I spent a couple weeks in Ibiza Spain and for those of you who haven’t been there I highly recommend it. Most of my time was spent on the beaches playing beach volleyball amongst the topless and sometimes bottomless beach goers. As a marketer I was truly amazed with the effort put into bringing people into the various nightclubs around the island and even more amazing was the fact that they believed they were being successful. In reality the clubs were paying for extravagant advertisements, parades, and street panders with little effect to the majority of Ibiza goers. Social networking had already determined where everyone was headed, which day, what time, and generally where they would go afterwards. The in crowd never looks to advertising for help in planning an exciting evening, and everyone either wants to be part of the in crowd or believes they are part of it. Word of mouth had already set into play an intricate maze of bars, nightclubs, disco’s and restaurants.

View Larger Map Unfortunately for marketers the power of these forces had been rarely understood before the advent of such tools as Myspace.com and Facebook.com. Before such sites marketers had to rely upon common sense and gut instinct because the technology didn’t exist to measure the true power of social networking. Now that we can plainly see the power of social networking, attracting millions of people, and hundreds of millions of page views every day, everyone is rushing to figure out how to capitalize on this new phenomenon and asking the question, “how do we market too these people?” Everyone is asking the wrong question.

Social networking sites have simply brought to light the true nature of marketing. As Seth Godin says, social networks are turning the funnel on its side. He is on the right track, and based upon traditional thought patterns, he makes a valid point, however he has slightly missed the larger point. The fact is that the funnel has always been on its side. Now with tools like social networks, it’s simply easier for people to exchange information. Social networks, email, YouTube.com, and myriads of other sites have made it possible for information to be spread like wildfire. The drive to spread that information has always been there, but measuring the demand for that information has not.

And there is demand. So what is the question people should be asking? Simple, how do I apply this time tested yet recently proven marketing method? Proof of its effectiveness is irrefutable and impossible to ignore but are there mechanisms available to marketers to leverage the social aspects of marketing?

Companies like H&R Block have already begun experimenting with YouTube.com attempting to engage in a dialogue with anyone out there who is interested. What could be more boring than preparing taxes, well H&R put together a contest on YouTube.com asking people what they planned to do with their refund. The contest garnered thousands of entrants, hundreds of thousands of views, and thousands of hours of viewing. Did H&R use YouTube.com or did YouTube.com users use H&R? Did this contest leverage the power of social networking and create the opportunity for advocates of H&R to spread the good word? What were the YouTube.com users trying to do when they competed to win the grand prize? Were they seeking their 15 megabytes of fame or spreading the word to people who believed their message? The obvious answer is that for relatively short money H&R got random people, many of whom have yet to file their first tax return, to put together amazing creative, at NO cost, on H&R’s behalf, and then socially network to everyone they knew to spread the word that they had produced a funny clip about H&R.

The net result was certainly a win for H&R but again it misses the target. The focus of social networking is creating systems, settings, or situations whereby people can meet on common ground, and connect on one level or another. If, during that connection, they want to share information about their outstanding service at H&R the probability of others in that network using H&R goes up dramatically. The more likely scenario happening a million times a day is the converse.

On a daily basis through social networks both online and offline people are exchanging horror stories of the horrible customer service from Dell, or the insurance company that ripped them off. Bad news travels at lightning speed in a social network, and with the power of the internet at connecting people and sharing information it doesn’t take long to trash the reputation of a company that has worked a lifetime to build it. Now anyone can write a blog about something that interests them, look at me, and with little or no background, authority, or complete understanding of the situation, begin chipping at the foundation of remarkable companies. The power of a social network lies in its ability to spread news quickly, good news quicker, and bad news faster than the speed of light.

How does this affect your marketing strategy? This is a question that Microsoft should have asked three years ago. The balance of power is shifting back to Apple largely due to the awesome power of social networking – word of mouth. People are tired of the failures of Microsoft and are voicing their concerns en mass. It is easily foreseeable that within five years the prevalent computer will be an Apple. This is a multi-billion dollar shift that social networking is accelerating. Advocates of Apple tend to be crusaders and aren’t shy about letting you know, as opposed to Microsoft. The persona used in the Apple commercials typifies the personality of the Apple user and it is exactly that user who is championing the cause of Apple to anyone in their social network, which in the past used to be limited to their cubicle and a few select friends, and has now grown to hundreds of people in their extended network. So what is the bottom line to social networks?

Listen to them. You can just as soon stem the rising tide as you can control a social network, let alone effectively leverage it for your product or service. Social networks use you, not the other way around. Produce a great product, support it, and focus on customer service. The consumer has been empowered by social networks and companies like Apple get that. Companies like H&R although innovative, have missed the point. My advice to any marketing group in any company is simple, don’t be a social miscreant because the consumer will make your bottom line hurt through their new weapon against bad service, and poor products. This article was not written by Ralph Nader.

The contest is over, but here is the H&R Block contest video: