Social Media; Another Tech Bubble or Leading Retail Game-Changer?

Could social media be just another Silicon Valley tech bubble? We’re halfway through 2012, and it seems as though a bubble burst may be imminent for the social media fad. On the day Facebook launched as a publicly traded company, it was valued at more than $100 billion for a few hours. Now, its stock has dropped to about half that. Investors who bought shares of Facebook or Groupon must finally face it; they bought the hype!

Facebook’s IPO was so disruptive, in fact, that afterward there was a lull of more than a month before another U.S. firm went public. Facebook’s abrupt comedown makes it an easy target, yet several other social-media firms are also reeling. Zynga, Groupon, Pandora — all of their shares have taken a beating since their IPO came out and all of these are down by 45%-70% as compared to their initial offering share price. Still not convinced that whether it is Google+ or Twitter, the social media bubble is bursting? Read on…

Is Social Media Bubble Bursting Already?

– We’ve seen the less-than-enthusiastic market reaction to the Facebook IPO
– We’ve seen major brands cut or halt all of their social media ad spending
– MySpace is virtually deserted
– Digg has been a complete failure as their users have begun jumping ship

And for retailers, a new study has revealed that social media’s importance as an influencer of consumer buying behavior. IBM recently released their State of Marketing 2012 report which outlined some important statistics that retailers should know about:

– Sales generated through mobile devices increased by 12% over the past quarter.
– Only about 1.3% of online shoppers were referred from social networks. And this number has grown very little since the previous quarter.
– The percentage of purchases made by shoppers referred through social media has dropped steadily from 2.4% to 1.9% in the past quarter.
– Positive consumer feelings towards social media have dropped sharply from 25.1% to 18.6% in the past quarter.

These figures come out of a detailed study which was conducted peer-level, analytics-based benchmarking through anonymously aggregated industry data. This data was also combined with IBM’s “social sentiment” indicator in order to statistically quantify negative, positive or neutral consumer opinions across social networks. And the data was publicly released as part of IBM’s Smarter Commerce initiative. Combines analytics and natural language processing to perform sophisticated calculations and provide retailers with real-time insight into buying trends.

But the most important statistic which can be pulled from this report is that online retailers reported an increase of 15% in sales from mobile devices such as smart phones and tablets during the past 3 months. At the same time, sales from social media sources fell by over 20% within the same quarter.

The introduction of mobile devices could have some profound implications for both online retail and bricks-and-mortar shops.

For physical retail stores, mobile devices allow customers to share their experiences – good and bad – with their community in real time. It also allows for better price-shopping, which will force these retailers to become more competitive.

Mobile shopping will also have important implication for online retail since consumers will now change their behaviors and habits when shopping online. For example, mobile online shopping may create a new trend in impulse purchases since users no longer have to wait until they get home to buy a product.

The real test for these trends will come in the 2012 holiday season, when consumers really start to flex their buying muscles and tell retailers how, when and why they spend.

About The Author: Storagepipe Solutions are the leaders in providing powerful, industrial-strength backup services for IBM iSeries and AS/400 servers.


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