Friday, February 24, 2012

Can social media predict the future?

We all know reporters love to prognosticate, their opinions respecting no temporal boundaries. But now a whole other industry has grown up that lives off their stories, trying to predict future events based on today’s news coverage. Companies like RavenPack have built a business by sifting through news stories in near real-time, looking for the sentiment of coverage related to publicly-traded companies. They claim this information can be profitably used to predict fluctuations in stock prices.

Predicting stock price moves based on current media sentiment has logic to it – readers are also traders, so if we see a string of gloomy stories about IBM’s recent product announcement, then some of us will likely dump the stock. And our likelihood to take action is proportional to our trust in the news source: If we see negative reporting in the Wall Street Journal that outweighs positive opinions on

Now we have social media and the prediction game has got a good deal more complicated. Researchers at the USC Annenberg School have been working hard to see how social media traffic can be used to try and predict future events. They started by looking at new movies and tried to correlate Twitter messages to first weekend receipts. They managed to get very good at estimating this, often better than industry experts, and what they found has broad implications for social media marketing.

The Annenberg team discovered that the best predictor of box office outcomes wasn’t the volume of traffic related to a movie, but the net sentiment expressed. In other words, quality beats quantity in predicting outcomes. A new movie might get a lot of buzz, but that wasn’t predictive of making a lot of money. This confirms what companies like RavenPack have long known: it’s the tonality, not the totality of coverage that really matter.

The takeaway from this? We need to be very careful how we measure social media outcomes. Measuring retweets, mentions and the raw volume of coverage for your brand just isn’t enough. Yet this is what most people do today.

Annenberg, in co-operation with the LA Times, are now trying to see if they can use their system to predict the outcome of this week’s Oscars. If you believe them, we should expect a big upset: The winner for best movie will be Midnight in Paris. Here I’ll make a prediction of my own: Much as I liked it, Midnight will lose.

Remember, I said that being able to predict stock fluctuations worked because readers are also often traders; the same logic does not apply to Oscar voting. The Oscar outcomes are based on the opinions of a mere 5,700 members of the Academy. Winning others awards such as BAFTA are a much better indicator of Oscar success.

The lesson here is that listening to everyone’s opinions is often a mistake. Instead, we need to target on influential audiences – potential customers, shareholders, employees – and understand clearly how they impact our brand and business.

Friday, February 10, 2012

The social deluge and market saturation

Here’s a fun statistic: every 10 days, over a century’s worth of video footage gets uploaded to YouTube. Here’s another: there are over 27 billion likes and comments added to Facebook every day. Or try this: last week, the number of Superbowl tweets peaked at over 12,000 per second.

If you’re a marketing type, then your first reaction to all this is probably salivation – all those eyeballs, all that attention!! – but dwell on this for a moment and you’ll quickly despair.  The astonishing growth in social media  –  the unbelievable volume and velocity of messages, news, and information – is quickly leading to saturation. As users of social, we’re all increasingly unable to deal with the cacophony and clutter.

There’s another, related effect. In his book Data Smog, David Shenk estimated that the average American consumer was exposed to about 50 commercial messages a day in the 1970s; by 1997, that number had grown to 3,000 messages a day. Today, some put the number of marketing messages as high as 5,000 per day, with most of the increase coming from online and social sources. Commensurate with this dramatic increase in message density is a dramatic decrease in advertising effectiveness. The effectiveness of commercial messages is inversely proportional to the number of messages received.

Getting attention in social media is getting harder and harder. The effectiveness of pushing any messages through social channels will only diminish with time. This isn’t solely an advertising problem.

There are several consequences to this. First, social platforms that rely wholly on advertising for revenue will slowly see growth-rates falter as smart, data-driven companies begin to see waning returns from their advertising investments. The irony here is that the runaway popularity of social platforms will be their undoing.

Second, marketing pros will be forced to rethink old ways of engaging with consumers. Heavy-handed corporate marketing in a social world won’t work. Getting heard amid the social din will require an authenticity and empathy that is alien to many old-school marketing pros. It will require careful targeting and impeccable timing.

Finally, marketing professionals need to educate their organizations on what can realistically be achieved with social media. Engaging through social marketing will require clarity of message and intention, as well as focus and agility – and resources.