Thursday, April 02, 2015

Social Activity as Business Exchange

I am torn over what I think about this article from PSFK.  It talks about companies that are using social media activity as a form of payment and responding with tangible rewards.  In fact, PSFK recommends this as an innovative business model for companies. A positive mention from an influential user can bring in a lot of business.  So it is worth rewarding.

They cite some statistics that I question (each retweet of a brand communication is worth $20.37 in revenue), but it is the strategy that I am questioning today.  If an apparel company offers cash back discounts to users who recommend purchases to their friends, what happens?  In the very short term, it could be a good thing.  If I like something I buy from the company, I naturally recommend it to friends that I think might also like it.  And since I know my friends pretty well, I can do this relatively accurately.  Then I get a reward from the company and feel good.  And since the reward requires another purchase, the cycle continues.

At first, I might not be too tempted to start making dozens of recommendations to build up store credits.  That would be an easy way to lose my friends. Or even just a few really imprecise recommendations would make my friends stop trusting them and I lose my status among my friends.  But over time, the small but steady temptation increases.  All of a sudden, I become the curator of the stores products.  Whenever I see an item from the company, my thoughts go to which of my friends might buy it and how can I pitch it to them? 

Now, what is the long term effect if we all start doing this?  Not all of us all the time, but a little bit more here and a little bit more there – times 300 million people just in the U.S. If it replaces some of the growth of traditional advertising, I can see this tempting many of you.  But how would it erode the trust among friends?  Why are you telling me to eat more sardines?  Are they healthful or did you get a free case from Costco?  Why did you tell me how gorgeous the Toyota you saw on the street was?  Are you on the market for one?  I have a feeling this would create many insidious side effects we don’t realize now and are very hard to predict.