Today I read a blog post by Dave Rosenberg on Facebook and how much money they are making from the sale of virtual goods. Some estimates have come in at $34.5 million of how much Facebook users have sent on virtual goods.

Virtual goods. That’s right, fake goods that you can buy for people and post in their profiles. But this line is what caught my attention:

“The vast majority of Facebook gifts are bought from the first screen of gifts in the directory–almost 80 percent of the total sales come from the group of the first 20 gifts. This points to the self-reinforcing nature of popularity (the crowdiness of crowds rather than the wisdom of crowds) when popularity data is made public.”

This “crowdiness of crowds versus the wisdom of crowds” is a very important concept to think about as it pertains to e-commerce, blogging, and establishing power users in social networks.

People like to follow the crowd. In the Facebook example, the most popular products rise to the front and this prequalifies the selections for those who are not as decisive. The thinking may be, “well others like these products so I should too.” When strategic levers are in place, marketers can leverage this phenomenon to create great results. Read more…

It was a familiar sight. I was reading Boston.com, the online newspaper for the Boston Globe and I saw a series of familiar pink boxes and a coffee cup. Must be another series of Dunkin Donuts ads I thought. But after a closer look I noticed something interesting.

Those ads were not Dunkin. They were Starbucks. When you think of the color “pink”, Starbucks is the last thing that should cross your mind. As someone who has worked on the Starbucks account, I can tell you that browns, and earth tones are a mainstay. Not the festive pink and orange that defines Dunkin’s brand.

It looks as if Starbucks is playing in Dunkin’s sandbox. Read more…

In 1993, The U.S. Department of Transportation coined the term “The Southwest Effect“. This was in reference to Southwest Airline’s entry into the airline market. By lowering cost, focusing on customer service, and flying to less frequently travelled cities, Southwest Airlines changed the industry.

Rival airlines were scared that it the lower fares would cause them to lose customers. So they lowered fares too. What developed was a surge in demand for air travel, a rise of “all boats”, and a stimulus to some second-tiered cities.

What is very interesting about the story of Southwest Airlines is they started flying to lesser travelled cities because the bigger hubs had no room for them. But what happened was people started flying in and out of these satellite cities causing new markets and new opportunities for growth. Read more…