As companies continue to tout their social media involvement, digital word-of-mouth marketing and social media sponsorships are bucking the advertising trend toward decline.
According to PQ Media in Stamford and its newly released forecast, social media sponsorships grew 13.9 percent to $46 million in 2009, despite double-digit declines in traditional advertising spending, and have continued that growth in 2010.
“Brand marketers move dollars to where their target consumers are spending time to build relationships with them,” said Patrick Quinn, CEO of PQ Media. “As social media captures more of consumers”™ time, brands are warming to social media sponsorships as a new method to engage, educate and activate them.”
PQ, “an alternative media econometrics research company,” recently released its Social Media Sponsorships Forecast 2010-2014, one of the first baselines for defining size, structure and forecast of the growing segment of word-of-mouth marketing. The report sees the categories spending reaching $56.8 Million in 2010.
“There is a need for someone to cover this emergence,” said Quinn. “As far as social media sponsorships go, it”™s still a small segment but its growing a lot.”
Social media sponsorships contract social media content creators promote and review their products and services through long-form text or status updates, often with accompanying visuals. The companies don”™t always pay in cash and sometimes provide material compensation, such as products, points or trips.
“This is a very young marketing category, but we view it as significant because of its impressive growth in the face of declining overall ad spending,” said Quinn. “We believe this sector will be among the fastest-growing alternative media in the near future because of the growth of social media, driven by popular mobile and online applications and devices, as well as the FTC”™s (Federal Trade Commission) transparency guidelines, which require social media content creators to disclose when they receive compensation in exchange for editorial coverage.”
PQ found the value of paid and nonpaid social media sponsorships grew at a compound annual rate of 77.6 percent from 2004 to 2009, accounting for 2.7 percent of total marketing spending in 2009, up from only 0.5 percent in 2004.
Ted Murphy, founder and CEO of IZEA based in Orlando, Fla., and one of the national leaders in the digital word-of-mouth category, has built a structure in which views, clicks, and pass-along”™s are trackable.
“It”™s performance based,” said Murphy.
Murphy said he can track the buy much like they could with a traditional advertising spending scenario.
“We don”™t guarantee that the person is going to say something positive,” said Murphy. “But we allow them to see that feedback and aggregate it in real time, that”™s a real opportunity for them.”
Though IZEA deals with large advertisers and marketers with its three marketing outlets, Sponsored Tweets, Social Spark and Sponzai, but it is launching a small-business digital social media marketing tool this month. Murphy said that to stay in front, it”™s an important arena.
“In this world everyone is a publisher on a different scale, and whether it”™s through blog or mobile device, they”™re sharing things throughout the day,” said Murphy. “That”™s an opportunity. The question is, How do you become part of the conversation that is taking part?”
The company expects the total value of social media sponsorships to increase almost 24 percent in 2010, driven by a stronger advertising and marketing environment as the economy improves, as well as driven by continued pressure on brands to increase their presence in social media.
Judi Virgulak founder and president of Jumar Marketing in Stamford helps to engage her clients in social media sponsored marketing everyday as part of their search engine optimization program.
“We do anonymous tweeting and posting on their behalf of our clients,” said Virgulak. “A lot of businesses come to us to generate awareness, and that”™s what we”™re doing. We work with them to come up with the content and the messages being put out there on there.”
Virgulak said the main goal is to drive awareness and drive content to customers: “I think what is happening is more businesses are hearing about this trend and know they need to do something in the space.”
The report showed cash-sponsored social media, available through sponsored conversation firms, as the fastest-growing social media sponsorship division. Spending in the segment rose 37 percent in 2009 to $10.3 million, driven by brand requirements to reach specific “influentials” such as young females and working mothers.
Quinn said FTC guidelines have served to bolster the category”™s growth over the past year, in spite of many industry observers thinking growth would be hampered.
“A lot of folks thought that that was going to squash the growth in the space, but it”™s actually served to bolster it, said Quinn. “Seeing that there was a need to regulate it served to encourage more companies to dip their toes to in water.”
According to the report, while social media sponsorships accounted for less than 3 percent of overall word-of-mouth marketing spending in 2009, the share is expected to continue growing over the next several years, fueled by the sponsored conversations segment, which comes with a control asterisk.
Quinn said sponsored conversations can help brands create more buzz because by paying social media content generators, a brand is assured of receiving editorial coverage on a targeted blog, online video, podcast or other social network. But, he said, one of the pitfalls of the tactic is the brands can”™t control whether the coverage will be positive or negative.
Virgulak said there are even online conversations about businesses that do not have an online presence at all.
“Ultimately people can go online and slam a category,” said Virgulak. “It can be very powerful because it is such an easy tool people are going to use it to have a voice.”
Virgulak said for a business having hand in navigating the free-for-all coverage of the internet is very important. She said clients need to know when to talk about their own product or service and when to provide information and prove a resource in that regard.
“In spite of the ambiguity of the content, the category continues strong development because leading social networks, like YouTube, have started to develop partnerships,” said Quinn. “Either way they”™re assured of receiving some sort of editorial coverage.”
The partnerships form agreements with brands and let end-users to make money by hosting and posting video blogs on products they purchased.
Sisters Elle and Blair Fowler found the spotlight earlier this year on an ABC News segment regarding “haul videos,” in which young women were compensated to shop and then post videos through the YouTube Partner Program praising the products they purchased. Some of the female vloggers (video loggers) claimed to generate over a $1,000 a month and the most fashionable girls were said to have earned more than $100,000 in a year.
