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Promising ROI for pass-along marketing

Peer-to-peer buzz about products is gold to advertisers, after all, most people tend to buy what their friends recommend over what an ad suggests, but quantifying word-of-mouth value has been vexing. Meteor Solutions, a new company, says its technology can connect the performance of paid online ad campaigns with the lift that occurs when people pass on the ads to others through social networking sites and e-mail.

So, for instance, if a customer who clicks on an ad sends the link to the merchant's page to others who've never seen that ad, there's more value to that ad than meets the eye. Especially since industry insiders say word-of-mouth recommendations turn into sales.

"Word of mouth (WOM) is one of the most credible ways to get a recommendation about a company, product or service, and the practice is growing exponentially with the advent of social networking and Web 2.0," says Larry Freed, CEO of ForeSee Results. "Recent research we've conducted has shown that nearly one-fifth (20 percent) of all visitors to the 100 top-grossing retail Web sites came by way of recommendation, and those that came from WOM were more likely to buy, recommend, return to the site and remain loyal."

Also, people referred to e-commerce sites by shared links are four times more likely to buy a product than people who come from other sources, according to the report "Social Media Measurement: Measurable outcomes of social media engagement (tying revenue to social media actions)" by online marketing company Razorfish.

"Put this together with the fact that 20 percent of traffic is coming from word-of-mouth, and suddenly the WOM channel and knowing exactly what's going on there becomes hugely important to e-commerce sites," said Ben Straley, CEO of Meteor Solutions.

The problem for advertisers was that it was difficult to quantify this peer-to-peer buzz, but Meteor Solutions is promising to change that by allowing advertisers to measure, optimize and manage word-of-mouth branding with the same precision as paid advertising.

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