Social Recommendations vs. Online Ads: Which is Better Source of Traffic?

Social recommendation is a new trend gaining heat in the e-commerce industry. Social recommendation means that people in your friend network on social media sites like Facebook and Twitter recommend products or sites to you for your purchases or for general product review queries.  For example, when you purchase a new camcorder and you share and recommend your purchase on Facebook through social recommendation sites like ShopSocially, that’s social recommendation.

This new method of social shopping is a huge opportunity for online retailers, but still lying untapped. When someone recommends something to his or her friends, retailers can always expect some extra traffic which will be generated from it. The question arises that why should retailers be more interested in investing in social recommendation than on online ads.

Well, here are the reasons why online retailers should be more focused on traffic from social recommendations.

High quality traffic:

The traffic which is generated from social recommendation sites like ShopSocially has more chances of getting converted into sales as compared to that from online ads. This is because the recommendation from known people has 90% trust level as compared to less than 41% for online search engine ads, online video ads and online banner ads.

Social recommendation

The above results are from a study done by Nielsen. The study clearly shows the high level of trust that social recommendation can generate.

Better chances of sales conversion:

Since the traffic which is generated from social recommendation is of high quality, it means it has batter chances of getting converted into sales. Let’s say that an online retail store has 50,000 purchases per month out of which 5% are shared on ShopSocially. So total purchases shared will be 2500. If we take a modest number of 10 hits by friends for each purchase shared, online retailers can get around 25000 clicks on shared purchases. If around 3% of the traffic gets converted into sales, then we have 750 total purchases from social recommendation traffic every month. The above estimate is using very modest approximates of how many recommendations will get converted into sales. Going forward, social media recommendation is going to play an important role in the way companies do advertising. So it is critical for the companies to tap this source of traffic right from the start to get that competitive advantage in online space.
It is going to be a chain reaction:

Here we are going to see the power of social media and how a single purchase shared by a user can proliferate into countless number of hits and sharing by friends on social network. Let’s say that 1 user shares his purchase on Facebook which generates 10 more clicks by friends of that user. If at least one of them makes a purchase on the retailer’s site via this route and he also shares this among his friends on social media sites, again this will generate further high quality traffic to the dealer’s website and so on. So here we have virtually no limit on the amount of traffic which can be generated by just one purchase. The volume of traffic is going to increase as more and more users get connected to the chain and keep sharing their purchases.
Boost in Search Engine Rankings:

When more and more users share their purchases from a particular retailer on their social media network, it is going to create many inbound links to the retailer’s website. As seen previously, we can estimate an average of 750 inbound links to the retailer’s web page through social recommendation every month. This is going to have a huge impact on the search engine ranking of the retailer’s web site. And the most important part is that all this is going to be free traffic and free advertising for the retailer. The only cost he has to pay is that of a tie up with social shopping sites like ShopSocially and the rest will be taken care of by the users themselves. And who wouldn’t like this free publicity?
So going forward, online social networking space is going to play an important role in the way advertising is done by the retailers. This advertising is not going to be restricted to online banner ads and search engine ads. The new concept of social shopping and social recommendation has added a completely new dimension to the advertising strategies of the companies, be they online or offline. So it is essential for the retailers to keep an eye of this new change in the social media landscape to reap the full benefits of it.

Do let us know if you consider social recommendation or prefer online advertisements to buy products?

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COMMENTs ( 9 )

  1. Sachin says

    I know that the mouth marketing is the best way to generate some targeted leads & this social media recommendation strategy proved it. Its obvious if in need any product & my friend is recommending me something then i’ll defiantly look in to it…

  2. Rahul says

    it’s nice article and the topic of the content is awesome. the statistic shown in your article is very impressive. social media is very effective because here we have chance to communicate our friends directly and a good relationship always talks. thanks for this nice post.

  3. Nihar says

    Great post with good comparision.

    Yes you are right. Social Recommendations will work better as most of the ppl who end up in the site are interested in the product.

  4. Jens P. Berget says

    When I buy something (or when I decide not to buy) I almost always read what my friends are saying about the product. But, I’m also sometimes first, because I want to be the first one doing the testing. But then, I’ll be the one recommending. So either way, recommendations works a lot better than “traditional” online ads.

    This is why it works great to advertise with Facebook and filter the ads to advertise to friends of people who like a page or a group. This way the people who are seeing the advertisement will also see that one of their friends like it (the conversion rates are awesome).

  5. Devesh says

    Great Comparison!
    Social recommendations works much better then online ads.

    Thanks for sharing. Have a great weekend.

  6. Arif Nezami says

    Yep, Social recommendations works like miracle… but you should have a big friend list to do that…

    • SmartAboutThings says

      one is a big list and second is a big list with people WILLING to dig, retweet or buzz your stuff