The huge burst in popularity of social media channels caught most businesses by surprise when their popularity amongst demographically ideal consumer age groups became apparent in early 2009, when Facebook’s audience was a mere 150 million. Now they boast over 500 million users, and were even likened to a utility in the New York Times.

As the fourth quarter and the impending budget cycle loom, there are several key considerations companies must consider. In a recent report entitled The ROI of Social Media Marketing, Forrester suggested that as social media matures, metrics must mature along with it, and suggests three considerations when valuing social media metrics:

• Metrics will gauge not just activity but outcome. Forrester’s Augie Ray suggests that as the technology matures, many new measures are abandoned in favor of traditional ones that align with business objectives, not simply technology, and that true social media measurement will come from gauging  all outcomes in business terms.
• Social Media focus will shift from short term to long term.  The greatest and most valuable brands weren’t created one quarter to the next, but rather with an eye toward building lasting relationships with customers.
• Not every social media program needs ROI to deliver business benefit.  Just like companies continue to invest in redesigns, micro sites and technology on their website to keep up with customer expectations and competition, many social media programs such as Facebook presence are becoming the new table stakes, regardless of immediately available ROI metrics.

This leads to the vexing question of how companies should budget and fund their social media programs.  Since social media actually crosses multiple departments (Public Relations, Branding, Research, Customer Service and Sales) one technique might be to project the annual cost of administering the planned social media program, and then pulling 20% from each “bucket” in these respective departments.  Whatever technique companies choose to utilize, the level of investment should be significant enough to fund both the frequency and quality of desired interactions with fans and followers to insure their true brand voice is heard.

July is a month that pays homage to independence and breakaways from uninvited rule by others.  In the U.S., July 4 gave us our freedom.  France’s long sought independence from the same type of control was celebrated yesterday, July 14, Bastille Day.

It’s fittingly appropriate to discuss social media in light of France’s Independence Day. For most people, their visual interpretation of French culture is one that has an emphasis on social gatherings revolving around respect for cuisine and fine dining at a leisurely pace. Our imagery tends to be dominated by visions of people in a café, sipping espresso or wine and nibbling on something delicious while engaged in a very deep and usually passionate conversation.  In essence, social media evokes this kind of mood. It’s a more languorous way to communicate with your customers, and it is quite personal.

Where the major thrusts of most web strategies revolve around generating commerce by anticipating search behavior and the resulting monetization of the consumer relationship, social media communications give companies the freedom to be friendly and not so obviously direct.  That’s why companies must be very careful about being “pushy” in the province of social media; they’ll risk losing hard-earned followers.

Likewise it’s also crucial that companies respond to comments in a timely fashion. Think of the old model – someone is at the cash register with one final question before they purchase, but the clerk is elsewhere or worse yet, talking on the phone.  Hard to keep the brand loyalty going if you’re not present.

Someone once likened social media to having a drink with a good friend. It’s comfortable, relaxed, unhurried.  Since the majority of social media interactions occur on Facebook and Twitter, companies should plan for a balanced approach to how they interact with fans and followers.

Think of it this way. If you meet a sales professional at a networking event and they aggressively drill you for whatever sales potential your company might hold for them, they never ask you anything meaningful about YOU and then they push their business card in your palm, are you likely to ever do business with that person? But in an alternate scenario, if you meet a sales representative from that very same company because they joined a conversation you were having with a respected associate, and they listened to you, asked probing questions, and seemed honest and friendly, wouldn’t you be more likely to consider doing business with them? Social Media offers an incredibly honest way to connect with your customers and earn new brand followers by providing a voice to your brand that is genuine and authentic.

In a final French analogy, think of how the concept of the peloton functions in the Tour de France.   The team riders cluster themselves into a tight bunch to save energy by riding close to one another in a technique known as drafting. The reduction in drag is dramatic.

In social media, if you want your company to earn a coveted position in a future customer’s personal peloton, it has to be an earned position. If you only use these platforms to sell and monetize, your message will ultimately become a drag.

