Internet advertising may get all the headlines for its huge growth, but there’s another advertising segment registering even bigger gains. It’s word of mouth, and according to a new study by PQ Media, the Stamford, Conn., research firm, WoM spending rose 35.9 percent in 2006, to $981 million. By 2011, it will reach more than $3 billion, with an annual growth rate of more than 30 percent, at a time when newspapers, magazines and radio are struggling just to maintain their ad revenues. A recent Nielsen study found that WoM is the most influential form of advertising, and that’s partly because it can take so many forms – from brand marketing to new media. Yet while the internet has certainly given WoM new platforms, mostly through blogs and social networks, roughly 90 percent of WoM advertising still takes place offline. Dr. Leo Kivijarv, vice president of research at PQ Media, talks to Media Life about what word of mouth actually encompasses, why it’s growing so fast, and how GlaxoSmithKline used it smartly for the new weight-loss drug Alli.

 
Word of mouth is such a nebulous term in advertising. How do you define it, and how can you put a dollar value on it?
 
Our official definition is it’s an alternative marketing strategy supported by research and technology that encourages consumers to dialogue about products and services. Word of mouth marketing strategy is deployed through various online and offline tactics, often facilitated by influential peers, WoM communities and various brand agents.
 
Within the WoM marketing sectors, there’s two major segments, content and services and ancillary products. Content and services include companies that develop strategic initiatives for brand marketers to disseminate marketing messages via multiple media tactics to their target consumer audience.
 
Ancillary products include companies that provide research or technology designed to improve proficiency or measure ROI.
 
Those are our official definitions.
 
Here we were looking specifically at outsource spending by brand marketers that would help facilitate their WoM marketing campaigns. So it doesn’t include anything spent internally, salaries, etc., just the outsource dollars.
 

Why has WoM marketing grown at such a rapid rate the past five years?
 
WoM is part of marketing services as well as alternative media. There’s a whole seismic change happening in those areas.

Specifically looking at the WoM industry, within the last five years it’s become more standardized. Compared to other media, this media grew up on research and technology. In the beginning, even though it’s been around forever, people were saying, “We need to be more efficient at creating buzz.” And the internet had a lot to do with that.
 
So they experimented a lot in the early 2004-‘05 period, monitoring whether something got a positive or negative buzz. These campaigns, which usually ran in conjunction with other ad campaigns, were so successful that the brand marketers started making it a line item.

Because it’s so successful, now there are companies that are specialists in getting us to the target audience and technology that makes WoM easier. So there’s been a cottage industry that’s just grown in the last three or four years.
 

What area(s) of WoM are producing the most growth? Which ones do you see really breaking out in the coming years?
 
At the present time a lot of that goes to companies who’ve become specialized in the area. If you look at content and services, there are WoM media companies that brand marketers use to access influentials, etc., in their target audience. They may say something like, “I’ve got to reach college women.”
 

How has the internet reshaped WoM marketing in recent years?
 
It’s been driving the social network aspect. There are specific companies, online communities, that are hired by brand marketers to set up brand-specific blogs. And they’re always identified – “this is a blog that Procter & Gamble has put on the web so they’re getting feedback about the products they sell.”
 
That’s where the technology starts kicking in. They help facilitate some of this web development that’s specific to WoM from the social networks.
 
There are 3.5 billion WoM conversations per day. And that’s not necessarily that there’s a specific brand doing it, but there is evidence that about 70 percent of conversations have some sort of brand tied to it. And yet 90 percent of WOM happens offline.
 
The internet has helped generate buzz, but the industry does need to strengthen some of its offline ROI measurements.
 

It would seem that there's a dangerous line to walk online between building buzz for a product and selling it through less-than-upfront measures, like the Wal-Mart blog that sort of exploded in the chain's face a few years ago. How are brand marketers learning to navigate this area of online WoM?
 
WoM marketing tries to distance itself from that, because the Word of Mouth Marketing Association on its web site says what it considers WoM and practices it doesn’t consider WoM.

They try to distance themselves from viral and guerrilla marketing. You have to clearly state, “I received this sample from this company, and I’ve been hired to write this blog.”
 

What are some examples of successful online WoM campaigns in recent years? Why did they work?
 
One of the best examples is GlaxoSmithKline. It put out a drug Alli, a weight-loss drug. They hired a company and said, “We want to supply a sample of this to your agents and want them to log on and say what happens.”

This went on for three or four months, and when the results were in, a lot of the marketing materials they used were data that were provided by this WoM. Here’s why you want to use it, here’s where we know you’ll have problems, etc.
 
Lee jeans similarly said we have these new jeans, how can we create buzz? To make sure it’s considered WoM, marketing people are acknowledging they’ve been hired by Lee jeans and they received the sample.
 

What has been the most interesting or surprising WoM finding you came upon in your research?
 
We probably were surprised on how organized the industry has become so quickly. And how they grew up smartly because they were able to combine the technology and research aspect of it that you don’t see in other alternative media.
 
A number of our clients are saying they’re missing out on ROI measurements, which is how we realized that WoM is already in that space.

Do they need to do more? Yes, especially offline, but they are ahead of the curve compared to a lot of other alternative media.
 
If you put it into perspective, if we just looked at the $250 billion ad sector, it’s easy for a brand marketer to say, “Do I want to spend $1 million on WoM campaign?” Some may say, “Sure, I’m already spending $2.5 million on the Super Bowl for 30 seconds.” It’s one of the fastest-growing sectors, but it is still one of the smallest overall sectors.