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Wall Street Journal Interviews LiveWorld CEO Peter Friedman

Online Communities Emerge as Effective Marketing Tool
By Emily Steel
July 26, 2006

Questions For ... Peter Friedman

Kelly Hampton calls herself a TV nerd, fascinated with everything about her favorite shows. Until April, however, the resident of Stroud, Ontario, had few ways of connecting with other TV enthusiasts. That changed when TVGuide.com launched its online community for TV addicts like Ms. Hampton.

Online "communities," where people with similar interests can post material such as blog items, are emerging as an increasingly popular way for companies to market products and connect with customers. The Campbell’s Soup Web site, for instance, has a section where customers can trade recipes.

LiveWorld has built a business helping companies, universities and other organizations set up these online networks. Clients include Campbell Soup, HBO, eBay and Tulane University -- and now TV Guide. Madison Avenue’s growing recognition of the importance of online communities recently prompted ad-holding firm WPP Group to form a joint venture with LiveWorld called LiveWorld-WPP. The partnership will make it easier for LiveWorld to expand its business, as well as enhancing WPP’s credibility in the Internet world.

Peter Friedman, 51 years old, founded LiveWorld in April 1996 after working as vice president and general manager of Apple Computer’s Internet/Online Services business unit, overseeing the creation of services like AppleLink, Apple’s global marketing and customer support service. He talks below about Madison Avenue’s foray into the social-networking sphere.

WSJ: How does marketers' use of online communities differ from simply advertising on popular networking sites such as MySpace, Facebook and Xanga?

Mr. Friedman: When we create these branded communities, these private-label communities, we are a little bit ahead of those sites because we are deeper into creating an immersive branding experience.... It is not like a brand should do what we do or just go advertise on the social networks. Brands really need to create an online-community social-network brand strategy that uses each of these elements.

WSJ: Your service creates loyalty marketing communities, promising to integrate brands into customers' daily lives. How does this work generate a viral marketing buzz?

Mr. Friedman: We did a study with McKinsey that showed that people who participate in an online community, if it is done well, return to a site nine times as often and five times as long...that is a 45 times increase in loyalty.... So right there is a hard metric that shows if you do this community there is more happening. The second thing is that as you empower people within these communities ...they are talking. If they are talking about you online, then they are talking about you offline, so you create all of this word-of-mouth buzz. It is a word-of-mouth engine.

WSJ: Since folks today are hard-pressed to find free time, do you provide incentives to these panels?

Mr. Friedman: Generally not. The majority of the world has time in the day to meet other people, and they want to do it. But as great as technology is, for the past 50 years it has functioned to isolate people. The Internet and particularly online community venues turns that around and enables people to connect with each other and go back to the fundamental need that the last 50 years of society and technology and marketing has hindered. So this really is getting people back to what they are all about, and they want to do it, and that is for any age group.

WSJ: You've built hundreds of online communities for hundreds of clients. Tell me one that didn't go the right way and what your company and the marketer learned in the process?

Mr. Friedman: We didn't think (that one client, a very well-known brand) was getting good enough results. We said, "The reason is you are not integrating the rest of your company with this enough." We actually told them if they were not going to do it, we recommend that they stop the program.... This is not a mousetrap that you build it, and they just come. You have to be proactive and participate with your audience.

WSJ: LiveWorld claims to create a dialogue with and among customers about businesses. What happens when this communication turns negative?

Mr. Friedman: One thing we tell our customers is if they are going to say something bad about your brand on your community, you can be sure they are saying it someplace else. You might as well get your arms around it, address it, listen to it and know what it is.

WSJ: Do online communities force truthfulness in advertising?

Mr. Friedman: In the world of marketing, for decades we've said the worst thing for a bad product is a good ad. Everybody will try it and figure it out. If people talk to each other, the reality and truth is in that conversation. The real question is: Is your marketing matching that truth? There is no question that the reality and the truth of what people think is in these communities.

WSJ: Where do you find the balance between promoting free speech in these communities and allowing companies to monitor content?

Mr. Friedman: You want to create a culture in the community that is consistent with your brand goals. What you are trying to do is attract people and give them cues in what they will do. Just like if you were creating a party and it was in a warehouse and you did nothing, people would mill around and they wouldn't know what was going on. But if they walked into the room there were white-and-red checkered tablecloths and a country band and straw on the floor and waiters in cowboy outfits, they would get the idea this is a country thing. If it is white tablecloths and waiters in tuxedos with champagne you go, "Oh, this is an elegant thing." So you are creating a sense of context and culture. Again, it has to be very much engaged with what the users are about, why are they there. But people want to go to a party that has a theme.... The really critical thing is to be clear what the community is about and to manage it to that.

WSJ: Social-networking sites recently have been under fire after reports of sexual predators. LiveWorld also recently formed a partnership with Blogsafety.com. What safety issues will the advertising agencies or companies need to deal with as they open their own sites?

Mr. Friedman: I don't see that as much of an advertiser issue.... An advertiser doesn't want to be advertising in an environment that is known for lots of pornography and predators. Nobody wants to do that. So that comes back to creating a culture and an environment that makes sense.

WSJ: Some people are saying that mainstream social-networking sites like MySpace are becoming too popular and soon will lose their prominence. What do you predict for the future of social networking? How do products like yours fit into this scheme?

Mr. Friedman: Different brands and features and services will come and go, but because these products and their popularity is not a sudden feature or an oddball phenomenon; because they represent and reflect a fundamental in the core human construct of behavior, they are here forever. For anybody in a modern country that is up to 30, they grew up with the Internet in one hand and a cellphone in another. Their basic approach to life is different. They live there, and everything else comes around that.

Write to Emily Steel at emily.steel@wsj.com