technology to support a growing trend in online retail: an ever-broadening range of merchandise that can be customized and ordered online, says Doug Mack, CEO of imaging technology provider Scene7. After initial forays into custom apparel on the part of leaders such as LandsEnd.com and the custom items long available at dedicated gift retailers such as PersonalCreations.com, more retailers are becoming interested in what Mack calls “made-for-me.”
“Since somebody figured out the fulfillment process of making lots of one for consumers, I see a mega trend in made-for-me items,” Mack says. “I talk to retailers every day and this is a big wave that is going to hit. The Internet is enabling it because customers can go online, have an interactive experience with the retailer, order custom goods and have it drop shipped to them.”