As audiences continue to fragment and marketers scramble to find the next big thing that is going to save the traditional advertising industry, they continue to mistakenly apply the traditional one-way mass media model to the tribalized digital environment. It's the equivalent of using chess pieces to play Halo 3.
Either as a result of naivete or a concerted effort to mislead those who buy advertising, they also continue to use delusive statistics to quantify that the traditional media is still on top. The latest example is a study by Knowledge Networks (written up in MediaPost). It concludes that in spite of the fact that 83 percent of the population on the Internet is using social media, "...genre has failed to become much of a marketing medium, and in the opinion of the Knowledge Networks' analysts, likely never will."
The conclusion is based on (among other things) the statistics that "5% of social media users regularly turn to these social networks for 'guidance on purchase decisions'" and "only 16% of social media users say they are more likely to buy from companies that advertise on social sites."
Based on these statistics, a Knowledge Networks VP reaches the conclusion, "...word-of-mouth is still the No. 1 most influential source, followed by TV. The influence of social media isn't at the bottom of the list, but it is somewhere in the long tail of marketing - about the same as print ads, or online [display] ads.'"
It sounds compelling until one realizes that they're completely missing the point.
First, social media enables people to broaden their social networks and to interact with friends and family in new ways. It not only greases the skids for interactions within one's social circle, but it indexes them and makes them searchable. Put another way - social media is a more effective iteration of word of mouth.
This makes it very difficult to draw the line between a decision influenced purely by word-of-mouth and a decision influenced purely by an interaction within a social media environment. For example, if I buy a car because my friend recommended it to me at a social function, but I learned this friend was an expert because of articles they posted on their Facebook profile - which medium gets the credit for the transaction?
Of course social media fails when used for traditional marketing efforts. It's created a completely new paradigm that has made possible entirely new economic systems and business models (to say nothing of how it has affected aspects of business like marketing). If you're a business built on volume trying to reach a mass audience - you're likely going to fail using social media. In fact, your failure is virtually guaranteed if you go about it in the traditional ways.
Invariably some percentage of those sales attributed to "word-of-mouth" rightly belong to social media, because of the way social media allows individuals to maintain contact with those they take "word-of-mouth" recommendations from.
The point of using social media for marketing is that allows one to easily target a very small, specialized audience in a very inexpensive way. So if you're trying to sell the most popular car (Toyota Camry) in the most popular color (White), you're wasting your time. If, instead, you're trying to sell a custom-crafted automobile (Tesla Roadster) in a custom color (Chartreuse) - you can now find and influence your audience more cheaply and easily.