Jonathan Spier, chief executive officer of social media analytics company NetBase, had the chance in early 2009 to win a multimillion-dollar contract for his 25-person firm if he could answer one question: Why do men sport stubble?
The query, posed by a consumer-products company to more than 100 research firms, had to be answered by mining millions of postings by men on social media sites. NetBase's software, which reads and analyzes 50,000 sentences a minute, found 77,000 mentions of stubble online in less than six seconds. Its researchers isolated all the positive comments, categorized them into themes, and built a chart in less than an hour ranking all the reasons. While the answer—most men wear stubble because they perceive it to be sexy—isn't that eye-opening, the ability to quickly collect and analyze all that Web data is. The process provides something marketers have long wanted: a way to pick up intelligence and trends from among all that chatter floating across the Net.
"It's all oriented around what businesses need and want from information," said Spier, whose Mountain View (Calif.)-based company now employs 50 people and works with Coca-Cola (KO), Kraft Foods (KFT), and Procter & Gamble (PG). "That's our selling point."
Companies are expected to more than double the amount they're spending for online data, to $840 million in 2012 from last year, according to marketing consultant Winterberry Group. The prospect of such fast-growing revenue is one reason social media monitoring outfits are being snapped up by larger software and market-research firms intent on improving their ability to use Twitter, Facebook, and blog postings as windows into the thinking of consumers.
"For years advertising was one-to-many, and then there was all this big hoopla about how to do one-to-one advertising, with the advent of the Web and Web metrics," said Debbie DeGabrielle, chief marketing officer of Visible Technologies, a social media analytics company that has grown 18-fold since 2006. "Social intelligence is the iteration beyond that—it is not mass personalization, it is personalization one-to-one."
Advertisers in the U.S. are getting the message. They will increase their spending on social media sites by 24 percent next year, to $2.09 billion, according to researcher eMarketer in New York.
Using the Web to collect information more quickly can help companies avoid product disasters. When Coca-Cola released New Coke in 1985, it committed one of the biggest blunders in marketing history, "spawning consumer angst the likes of which no business has ever seen," the company says on its website. Three months later, Coke returned its original soda to the market. Stan Sthanunathan, Coke's vice-president of marketing strategy and insights, doubts it would have taken that long to react in today's Web-connected world. "Back then, people had to write letters and send it to us, saying 'please bring back old Coke,' " Sthanunathan said. "It came out in large numbers, but it came after a few days. Right now, people will tell you that in a matter of two minutes on their Facebook page."
Gap (GPS) experienced such a reaction earlier this month when it briefly replaced its iconic blue box with a new logo. The design was widely panned online, and the retailer yanked it a week later. "We did not go about this in the right way," said Marka Hansen, the Gap president for North America. "We recognize that we missed the opportunity to engage with the online community."
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