WOM: Paranormal Activity Case Study

Movie studios and music houses are tapping social media not only to generate digital word-of-mouth (WOM) appeal - a strategy first deployed to great success with the Blair Witch Project more than 10 years ago - but also to listen to fans' judgments of film and music and make decisions based on them.
According to Marketing Vox, though Hollywood has always intuitively understood the power of WOM marketing, such buzz usually paled in comparison to the publicity generated by mammoth-sized advertising and promotion budgets. Now, those budgets are not quite so large, and thanks to the viral nature of social web, WOM has become an important communication channel in its own right.
Twitter and Facebook, perhaps not surprisingly, are the two main WOM platforms used by movie studios. Studios are also using Twitter and Facebook to track movies that prove unpopular with viewers as well.
The movie "Paranormal Activity" was a $7.9 million box office hit on its first weekend last year in large part because of the online viral campaign that accompanied it. Part of what made the original "Paranormal Activity" such a topic of conversation last year was how it took audiences by surprise. The trailers didn't give away much of the story, showing how audiences reacted to the movie more than the actual footage. While some of the buzz was genuinely favorable reaction from viewers, some of it was also studio produced. The trailer, instead of typical scenes from the movie, was instead a clip on how defibrillators fell short during the test screenings. The actors didn't pop up on talk shows. And anticipation for the movie grew organically on the Web, and it quickly became the "must-see" movie of last fall. According to CNN, the campaign's ROI is impressive, especially since the movie cost only about $11,000 to produce. When the first movie made an astonishing $107 million at the domestic box office, it was inevitable that a sequel would be haunting theaters once again. Now it's a year later, and "Paranormal Activity 2" is opening tomorrow. And like before, the film's studio, Paramount Pictures, is releasing very little information about what's in this new movie.
WOM entertainment success stories are so prevalent now that other industries have wholeheartedly embraced the techniques, making it a $3 billion-plus phenomenon that is clearly entering a new phase of growth – one that is accompanied by stepped up government regulations.
Transplanting these techniques to other business sectors, though, is not always straightforward. Much depends on the product in question of course; in some instances, the community that generates the buzz is just as important as the buzz itself.
In other cases, marketers find they don’t need to prompt customers too much to work on their behalf. A study out of Penn State University found that 20% of Tweets are brand-related, and many are positive. Bottom line: WOM has become a huge IT category. Another study by PQ Media reported that WOM marketing is the fastest-growing segment of the
 $254 billion marketing services sector of the media industry, with expenditures projected to climb at a compound 
annual rate of 30.4% in 2006-2011 to $3.7 billion.
More so than other forms of marketing, WOM, can be a double-edged sword if its use is seen as inappropriate or manipulative, and over-the-top campaigns are likely to attract regulatory scrutiny if not action. For example, the Federal Trade Commission's new guidance calls for bloggers and tweeters to explicitly state if there are financial ties to the products they are promoting. As it happens, the Word of Mouth Marketing Association (WOMMA) agrees with the FTC - especially since it has become clear the agency expects more of the burden of disclosure to fall upon marketers vs. bloggers.