Facebook is a giant monster. 4 bazillion people use it every day. And according to a statistic I just made up, every man woman and child in the United States wastes 119.7 hours each week playing Farmville and Mafia Wars.

But what is the net/net of Facebook for marketers? As I’ve talked about before, Facebook has altered the presentation layer. Marketers are seeing traffic growth to their Facebook page dramatically outstrip the traffic growth to their own web site. Putting the numeric economies aside, this means that Facebook is a growth channel. Facebook is suddenly #1 in traffic growth potential for many marketers.

Now this sounds pretty amazing, doesn’t it? You’ve found a new growth channel! But wait, it is this very interactive growth channel, that may not have conversion opportunities, that allows users to publicly ask question and make statements external to your control and allows the conversation to be bidirectional. And, as a marketer your message lives inside of Facebook’s world. On every one of YOUR Facebook pages is the blue Facebook logo. They are subverting your brand experience!

And that is the best thing that could ever happen to your marketing efforts.

Facebook is killing the internet because it changes the paradigm. No longer do consumers need to go to your website to interact with you. No longer to they need to use a search engine to find out what you sell. No longer do they need to rely on your multi-channel advertising efforts to learn about your brand. They just need to go to Facebook and pay attention to what their network “likes”.

And for e-commerce players, Facebook and other parties are making it easy to add transaction capabilities to your Facebook page. You can upload products and start generating sales in just a few hours. In fact, some brands have shut down their websites entirely to become Facebook only entities.

Facebook is becoming the primary channel of online interaction for a growing cadre of consumers. Why is this a good thing? Facebook forces you to relinquish some control and share it with your consumers. There are limits to what you can do on your brand’s Facebook page. Consumers now have a forum in which to publicly air their grievances and praise. Facebook is dynamic. It is ever-changing. It runs fast.

In short, Facebook keep you on your toes and makes you react and run faster than ever before. Facebook alerts you to consumer perception of your brand. Facebook demands that you be better.

Yeah…there…I said it. Facebook demands that you be better. You can’t be lazy on Facebook. You can’t delay changing your specials or responding to consumer concerns. Facebook won’t let you hide. Your actions are out there for everyone to see.

So, Facebook is killing the internet. It is gobbling up traffic like crazy. And it won’t put up with bad marketing. Facebook is killing the internet…and I love it.

Marketing Opportunities vs. Privacy

Suzy Sandberg:  When I first heard the details of Open Graph, I immediately went into Facebook to turn the feature off.  Facebook went with a pre-checked box to enable the Open Graph feature which requires unchecking to opt out.   We’ve seen this before — a Facebook platform change with privacy implications where the user must seek out and select new privacy settings in the application to undo a new feature.

Open Graph is getting buzz for two reasons:  one is its ability to socialize the internet in a new, unique way.  The other is the emergence of new privacy concerns, of which Facebook has already had its share of in the past.  Are the benefits of Open Graph really worth the positive buzz?  And/or how much of the privacy concerns are just noise?

I think it really depends on your point of view.  On the plus side, the Open Graph plug-in will bring socialization to the web in a way that hasn’t been done before.  The “like” button is often used in Facebook, and its familiarity with users could yield high usage rates making its adoption on websites take off quickly.  Large swaths of people are signing on to FourSquare, Gowalla and other location-based networks to share their info with friends, so Open Graph certainly won’t spook users of those applications.  In fact, sharing their likes online could be considered less intrusive than broadcasting personal info by GPS.  The younger demographic is comfortable with sharing online, so this new application may be quite appealing.

On the privacy side, there are four components of the issue.

