Advertising in the Age of Social Media

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Julian Sanchez points out today that chain restaurants are largely an answer to a signaling problem: once cars allowed us to routinely travel to unfamiliar places, we needed a way to avoid truly awful food. Chains may not have offered the best food in a given place, but they guaranteed that you wouldn’t get something too horrible.

Branding and marketing in general serve this same signaling purpose, but what happens if consumer rating services like Yelp take over the world?

Imagine [] what effect it might have if, five or ten years hence, augmented reality using sophisticated image recognition were as ubiquitous as Internet-enabled phones are becoming in the developed world. Imagine that, for nearly any product consumers encountered, some kind of aggregate rating—based on whatever criteria the individual has determined are most important—would simply appear, with minimal effort. Simply looking at an aisle of products—or even passing shops on the street—I might effortlessly learn which were deemed most satisfactory by people with tastes similar to mine. My incentive to take the time to rank products would be provided by my desire to give the system a basis for determining which other user’s rankings were most likely to be relevant for me. (Think here of Netflix recommendations or other type of social filtering, where contributing ratings enables the system to make better predictions about what I am likely to enjoy.)

With such information more directly available, marketing would become far less relevant to the buyer—and a far less worthwhile investment for the producer. Products, of course, would still need to be distinguished in some way, but a seller with a superior product would be far better able to compete without investing in a costly national marketing campaign. Advertising might be initially important in raising awareness about a new product and building an initial pool of reviews, but its salience would rapidly diminish.

I’d need to think about this some more to decide if I agree. In general, I feel that the power of corporate marketing is routinely underestimated by internet-centric consumers. Remember the Cluetrain Manifesto? Well, it turned out that to a large extent, corporate America adapted just fine to the power of conversation and ended up controlling large swathes of the internet, not the other way around. I suspect that corporate advertisers will adapt just fine too. Marketing is simply too central to human activity to be reined in significantly.

Will marketing change a lot? Probably so. But my gut feel is that it will remain controlled by gigantic, rich, sophisticated players for a long time. They’ll just figure out ever better and subtler ways of keeping us from knowing it.

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