• by Diane Mermigas , October 29, 2008

Many media, advertising and Internet players underestimate the extent to which interactive consumers, their social networks and their fluid connections can provide a silver lining to the lingering economic morass. The difference between their conventional wisdom and the more compelling reality of digital consumer behavior could be billions in new revenues.

This is not about simply posting comments to or accessing streaming video from a Web site. It is about the advice, information, video and photos that consumers freely exchange in their niche online social networks. Nielsen describes it in its "networked insights" report as the difference between a 15% vocal minority in measured media and the 85% silent majority in interactive socializing that includes linking, inviting, rating, reading, chatting and "tweeting" with other consumers. A Jupiter Research study commissioned by BuzzLogic concludes that consumer purchases are more likely to be influenced by blog exchanges than by comments by friends on social networks.

Either way, the more rapidly that all these social interactions are integrated into the fabric of digital video, data and communications, the sooner that content producers, aggregators and advertisers will find a way out of their low growth-no growth conundrum. So far, that challenge has been in the hands of devices that facilitate social networking around content and communications. It has been a function of the video game consoles, Web-connected TV hubs from Apple and Microsoft, and advanced software for personal computers and smart phones. Encouraging consumer exchanges around streaming or downloaded content has more recently become the fascination of YouTube, MySpace, Twitter and Last.fm--all in search of advertising premiums for delivering valuable niches. Amazon is an e-commerce social networking site in a class by itself.

However, digital socialization will not pack its full revenue punch until mainstream media becomes fully interactive. The ravages of a protracted recession may be the best impetus. The base principles are simple. Consumers will spend less, but what they do spend is increasingly predicated on their special interests, peer recommendations and marketers being able to cater to their affinities through ongoing interactive connections. Branded sites and social networks have a long way to go to monetize social interaction.

Many media and advertising executives barely have their heads wrapped around the huge revenue losses--and low single-digit growth online--they will sustain over the next 18 months.

They need to look beyond the recession to mine consumer interactivity: real-time conversations and content exchanges in and around music, television, movies, photos, advertisements and video games. This means skillfully weaving social networking elements through every kind of media, telecommunications and online experience.

This all-or-nothing embrace of social interactivity is the focus of an enterprising new Razorfish report titled "Feed" that is a compilation of essays, studies and forecasts. The biggest recent change in Internet behavior is the mass acceptance of the Web as a social medium, so future "killer apps" must be social in nature. Advice to brand advertisers and content providers: "Rethink the way they create relationships (or conversations) with consumers before it's too late."

While more mainstream media, advertisers and industry analysts concede that niche connections, context and aggregation are just as important as content, too many remain hung up on distribution platforms and devices--from cable providers to Internet portals, from Apple's iPhone to Microsoft's Xbox.

A new Forrester Research survey finds that social-technology adoption exceeds those physical boundaries. Three of four domestic online adults use social tools to universally connect through recommendations and reviews--voting on Web sites, responding to peer-generated video, blogging and tagging content. With only 35% of online Americans as members of social networks such as Facebook or LinkedIn, users are finding other venues for digital exchanges.

"The rise and sophistication of social participants will not only allow marketers to change the way they interact with customers, but to reinvent their business practices long-term," says Forrester analyst Josh Bernoff. That means moving past brand awareness to customer retention and loyalty as well as measuring individual responses instead of page views and unique visitors.

The Razorfish report goes even further. Interactive social engagement and adoption are a given; it's time to "use it or lose it." Some 40% of respondents in Razorfish's recent survey said they made a purchase based on advertising that appeared on a social media site; about half of all respondents said they were influenced by social-site recommendations. Three-quarters of those surveyed favored targeted brand advertising on social-network sites. Bursts of micro-interactions (think "tweets") are rapidly evolving into a dynamic form of social influence marketing that leverages the proliferation of communications channels while cutting through information overload.

Razorfish advises building semantic structures, applying new language and relational models to instantly respond to users' exchanges and personal needs. The goal is to tap into the power of community, entice more consumers to learn about new products and services on social networks, provide creative reviews that influence their purchases, and engage in ongoing rapport for news about developments and discounts. The experts insist that this will lead to the creation of new businesses in a social network economy and an important antidote to today's woes.