• Facebook users who see the identities of their friends listed on a website with the Open Graph plug in for “liking” the content on the page probably believe their identity is being disclosed to the masses.  In actuality, the only people who would see someone’s identity are other people in their network.  Assuming someone is ok with sharing their likes to friends, this isn’t an issue at all.  The majority of users, though, who don’t know anything about iframes and how this all works, may be spooked.  Facebook may get a bad rap because it’s too complex for people to understand. If such an objection goes viral and creates mass buzz as we’ve seen in the past, this program may go the way of Beacon.
• If you don’t want your friends seeing which sites you “Like,” you will have legitimate privacy concerns.  You can always opt out, though.
• Having to opt out is troublesome and the process is cumbersome.  Pre-checked boxes went away from reputable websites years ago because of CAN-SPAM, so Facebook is going against the grain here in terms of using the best industry practices.  I understand that Facebook wants wide adoption, but email marketers wanted big lists too – they ultimately understood and accepted that pre-checked boxes can be perceived as deceptive.
• The most troublesome aspect of Open Graph from a privacy standpoint, and I imagine this is what New York Senator Charles Schumer and Moveon.org will latch on to, is that part of Open Graph entails a “small pilot program” with a few big sites (Yelp and Pandora, for example).  The partners in the pilot program do receive personal information on Facebook users including names, friend lists, interests and likes so that they can personalize the experience for users.  Facebook itself describes this information as public in their blog post explaining the program.  A person can opt out by checking a blue bar that appears at the top of the site, but I have to imagine that many users will not understand the purpose of the bar, meaning that these consumers have therefore not willingly agreed to share their personal information with the businesses in question.

A Boon for Marketers and Consumers Alike

For years and years, catalogers have been sharing data with each other.  (How else did you think that Williams-Sonoma started sending you catalogs after you bought something at Sur La Table?)  And for just as long, there have been marketing databases that essentially profile what kind of marketing you are likely to respond to based on assumptive demographics.  Based on your address and zip code, marketers all over the world can find out tons about you.

So, sharing the kinds of things that you “Like” on Facebook is pretty innocuous. You are clicking on a button that says “Like” and it gets broadcast to your network.  Your assumption of privacy ends at your public declaration of “Like”.

Are there issues with Facebook’s implementation? Sure.  Should it be easier to opt out?  Absolutely.  Should you have to opt in?  Well, I don’t know about that.  You have already made a public declaration of liking something…you are only exposing your data if you engage…the Open Graph isn’t pushed on you.  It doesn’t interrupt you; it only shares information if you actively participate.  Already opted in seems fine here because you must take an explicit action to share.

What is the opportunity?

This is a boon for marketers and consumers alike. Fundamentally, pervasive implementation of social marketing through Facebook’s API gives marketers a wonderful opportunity to personalize and customize their web experience based on explicit declarations of preference. This gives marketers an opportunity to present a unique, personalized experience to customers, even if they’ve never visited before.  This is powerful.

For consumers this is a great opportunity too.  If you have expressed on Facebook that you are a fan of ESPN, College Sports Network, MLB and the NBA, you might see more sports related merchandise when you visit a participating site.  This is great.  It may be a little “Minority Report” for some, but for most folks, allowing merchants and marketers to personalize their pitches to you is highly desirable.  You get to see more of the stuff that you want to see.  The devil is in the details, of course, some marketers will do a better job at this than others. But fundamentally, by allowing marketers a glimpse into what you like before they present to you gives them the opportunity to give you more wheat and less chaff. I think the privacy concerns are overblown.  By engaging with Facebook, you have already made public declarations about your affiliations. And marketers should be able to use information about you that you publicly disclose to serve you better.

For marketers, this is such an amazing opportunity, because you suddenly have deep access to potentially millions of visitors. You will be able to learn more about them, more about how they interact with your brands and how you can deliver them the right offer at the right time.

The big winner here is, of course, Facebook.  If the “Like” button gets deep acceptance across the web, Facebook has harnessed the power of 400 million minds to help them understand the web and how people use it.  That is infinitely more powerful than anything Google can do. Further, with all of these explicit preferences known, Facebook can uniquely target you with salient, relevant ads…this is the real reason for the Open Graph, but the ancillary benefit for marketers to know more about their customers and for customers to get more personalized services from marketers is a real win.

Final Thoughts:  The Importance of Clarity

Chris Paradysz:   The challenge with even the definition of “Privacy” is that its meaning differs for each user.  In Facebook’s case, unlike that other behemoth Google, they are ambiguous and often resort to using industry jargon to describe their practices which users could perceive as arrogant, naïve, or even black hat, the latter of which is what gets privacy advocates and AG’s all cranked up.  They are typically reactive with their policy changes instead of understanding their customer and the legislative rants around them which, unfortunately, is giving them an early and very expensive education.

No one really begrudges Facebook for trying to make money, but they would sure save themselves a lot of headache and goodwill if they’d be more open.  Isn’t shared candor social media’s intent, anyway?

For marketers, Open Graph should be a bonanza.  For consumers who let marketers in on their passions, it should be all good as long as Facebook understands who’s paying their bills and doesn’t corrupt the implicit trust they’ve created with their users.

Just ask MySpace.

Marketers love control. We crave it. We want to own the discussion. Setting the parameters of the interactions that our brands have with our consumers is our professional mission.

Many marketers have “grown up” in one-way media, be it television or print or catalog. In these experiences, the terms of the discussion were at the control of the marketer. By and large, we decided what our customers saw and heard.

But with the advent of the internet, our control has started to slip away. We control the presentation on our own websites (mostly), and in the early days of the internet, that was sufficient. As the dynamic nature of the internet and social media and search has evolved, it has become harder and harder to get the consumer to our little corner of the world, where their experience is shaped by our vision. Now we must attract them to that experience through multiple presentation layers that are the discovery mechanisms from which consumers self-select their interaction with us.

The two most obvious presentation layers are search and social media. Google , Bing, et al, shape the doorway to the internet. In essence, search engines have become a peculiar kind of portal, where the search engine results pages control our understanding of what is available to explore. This is the search presentation layer. The marketer has very modest control here. While we can espouse certain messages that we think will have impact, it is the search engines that ultimately decide what gets shown to whom and when. Social media has similar issues. You can only shape the Facebook experience so much. You can’t extend Twitter more than 140 characters. Marketers lose control of the terms of the discussion here. And this is a good thing.

What? Loss of control is good? Yes, it is!

When our brands and our experience gets filtered through another presentation layer, it forces us to focus on the essentials of our messaging and brand. When you have limited opportunity to shape the discussion, you’d better say the most important stuff as clearly and as directly as possible. Forget about setting the stage.  When you are speaking through the Facebook or Google microphone, you focus on the best message. You focus on clarity. You focus on understanding.

The presentation layers of search and social can be intimidating because they strip away the trappings of a controlled environment. But leveraging these opportunities shouldn’t be intimidating, it should be liberating. Working inside of a presentation layer that is not yours forces you to RE-think, RE-imagine and RE-work your brand and your message. And the result is RE-ward!

Tim Kilroy is Vice President of Natural Search at PM Digital.

As we saw with search, there is no doubt that Facebook’s features and tools will become more sophisticated and radically improve over time.  Facebook would surely like to monetize its 450 million users, and we know there are enhancements to the program already in the works.  With the attractive CPC pricing model, Facebook and would-be Facebook advertisers are lined up and waiting to sync up with APIs or at minimum, get easy access to reporting and some kind of bid management tool.

Looking into the future, could Facebook CPC ads ever become a force to be reckoned with in the media mix, matching or even exceeding paid search as a proportion of total online spend?

If you are a direct response advertiser, the answer is no.  The reason is because Facebook users are not there with an intent to purchase.  It is the element of intent to purchase that has made paid search effective for ecommerce. 

Direct response marketing relies on a combination of intent plus interest or demographic targeting  in order to be successful.  It’s easy to explain this dynamic as it applies to direct mail list selection.  A toy cataloger’s best lists are probably other toy catalogers.  The fact that names on a mailing list have purchased toys through the mail in the past is the implied intent to purchase.  Further, if the list of prior toy buyers makes recency available, it is the most recent buyers who will usually do the best (called “hotline buyers”).

