Social Marketing and Commerce. Marketing and E-Commerce subject at the International Master in Industrial Management. Guest speaker: Francisco Hernández Marcos Universidad Politécnica de Madrid Politecnico di Milano Kungliga Tekniska högskolan

1. Social Marketing and Commerce
Marketing and E-Commerce
International Master in Industrial Management
Francisco Hernández Marcos
fran.me
Madrid, 23rd January 2012

2. About me SHAMELESS
SELF-PROMOTION
Education:
Universidad Politécnica de Madrid, UNED, London
Business School, University of Chicago
Firms I worked for full-time:
Abengoa, McKinsey&Co, ABN AMRO, Real Madrid C.F.
Entrepreneurship: Crisalia
Consulting requests (Social Media & Internet):
francisco_hernandez@11goals.com
Full profile:
linkedin.com/in/franciscohm

3. Summary of session 1 REMINDER
¶ E-Commerce, E-Business… difficult to define and classify. Do not waste much time in
figure-out where your model fits.
¶ 17-year history but still growing strong, now specially in emerging markets (broadband
penetration, purchasing power), but maybe on mobile channels soon.
¶ E-Commerce is an intrinsically social activity. It evolved to the social space even before
the social media phenomenon started.
¶ Generic types of business models on the web.
¶ Technology not a problem anymore; success is many times driven by innovative
business models, sometimes easily copycatted if one does not protect oneself.
¶ 6 dimensions to social E-Commerce success.
¶ Takes time to refine an innovative business model. Test and error based on analytics is
the best way to refine a model. Be patient, imaginative, and analytical.
¶ Long tail concept
¶ Freemium concept
¶ “Piggyback” concept
Session 1 presentation

4. Summary of session 2 REMINDER
 Online advertising
 Affiliate programs
 Referral marketing
 Email marketing
 SEO
 Content marketing
 Online public relations
Social marketing
 Fake marketing
Session 2 presentation

5. Agenda
 Web 2.0
 Social media advertising
 Building an effective online community
 E-Commerce in Social Networks

6. The first online social network…
Social networking service:
“online service, platform, or
site that focuses on building
and reflecting of social
networks or social relations
among people, who, for
example, share interests
and/or activities” (Wikipedia)
Photo: http://www.flickr.com/photos/ajc1/3367295141/

7. …and the first social graph
Social graph: “the
global mapping of
everybody and how
they're related”
(Wikipedia)

8. Definition of web 2.0
“Web 2.0 is the network as platform, spanning all
connected devices; Web 2.0 applications are those
that make the most of the intrinsic advantages of
that platform: delivering software as a continually-
updated service that gets better the more people
use it, consuming and remixing data from multiple
sources, including individual users, while providing
their own data and services in a form that allows
remixing by others, creating network effects
through an "architecture of participation," and
going beyond the page metaphor of Web 1.0 to
deliver rich user experiences.”
Tim O’Reilly (October 2005)
Source: O’Reilly Radar: http://radar.oreilly.com/2005/10/web-20-compact-definition.html

9. Evolution towards web 2.0
“Social”
“Catalog” “Search”
“Web 2.0”
(www) (Google)
(Facebook)

10. Some important social networking websites

11. Facebook
#1 international social networking website
 Friends networking +
Brand communities
 >800 mill. active users
 Grew concentrically: Ivy
league universities ->
universities -> high
schools -> open
 Open Graph
 Facebook connect + API
 Social gaming
 Great content
segmentation tools
 Social advertising
 Moving fast towards
Mobile

12. Most popular Facebook pages
Source: Page Data http://pagedata.appdata.com/pages/leaderboard

13. Most popular Facebook apps
Source: App Data http://www.appdata.com/leaderboard/apps

14. Tencent - QZone
China’s largest social networking service(s)
 >450 mill. Users
 Part of Tencent Holdings, a
diversified Chinese Internet
company which became
popular thanks to QQ
messenger.
 Unlike Microsoft, Tencent
was able to turn a messenger
tool into a successful, real
social networking website.
 Tencent is the third (after
Google and Amazon) largest
Internet company in the
World by Market
capitalization (USD 42 bill.)
 Revenues: ~3 bill. /yr (less
than 15% from advertising)

15. Twitter
#1 Microblogging site
 It is more a
microblogging tool
rather than a social
networking site.
 >300 mill. users
 Works better for 1-to-
many communication

16. Google Plus
Latest SNS by the Google factory
 >90 mill. users
 Great usability and systems.
 Great Circles and Hangouts
features.
 Deeply integrated with other
Google services
 However: there is already a
predominant social
networking site and it is hard
for people to spend time in
changing to another social
networking site. People tend
to use one service, and is
reluctant to change unless
there is a huge difference
between services, which is
not the case.

