Questions on web marketing

I have been thinking a lot about Social Media Marketing. My thoughts and questions are more long term strategic as in measurement and long term use as a marketing channel, rather then tactical.

I am wondering how social media marketing is going to effect earlier waves of marketing like traditional media and traditional Internet marketing (web optimization, ad words, and e-mail blasts). We hear a lot about how new media is killing revenue for old media - "Craig's List" takes money from news papers without making "Craig's List" rich (issues covered in Anderson's book "Free"). What I am interesting in exploring is the effect of new marketing from the marketers point of view. Is it really effective? How do we know? Will social media companies figure out how to make money? That is from the marketeers point of view will they charge for access? If they charge then they will need to provide marketeers with effective measurements (cost per lead, cost per sale). If we all try using Social Media for marketing how quickly will this media become saturated and no longer have any effectiveness. What's next? Will the lack of effectiveness cause us to go back to more traditional forms of marketing? Will social marketing effect web site, web list, and web ad revenue? What's next?

As a data point:

A friend recently ran a B2C marketing campaign on Face book. They created a YouTube video to go along with their campaign. I thought it was quite clever. They got a lot of visits, a great viral spread, a lot of positive comments, which resulted in access to a lot of people they never would have accessed in a more traditional form (using both traditional media and Internet media). After their initial exhilaration they found that all of this attention did not increase sales - lots of tire kickers, no buyers.

I have started to research if this is normal or an anomaly. I am interested in others experience. If you say it works, how do you measure success? Why do you think your social media campaign was effective? Does it work for some markets like B2C, but works less effectively in a B2B market? Please get back to me with your comments and thoughts. You can post them here are e-mail me at anita@readygo.com.