What probably would not work, though, is a list of people who are known to have children within an age range that is appropriate for the toy cataloger’s merchandise.  Just because a person has a child does not mean they buy their toys through catalogs.  While this person may hit the exact target the toy cataloger is looking for, the intent to purchase is not there.  If I were a direct mail list planner, I would not select this list.

Lack of known purchasing intent is the reason Facebook CPC ads won’t outperform paid search cpc ads for direct response offers anytime soon.  Even if Facebook could target a person with a nine year old boy, serving a toy ad on Facebook would not be as effective as it would be on a search engine served to someone who keyed in “toys online for a nine year old boy.”  The latter is more likely to result in a sale.

In terms of what would work well with Facebook CPC ads today is using it to build up fan bases, brand advertising, and possibly direct response offers in very niche categories.

Google has made significant strides in improving their content offering over time, which, like Facebook CPC ads, may be perfectly targeted but are lacking intent to purchase.  Facebook should be carefully evaluating the tools Google now offers to leverage content and apply similar principles as they evolve their CPC product.  Comparatively, contextual search is probably the most similar model out there to Facebook CPC ads, and everyday contextual search performs a little better for direct response offers.

Suzy Sandberg is President of PM Digital.

Our latest “Game Changers” review of important news developments looks at recent changes that are impacting both old and new media in a positive way.  Here are four transformations worth keeping an eye on.    

The New York Times and Paid Content

The New York Times announced last week that it will begin charging for online content starting in January 2011.  The Wall Street Journal, Consumer Reports and a handful of other publications already charge for some or all of their content.  PM Digital’s Chris Paradysz predicted in a prior blog post that this would become a trend in 2010 – the NY Times move announced this week supports that.  As a long-time reader of the NY Times, I have watched the steady shrinkage of the paper.  Some of this has been due to cost-cutting and, more recently, fewer advertisements.  Circulation is down, too.  Surely the NY Times needs a new business model to withstand these circumstances. Should the paper ever wither away and shut down, it would be a real loss of quality content.  I support the Times’ new fee structure and definitely plan on paying for it.

Text Donations and the Evolution of Payment

Texted donations brought millions of dollars in aid for Haiti.  American Red Cross’ 90999 and UNICEF’s 20222 raised considerable sums though this method.   Based on the amount of individual donations received through texting, it appears that the simplicity and speed millions experienced in making their donations this way is appealing.  Another success driver is ease of advertising, which was done widely on TV.  Also notable is that the 90%+ abandon rates typically seen with website  donations were not a factor with the texting method. 

After it’s all been tallied, my guess is that the donations themselves would have been higher had they been placed online.  It’s also worth noting that nonprofits won’t have future access to the donor names for cultivation efforts since the carriers won’t release texting donor data to the charities.  What we don’t know is if texting yielded donations from people who would never have given otherwise.  If so, texting represents a brand new universe created with a new response mechanism.   We may be on the cusp of other uses for cell phones with the carriers doing the payment collection.  Was this a one shot or the future?   Consider other payment evolutions.  Cash was replaced by checks, which were in turn replaced by credit/debit cards. While we’re seeing texting as a new front-end acquisition method, the backend evolution may turn out to be an even bigger story.       

Super Bowl Ads Go Long with Social Media

Super Bowl advertising will be getting lots of play this year making the $3 million spent per 30-second ad go further than it ever has in the past.  Since it’s also an Olympics year, these ads will be shown repeatedly from now through at least mid-February.  As has been the case for the past few years, YouTube will make the ads available for viewing in one fell swoop, and this year they’ll be hoping for even more engagement by adding contests and ratings.  Twitter will play a big roll this year too, with the ads being tweeted and retweeted by the marketers who paid for them and (hopefully) by viewers as well.  Will the viral distribution be as big as the advertisers hope or will people get tired of the hype?  If these ads do have legs, the social media component could be a very nice value-add to the advertisers.  What’s likely is that those with a quality product will get wide distribution. 

