Word of 60 Million Mouths 

How many times have you sat at home and thought, I really need someone to come around to my house and sell me some new windows/ gas/ telephone/ insurance, then picked up the phone to call them?

Is it less often than the times you pick up the phone to call friends or relatives?

How often do those relationships lead to a recommendation for a product or service?

You're in a conversation with someone and they tell you about a great builder or cheaper phone calls. If you take those recommendations, then you know what is happening on the internet.

The Theory

Social networks like Bebo and Myspace, blogs and search engines, function in exactly the same way that word-of-mouth functions in the real world. The only difference is that it is much faster and more effective online.

The way in which people move from work to home, to meet with friends, or to have dinner with family and then go off to the pub is all behaviour that is mirrored in their online lives.

An entire relationship system exists online that directly influences buyer behaviour.

The impact and influence that social networking now has is enormous. The next generation of internet users are embracing social networking in the same way that the current generation embraced web search. Making buying decisions based on peer recommendations is becoming second nature.

Put together, searching and social networking magnify the influence and power that they have over consumer (and business) buying behaviour.

The fact that these social network companies are being acquired for such huge sums of money by big companies like News Corp. and Google is recognition of their raw power and marketing potential.

Google already has the search market tightly wrapped up and Myspace is the front-runner for the same claim in social networking. Keep an eye out for other, more sinister and addictive virtual worlds as they evolve. World of Warcraft, Second Life and Ever Quest are complete online worlds where people can meet and exchange recommendations. Their impact on product and service sales will be massive ... so start paying attention. 

Go and register for a free Second Life account now and spend some time understanding this amazing phenomenon.

Let us take mums as an example.

Mums represent a $1.7 trillion market! They account for 55% of consumer electronic spending, 51% of food spending, 49% of health and beauty and 48% of spending on home furnishings.

Mums are therefore a powerful market and 95% of them are on the internet at least once a day! Eighty-five percent of them click on adverts and 86% of them buy something. Yet only 20% say that advertisers are really connecting with them. So who is persuading them to buy all this stuff?

Research shows that mums are not really bothered about what celebs are selling, despite celebrity endorsements being central to advertising since the beginning. Much of this is due to a concept called 'demystification,' which also applies to political leaders.

Most consumers know that celebs are paid huge amounts of money to endorse a product and as such, have learned not to trust them. They therefore turn back to those they trust before committing to purchase anything.

Sixty-seven percent said they would rather receive information and endorsements from a peer rather than a celebrity.

This is also the case online. Blog expert Robert Scoble expressed a desire on his blog for some algorithmic expert to create a measure of engagement or action to represent the impact of bloggers and social networks.

He speaks from personal experience to illustrate the power of the online relationship:

I've compared notes with several bloggers and journalists and when the Register links to us, we get almost no traffic. But they claim to have millions of readers. So, if millions of people are hanging out there but no one is willing to click a link, that means their audience has low engagement. The Register is among the lowest that I can see.

Compare that to Digg. How many people hang out there every day? Maybe a million, but probably less. Yet if you get linked to from Digg, you'll see 30,000 to 60,000 people show up. And these people don't just read. They get involved. I can tell when Digg links to me cause the comments for that post go up too.

Buzz Bruggeman, CEO of Active Words, agreed. He received 32 unique visits from USA Today, compared to 400 on the recommendation of Scoble. Scoble is trusted by his readers because of the relationship he has built up with them and a recommendation from him is a call to action that is going to be acted upon.

So how do mum, social networks, blogs and online sales all meet up? There is a pattern emerging. Online journeys start with social networks or search, then move on to visiting trusted bloggers, who direct them to great places to spend money. Bloggers blog, tell their blogger friends about it, all of whom have friends or visitors that like to email instead of blog.

The UK market share of blog traffic is driven evenly by social networking and search according to Hitwise. More than 25% of blog visits come from social networks or chat rooms. Twenty-two percent of that traffic is sent by search engines. The most interesting thing, however, is where UK consumers were going after blogs.

More than 6% of those leaving the blogs go off to ecommerce sites. Most repeat the cycle by doing more searching and networking. Others are trickling to more blogs, checking their email or going to news and resource sites.

That means there is a lot of opportunity to touch people along the way. Like in the real world, location becomes the most important part of any online business and after that, the power of word-of-mouth.

That's a lot of opportunity to reach people along the way. Like in the outside world, the most important part of having an online business becomes business location, and then relying on word-of-mouth.

It's easy to get bogged down in statistics. The important message here is that people leave blogs to go and spend money or at least think about spending money and the places they go are often upon the recommendation of the trusted blogger.

What you should really pay attention to then is that the big players understand this traffic flow situation as well as they understand the power of the peer.

Did Google really overpay for YouTube? Is Facebook really worth $2 billion? Did Rupert Murdoch get a good deal on MySpace? It's not about the price. It's about controlling the flow of traffic and harnessing the subtle whispery power of word-of-mouth.