17. Sina Weibo
#1 social microblogging website in China
 Launched in 2009
 >250 mill. Users
 Huge engagement, 32nd
website in the World by
traffic (Alexa)
 Celebrity accounts
 Moving to mobile geolocated
services.

18. Mixi
#1 social networking website in Japan
 ~25 mill. Users
 30% from mobile
 Revenues: mostly
advertisement

19. Gree
The most profitable social company in Japan
Yoshikazu Tanaka
 Founded in 2004 by Yoshikazu Tanaka
 Gaming Social Networking website, and
specially mobile.
 98% users from mobile.
 Most of revenue coming from virtual
goods.

20. CyWorld
#1 Social Networking website in South Korea
 ~20 mill. Users.
 Owned by SK main telecom company.
 Pioneers in virtual currency: Dotori.
 ~80% revenues from virtual goods.
 Failed to enter in the US and Europe.

21. World map of Social Networks
June 2009
Source: vincos.it

22. World map of Social Networks
June 2011
The World is Facebokising.
Specially relevant latest countries: Arabic world, India and Mexico
Source: vincos.it

23. Facebook stats
Country ranking by users
• The USA is clearly the
country with the highest
number of Facebook users.
• Chile, USA, Canada,
Australia and Sweden are
the countries with more
Facebook penetration on
their populations.
• Very interesting
Facebook’s growth in
India, Brazil (threat to
Orkut?), Germany, Japan
(Mixi?), and South Korea
(CyWorld?).
Note: Change refers to the last 6 months
Source: Social Bakers

24. Women rule on Social Networks
Subtitle
Some studies indicate that
women are able to socialize
better in social networks like
Facebook. Women are able to
maintain more relationships
online, interact more, and when
they share a content, it is on
average more popular than if the
content was shared by a man.
Source: comScore, Inside Facebook

25. Web 2.0 is not only Social Networks…
Social Microblogging
Social Networks
Blogs
Social News Aggregators
Social… shopping,
video, photos, gaming,
mobile, newspapers,
aggregators…

26. EXAMPLE
Blog Networks
Weblogs SL
Founded in 2005.
Leader Blog Network in
Spanish Worldwide, and also
leader in Europe any
language.
86 mill. pageviews/month
21 mill. unique users/month
Business model: create blog
communities around an
interest, and monetize by
advertising.
Source: http://www.weblogssl.com/2011/12/01-trafico-del-mes-de-octubre-de-2011

27. EXAMPLE
Traditional, offline Social Networks

28. Agenda
 Web 2.0
 Social media advertising
 Building an effective online community
 E-Commerce in Social Networks

29. Facebook ads format
o Picture
o Text
o Social

30. EXAMPLE
Create a Facebook Ad: Segmenting
o Facebook allows to find your
target group based on
demographics and interest.
o Example: 1,860 women liking Real
Madrid C.F, engaged, living less
than 50 miles from Madrid and
speaking Spanish.

31. EXAMPLE
Create a Facebook Ad: Ad auction
o Similar auction system like
Google’s, but one can choose CPM
or CPC (in our notation PPI or PPC)

32. Contextual Vs Social Advertising
Focus on “Keywords”. Focus on “Target Segment”.
Unknown user. Known user: We know who he is and what he
likes.
Active user: He know what he wants because he is
searching for it or mentioning it in his emails. Passive user.
“one time” user. “continuously contacted/relationship” user.
PPI PPI/PPC
RECOMMENDED FOR: RECOMEMNED FOR:
•“Direct response” from customers who have •“Direct response” from customers who have
explicitly expressed a need (“Close the sale, NOT explicitly expressed a need (“Activate a
message in the right moment, at the right time.”). subjacent need.”).
•“First contact” with potential customers of
slow-selling products (“Establish a productive
relationship.”).
•“Brand image” campaigns.

33. Agenda
 Web 2.0
 Social media advertising
 Building an effective online community
 E-Commerce in Social Networks

34. From a person to the online community
People Community Online community
Common
interest Online
• An online community is a group of people that interact and communicate online around a topic of interest.
Internet allows those interactions to be real-time, effective, and free (as in free speech).
• Due to members being scattered around the world, most of those communities would not be possible if online
means did not exist. Many of those communities go directly to being an online community without being
previously an offline community.
• More and more communities are shifting online, with or without the brand’s leadership.