A New Device from Apple

The iTablet, iPad, iSlate, TabletMac – whatever the name turns out to be — is the latest exciting development from Apple.  We could be looking at a new device that garners the type of love shown for the iPod and iPhone.  Not to mention the Kindle.  In fact, the iTunes store – already the number one shopping destination for music – has no doubt made Apple’s new device of particular interest to content providers like The New York Times.   I am not sure yet if I personally am ready for another device but this one should definitely be worth checking out.  January 27^th is the date the specifics should be announced.

Suzy Sandberg is President of PM Digital.

1.  Mobile Matters – I have actually been beating the mobile drum since I worked on mobile search in 1997, but this year, mobile really matters. (Google and Apple have spent almost $1 billion in the last quarter to buy mobile ad networks…that should tell you something!) The growth of mobile is torrid and with the rise of the smartphone and ubiquitous 3G, mobile search is working. In 2010, you will see an appreciable amount of traffic from mobile browsers. Are you thinking of how you can present yourself to the mobile user? If you aren’t now, you should be.

2. Images Matter – Visual search is hot. There have been dozens and dozens of early stage visual search engines that have been no better than demo-ware. But Google Image search has exploded, and we see that our clients are driving traffic through images searches. (If you are looking for a red dress, doesn’t it make sense to look for the red dress in pictures?) And with the advent of Google Goggles, image search will continue to explode. Are you optimizing your images to be relevant and available for image search?

3. Not Being a Dog Matters – Do you remember this incredible cartoon which touted the invisibility of who you are online? Well, the world has changed dramatically since then, and your reputation as a marketer is now well known on the internet. In 2009, I suggested that reputation was about to become an important part of the online world, and 2010 that will become even more valuable. How you behave as a marketer, how you share information with customers, and how you engage with customers will have an impact on your search visibility in 2010.

4. Social Media Matters Even More – I am a bit of a broken record these days. With customers and prospects and colleagues, I am constantly singing the praises of social media. Social media is important from a marketing, customer experience and search perspective. And with its integration into search engines, it has become a hot search opportunity. But in 2010, these results will be more than novelty updates; they will become a core part of the way that we discover new content.

5. Speed Matters: Speed is crucial to search visibility. And by speed I mean speed in the old fashioned way. How long does it take your page to load? How responsive is your site? In 2010, this will matter. Google loves speed and they love a quality user experience. The sites that have the fastest response times will enjoy better visibility in 2010.

6. Content Matters – With the rise in social media outbursts and the fact that there are hundreds of pages published globally every second, search engines have become very selective about what they index. Duplicate content filters are set to high! Marketers must create quality content in order to be found and indexed. Simplistic variation won’t cut it (for instance, if you sell one shirt in 35 colors and each of them has its own page, expect that 34 of them will be filtered out.). In order to capture a spot in the search indexes, you need to have unique content. This is hard. It means more work for the marketer, but in 2010, content remains king.

7. Code Matters – Back when I started on the Internet in 1997, website code was pretty big. Lots of complex commands to achieve simple things. HTML has come a long way, and code has become less verbose (and HTML 5 looks terrific as a standard, BTW). But I see web pages everyday that have lots of bloated code. Believe it or not, search engines read your code. Too much code and your content gets lost. Less code on the page means that your content has a higher percentage of the search engine’s attention. And that is a good thing. In 2010, code matters.

8. Personalization Matters – In 2009, Google started personalizing everyone’s search results (regardless of whether you have a Google account or not). What this means is that you are likely to see more results from sites that you’ve already been to or links similar to the kinds of links that you’ve clicked on before. In 2010, this will increase. And for marketers that already get a lot of traffic, this is a good thing. You will still have great visibility to your existing searchers and to new searchers. This may make it harder in the future to steal a searcher who has been loyal to another marketer in the past. Fun stuff to be sure, but search personalization will be a BIG theme in 2010.

9. Customer Experience Matters: Already, bounce rate lives inside of the Google algorithm as a ranking factor (the higher your bounce rate, the lower you will rank for a term). I can see that bounce rate could be coupled with conversion rates to become a customer experience index. This index (lower bounce rate + higher conversion = better customer experience) could be one of those hidden factors in rankings…one that is hard to see, but makes a difference. My advice for 2010? Conversion optimization.

