12/17/2010 12:54 pm ET Updated May 25, 2011

From Old Spice to Levitra, Social Media Is the Place to Build Brands

First it took phosphates out of detergents, now Proctor & Gamble is taking money out of soap operas.

What's the Cincinnati-based consumer products giant up to? It's simply keeping up with the times. This includes moving more of its strategic marketing dollars to social media from traditional broadcast and print mediums. This fall marked the end of an era when the company said goodbye to TV's As The World Turns, the last remaining P&G-owned soap opera. The company had been a supporter of daytime dramas for decades. Now it's following with its money where more of its savvy customers are heading.

As more advertisers do, Internet marketing grows. This year, online advertising spending is expected to top $25 billion, according to eMarketer. This might come as a revelation to those who have never clicked on an online ad, but it's no surprise to the millions of people who engage product companies, service providers, media organizations and other entities on social media. While momentum has been building for some time, Facebook, YouTube and others became the darlings of the advertising world this year. In fact, they are changing the way product companies think about engaging customers and building brands.

Take drug-maker Bayer, for example. It's "In-Bed" YouTube videos about erectile dysfunction (ED) have become a hit in the ad world for their unflinching frankness and humor -- the kind that simply can't be done on TV. At the end of each video, users are encouraged to visit an informative web site featuring medical information, doctor interviews and more. The company's ED drug, Levitra, is barely mentioned, underscoring how different product promotion on social media is compared to traditional broadcast or print advertising.

To many advertisers, social media has emerged as an ideal medium for connecting with consumers who have both the technological means to shut out traditional marketing and the jaded predisposition to resist a hard sell. After a period of trial and error, more and more are figuring out how to best leverage the medium. "A payday could be arriving faster than expected," concludes McKinsey & Co. in a new study. By leveraging social media, aggressive companies have been able to increase their market share and their profit margins, McKinsey found. "We call this new kind of company the networked enterprise."

Many of these "new" kinds of companies are some of America's oldest stalwarts. After half-hearted attempts to leverage social media, many are now moving at full speed to make the most of it. This includes Coca-Cola, Dell and P&G. Its videos for Old Spice cologne featuring former football player Isaiah Mustafa have been viewed more than 140 million times on YouTube. To put that into perspective, Mustafa's videos hawking cologne are as popular as those featuring entertainer Kanye West. Mustafa's celebrity has landed him on "The Tonight Show" with Jay Leno, and his catch-phrase "I'm on a Horse" has given Old Spice unprecedented visibility. Not surprisingly, sales of the cologne have jumped by double-digits since the videos first debuted -- a significant turnabout for a once moribund brand.

Not all companies, of course, are making the transition successfully. In 2009, Mars Inc. miscued when it tried to aggressively leverage social media to promote candy -- too aggressively, in retrospect. The company set up a social media site to promote its Skittles treats. But it erred when it essentially allowed consumers to seize control of the site. When they began tweeting profanities and posting objectionable comments, Mars had to wrestle control back from social media users. The attempt at brand building turned into a public relations setback. Similarly, food giant Nestle learned a painful lesson about the downsides of social media when it tried to prevent environmental enthusiasts from using a modified form of the Nestle logo as their Facebook photos as part of a protest against Nestle's use of palm oil. When Nestle tried to strong-arm Facebook users and lay down the law, all hell broke out. Ultimately, Nestle apologized for trying to bully consumers, but not before doing alienating social media users.

Will others commit similar faux pas? Maybe. But that's not the point. The takeaway from 2010 is this: A significant, perhaps one-in-a-lifetime transition is under way. Those who seize the opportunity in social media could make gains that last for years to come.

Still unconvinced? Then ask yourself how Old Spice became the new thing in cologne. Even Sesame Street's Grover wants to be like Mustafa.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Author proceeds from sales of Doing Both go to charity. Follow Inder on Twitter at @indersidhu.