35. Three Forms of Community Affiliation
“Pools” “Web” “Hub”
• People have strong • People have strong • People have strong
associations with a one-to-one connections to a
shared activity or goal, relationships with central figure and
Description or shared values, and others who have weaker associations
loose associations with similar or with one another.
one another. complementary needs.
• Apple entusiaths. • Facebook. • Oprah Winfrey.
Examples • Political party • Cancer patiens and • Hannah Montana.
members. relatives.
Key elements for an online community to work well: members identification, self-
expression, interaction, and incentives.
Source: “Getting Brand Communities Right”, Harvard Business Review, April 2009

36. EXAMPLE
Community member roles
• Core participants • Needlers
• Readers/Lurkers • Newbies or NewBees
• Dominators • PollyAnnas
• Linkers, weavers and • Spammers
pollinators • "Black and White" Folks
• Flamers • "Shades of Grey" Folks
• Actors and Characters • Untouchable Elders
• Energy Creatures
• Defenders
Full description: http://www.fullcirc.com/community/memberroles.htm
Figure out your
community roles

37. Do we need a [great] brand to create a [great] online
community?
Online community
Failure Success
Strong
Brand
Weak or
non-existent
No
Common interest

38. Do we need brand’s leadership to create a great
online community?
Facebook fans ranking Facebook engagement ranking
27 Nov 2011 14 Nov 2011
No
Motivated leaders
Source: PageData.com y AllFacebook.com

39. The importance of the community over the brand
• A community exists with or without a
proactive management from the
brand. History
• Proactive community management
has some advantages for the brand:
information, conflict management,
revenues, etc. The brand has to be Brand Company
smart when carrying out proactive
management.
• Success examples: Apple, Harley
Davidson, MySQL, Starbucks, Coca-
Cola, etc. Community
• Examples of failure: Nestlé Kit-Kat

40. Miths and realities about managing communities SUMMARY
Myth Reality
1. A brand community is a marketing 1. A brand community is a business
Strategy. strategy.
2. A brand community exists to serve 2. A brand community exists to serve
the business. the people in it.
3. Build the brand, and the 3. Engineer the community, and the
community will follow brand will be strong.
4. Brand communities should be 4. Smart companies embrace the
lovefests for faithful brand conflicts that make communities
advocates. thrive.
5. Opinion leaders build strong 5. Communities are strongest when
communities. everyone plays a role.
6. Online social networks are the key 6. Online networks are just one tool,
to a community strategy. not a community strategy.
7. Successful brand communities are 7. Of and by the people, communities
tightly managed and controlled. defy managerial control.
Source: “Getting Brand Communities Right”, Harvard Business Review, April 2009.

41. The most important learning about managing [online]
communities
“Robust communities are built not on
brand reputation but on a deep
understanding of members’ lives.”
Source: “Getting Brand Communities Right”, Harvard Business Review, April 2009.

42. Priorities when developing the community
LONG TERM
• ….
• ….
MEDIUM TERM
• ….
• ….
• ….
SHORT TERM
• ….
• ….
• …..
• ….
Revenues + keep
More
More Fans fans and
Engagement
engagement

43. Agenda
 Web 2.0
 Social media advertising
 Building an effective online community
 E-Commerce in Social Networks

44. Customers trust each other, not the brand!
76% of American consumers believe companies don’t tell the truth in
advertising -Yankelovich (2005)
60% have a much more negative opinion of marketing & advertising than a few
years ago - Yankelovich (2004)
78% say consumer recommendations are the most credible form of advertising
- Nielsen (2007)
83% say online evaluations and reviews influence their purchasing decisions -
Opinion Research Corporation (2008)
84% trust user reviews more than critics’ reviews - MarketingSherpa (2007)
Trust in “person like me” tripled to 68% from 2004-2006 – biggest influencer to
consumers - Edelman Trust Barometer (2006, 2007)
Source: Your Users Trust Each Other, Not You: Why and How to Implement Ratings and Reviews, by Molecular Inc.