10. Bing Matters: Google owns a huge share of the search market. That is terrific. But in 2010, look for Bing to really matter. Are they going to capture the majority of the market? No way. BUT, Bing matters because it will have a 20%+ marketshare in 2010, which means that you will need to understand Bing and its users. In 2010, 2 out of every 10 visitors will come from Bing. You’ll want to treat them well.

And Finally, You Matter: When I talk to marketers, they feel like the world has turned against them a bit. The economy was after them throughout 2008 and 2009.  2010 looks better, but nowhere near easy. Google is throwing all kinds of changes at marketers, Bing is kicking up some dust, everyone tells you that you need to turn yourself into a social media mobile web 2.0 juggernaut or you will fall off the face of the earth. In 2010, we believe that you matter. The marketer is the lynchpin in this online ecosystem. Without the marketer, search engines have no way to make money. You matter. In 2010, look for opportunities in search and advertising to make you more efficient, to increase your return on investments, to help you acquire new customers. With the right focus, I predict that 2010 will be good for you.

Tim Kilroy is Vice President of Natural Search at PM Digital.

DMNews: Search marketing continues to command the lion’s share of online budgets. How will we see that channel evolve this year?

Chris Paradysz: Consumers have radically improved their search and online sophistication as a result of having less cash but still buying what they need to live, feed and clothe their families, pay their bills, enjoy their passions and manage their health.  Search phrases are more targeted because they know more about how to get what they’re looking for.

DMNews: Does that make it more competitive for marketers?

Chris Paradysz: Definitely. Consumers are only willing to pay for the value they perceive and no more.  If they don’t like what they’re offered, they click away to a place where they can get it at the price they want.  From better targeting at the shopping engines to features like private sale sites, the top retailers are adapting. At the same time the squeeze is on consumers, the search engines have brought enormous changes to their technologies.  With the newly released Google Caffeine, for instance, posts from YouTube, Facebook, Twitter and other social media are getting instant, top billing bringing an even more urgent real-time experience to searchers.

DMNews: How should marketers use database technology to improve their business at a strategic level?

Chris Paradysz: A good example is the national and large regional newspaper businesses. These content providers are rallying together to create their own ad networks and will test bypassing Google and other low CPM advertising outlets to create higher value advertising relationships that result in higher ad rates.  The only way to deliver this and meet the expectation will be to offer refined demographic targeting of their databases.  For their ad clients and agency media buyers to embrace this, advertising performance is all that matters.

DMNews: How can direct marketers implement effective social media strategies in the new year?

Chris Paradysz: This year, and especially holiday, will be the year that social media loses its innocent charm and crosses over into the demand requirements of traditional ROI-based search, display and e-mail campaigns. Social media is not a campaign, and that’s the biggest threat to its purity and ability to drive high-quality traffic for retailers. Particularly for brands with significant recognition, fans are growing at the rate organic search traffic was growing back in 2005. We expect this level of growth to continue through 2010, especially if brands do not compromise the relationships they’ve built with over-zealous marketing.

DMNews: Can you measure social media?

Chris Paradysz: As marketers, we know audience measurement and impact need to be brought into the calculation, but figuring out just how to measure it and what we want to measure will require a different set of analytics. Right now, there’s a bit of a land grab happening for which department owns it so for now, we won’t be able to answer those questions.

DMNews: What is the state of direct mail in 2010?

Chris Paradysz: Segmentation will put the punch back in direct mail economics. No media has the scale and audience reach combined with such targetability. The benefit of it being a legacy media is also helping it survive the privacy turmoil that is brewing on Capitol Hill.  Consumers understand its use and the dramatic increase in opt-in/opt-out opportunities has increased the credibility of the source.  We already know the mail’s power to drive ecommerce and its ability to so finely target and tune an audience. Ultimately, as is always the case, the economics will drive its future.  With the onslaught of new and re-energized businesses in the healthcare industry, for example, there is no replacement of scale for finding this audience.

