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WOM Stars in Hollywood; Plays Leading Roles Elsewhere

Movie studios and music houses are tapping social media not only to generate digital word-of-mouth (WOM) appeal - a strategy first deployed to great success with the Blair Witch Project more than 10 years ago - but also to listen to fans' judgments of film and music and make decisions based on them. 

Though Hollywood has always intuitively understood the power of WOM marketing, such buzz usually paled in comparison to the publicity generated by mammoth-sized advertising and promotion budgets. Now, those budgets are not quite so large, and thanks to the viral nature of social web, WOM has become an important communication channel in its own right.

"Paranormal Activity" Gets Fan Love

Twitter and Facebook, perhaps not surprisingly, are the two main WOM platforms used by movie studios. For example, the movie Paranormal Activity was a $7.9 million box office hit last weekend in large part because of the online viral campaign that accompanied it.

While some of the buzz was genuinely favorable reaction from viewers; some of it was also studio produced. The trailer, instead of typical scenes from the movie, was instead a clip on how defibrillators fell short during the test screenings. According to CNN (via CNET),  the campaign's ROI impressive, especially since the movie cost only about $11,000 to produce.

Studios are also using Twitter and Facebook to track movies that prove unpopular with viewers as well. "The writing is on the wall much quicker than ever before," said Pete Blackshaw, EVP of Nielsen Online's digital strategic services, via Reuters.

"If you know the dog's not going to hunt, at what point do you start to get more efficient and say, 'OK, we're not going to spend everything, maybe we save the marketing budget for DVD?" he added.

WOM Beyond Entertainment

WOM entertainment success stories are so prevalent now that other industries have wholeheartedly embraced the techniques, making it a $3 billion-plus phenomenon that is clearly entering a new phase of growth – one that is accompanied by stepped up government regulations.

Transplanting these techniques to other business sectors, though, is not always straightforward. Much depends on the product in question of course; in some instances, the community that generates the buzz is just as important as the buzz itself.

In other cases, marketers find they don’t need to prompt customers too much to work on their behalf. A study out of Penn State University found that 20% of Tweets are brand-related, and many are positive. "There are some good products out there, or at least products that people are happy with," said Jim Jansen, a Penn State professor and one of the study's authors.

Bottom line: WOM has become a significant IT category. In a recent report, BIA/The Kelsey Group forecasted revenues for e-mail, reputation and presence management (ERPM), to grow from $460 million in 2008 to $3.1 billion in 2013. The number of small and medium sized businesses using ERPM also is expected to increase from approximately 500,000 to nearly 4 million during the forecast period.

Another study released this summer by PQ Media found that WOM marketing is the fastest-growing segment of the
 $254 billion marketing services sector of the media industry, with expenditures projected to climb at a compound 
annual rate of 30.4% in 2006-2011 to $3.7 billion. In 2008 alone, spending on WOM rose 14.2% to $1.54 billion.

The WOM phenomenon is now catching the attention of more scholarly studies; in its Fall 2009 edition the American Journal of Business made an exhaustive examination of the "third-person effect" and its implications for WOM marketing.

Ethical Issues 

More so than other forms of marketing, WOM, can be a double-edged sword if its use is seen as inappropriate or manipulative, and over-the-top campaigns are likely to attract regulatory scrutiny if not action. For example, the Federal Trade Commission's new guidance calls for bloggers and tweeters to explicitly state if there are financial ties to the products they are promoting.

As it happens, the Word of Mouth Marketing Association (WOMMA) agrees with the FTC - especially since it has become clear the agency expects more of the burden of disclosure to fall upon marketers vs. bloggers.

WOMMA hopes and believes the updated guidelines will usher in a new generation of viral and social media marketers who place the highest priority on ethical practices, according to WOMMA President-Elect Paul Rand.

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