45. Definition of Social Commerce
“a subset of electronic commerce that involves
using social media, online media that supports
social interaction and user contributions, to assist
in the online buying and selling of products and
services.”
Two types :
• Social Media on E-Commerce Platforms:
“Helping people connect where they buy”.
We will focus on E-Commerce
• E-Commerce on social media platforms: within Social Networks (or
“Helping connected people to buy where deeply integrated to them).
they connect”.
Source: Wikipedia, Syzygy

46. What are CMOs (Chief Marketing Officers) worried
for the next few years?
Source: Customer Data, Social Media Top Marketing Priorities for CMOs Worldwide, eMarketer.com

47. What Booz & Co thinks social commerce is going to
be worth in 5 years
Source: Booz & Co.

48. Marketing 3.0 BONUS
CONCEPT
Kotler, Kartajaya & Setiawan
Marketing 1.0 Marketing 2.0 Marketing 3.0
•Product-oriented •Client-Oriented •Human (society)-oriented
• Long term (Vs short term)
• Transformation (Vs Philanthropy)
• Horizontal Marketing (Vs Vertical MKT)
• Participation / Globalization / Creativity

49. F-Commerce
“Facebook commerce, f-commerce, and f-comm refer to the buying and selling of goods
or services through Facebook, either through Facebook directly or through the
Facebook Open Graph.”
“Experts forecast that F-
commerce transactions on
Facebook will overcome
Amazon’s annual sales
($34 Billion) over the next 5
years.”
First purchase within Facebook: July 8th, 2009 on facebook.com/1800flowers
Source: Wikipedia, Janice Diner, F-Commerce Ecosphere Visual

50. Key points about Social-Commerce on social media
platforms
• Still in its infancy. Almost inexistent as of today. Mostly focused on the pre-selling stage: people
talk about and discover products through social media, ads on social media, etc.
• Most cases take advantage of the huge traffic that some social media platforms have, but do not
leverage on social integration to offer better, customized products and services. Leveraging on
social integration is better than merely sucking traffic because it adds value to the customer. The
customer can find it very interesting to shop in a place where he/she has products he/she and
his/her friends really like. Remember shopping can/should be a pleasant experience!
• Referral marketing through social networks seems to be an obvious way to take advantage of
someone’s social graph when doing E-Commerce. Concept of “Horizontal Marketing”.
• Spotify integrated on Facebook is a good example of social commerce: you see what your
friends are listening to, which is probably what you would like. Also, a friend listening to a song
and you seeing it is a form of referral marketing.
• Brands need to lose their fear to let people talk about them, and to invest in personalized,
smart social apps to tackle the full potential of Social-Commerce.
How would it be a social-commerce
strategy in your company?

51. Agenda
 Web 2.0
 Social media advertising
 Building an effective online community
 E-Commerce in Social Networks

52. Today’s main takeaways
Page 1 of 2
¶ Web 2.0 is not only Social Networking websites. There are other categories like social
blogging, microblogging, video, gaming, etc. But Social Networks gave full sense to
web 2.0 across all possible Internet services.
¶ Facebook is Worldwide leader in usage and technology. The World is still leaning
towards Facebook in many countries where it is not yet the leading SNS. Only China
and Russia seem to stay away from Facebook’s rule, the second one due to its
blocking.
¶ Asian countries, specially China, are specially interesting case studies. To some extent
they pioneered the social web (virtual networks, gaming, virtual goods, etc.), but
failed to internationalize.
¶ Women are more relevant social nodes in an SNS than men. Always take it into
account while designing a social media strategy.
¶ SNS is indeed yet another human activity (social networking) translated to the
Internet.
¶ Social media advertising is intrinsically different from other type of ads like contextual
advertising. They complement each other rather than compete. They should be used
for different goals.

53. Today’s main takeaways
Page 2 of 2
¶ Building an effective online brand community is an important business tool for many
companies. However it is a very difficult one to achieve.
¶ It is a frequent mistake to believe that having a good brand makes it easier to have a
good online community.
¶ In order to build your own successful online community it is important to understand
in depth your underlying community: how your members affiliate, what are their key
roles within the community, how do they benefit from being a member, etc.
¶ Online communities take time: first hire fans, then engage them (almost immediately
after hiring them), and finally try to monetize them in the least possible frictional way.
¶ Customers trust each other more than a brand, so big expectations are put on Social-
Commerce (E-Commerce within SNS).
¶ Social-Commerce is very related to the Marketing 3.0 concept proposed by Kotler,
Kartajaya and Setiawan.
¶ Facebook already has a set of tools to allow Social Commerce in its platform.
Possibilities are infinite!

54. Thanks!
Francisco Hernández Marcos
fran.me
@franciscohm