Note: Chris’ original Marketing Outlook for 2010 post can be found here.

A Slow Recovery

There will be continued slow recovery in US consumer spending, especially for large purchases due to a lack of discretionary cash (not income, per se), increased savings rates and a general adjustment to this new “now”.  2008 changed buying behavior to a “no”-first shopping mindset and 2009 cemented a value-only, thrifty approach.  2010 won’t change this.  Unemployment, under-employment and slow-growth for the private sector are the engines that are choking back substantive improvements in consumer confidence.  While there are certain job sectors re-igniting hiring, most industries will only begin to replace the attrition they forced during the lean 2008 and 2009.

Pent-Up Demand from the Jet-Set

For the super-wealthy demographic, expect that luxury items will be back in vogue as pent-up demand for jewelry, cars, homes, boats, fashion, at today’s reduced costs, increases.  Unfortunately, this is unlikely to offset the dramatic fall-off seen from the much larger affluent group that accounted for much of the demand growth during the run-up to the recession.

Personal Fulfillment for the Rest of Us

The definition of discretionary has changed relative to consumer purchases and buying behavior.  Where, pre-recession, this meant items people didn’t need but wanted, the recession and its epic duration have people focused on their hobbies and passions to relieve stress and to add back pleasure in their lives.  No longer considered discretionary, these hobbies and their related items and services have become part of the indispensable.  I anticipate revenues from home improvement, home-based interests like gardening and exercise, and passion hobbies like crafts, music, fishing, etc. stay in vogue and continue to capture wallet share.

Just the Basics for the Apparel Market

Recovery in this sector will likely take all of 2010, and I remain suspect of any predictions that buyers will return to their pre-recession buying behaviors.  I believe we’ll see minimal increased spending except for wardrobe maintenance and accessories.  In other words, “yes” to blouses, shirts, jackets, slacks and low-cost accessories, but “no” to high-end designer fashion unless it also has a high perceived value.  That said, this recession has instigated new opportunities for designers…Jimmy Choo and its line of clothes for H&M, Norma Kamali and her Walmart business are fascinating experiments.  I do think it’s going to be an exciting time for the fashion industry but certainly not in terms of their business economics.

The Mature Market Will Keep Booming

I expect the mature market — including insurance, financial services, healthcare products and domestic travel — to see revenue growth throughout the year.  The aging baby boomer continues to age and there are ongoing decisions this audience will need to make that younger generations can save for another day.

Paid Content Will Test Its Limits

2010 will be the year of publishers testing paid content business models.  Led by Murdoch and others, lean advertising has forced publishers to develop new revenue streams without significant cash outlays.  Existing readers and registered users are going to have their interests tested.  Where the line between paid and free exists, and whether the fundamental shift in technology and the internet’s jarring redirect of consumer’s reading behavior has made getting paid moot, will be tested.

Newspapers Will Leverage Strong Regional Brands and Databases

The national and large regional newspaper businesses are rallying together to create their own ad networks and will test bypassing Google and other low-cpm advertising outlets to create higher value advertising relationships that result in higher ad rates.  The only way to deliver this and meet the expectation will be to offer refined demographic targeting of their databases.  For their ad clients and agency media buyers to embrace this, advertising performance is all that matters.

Social Media Will Grow Up

2010, and especially Holiday, will be the year that social media loses its innocent charm and crosses over into the demand requirements of traditional ROI-based search, display and email campaigns.  Social media is not a campaign, and that’s the biggest threat to its purity and ability to drive high-quality traffic for retailers.  Particularly for brands with significant recognition, fans are growing at the rate organic search traffic was growing back in 2005.  We expect this level of growth to continue through 2010 especially if brands do not compromise the relationships they’ve built with over-zealous marketing, but that’s unlikely as companies are spending real money on people and talent.  As marketers, we know audience measurement and impact need to be brought into the calculation but figuring out just how to measure it and what we want to measure will require a different set of analytics since there’s a bit of a land grab happening for which department owns it.