Do social networks need advertising?

Mitch Joel pointed me to a business week article about advertising in social networks. In the same post he also links to a blogpost claiming social media sites need advertising.

In short: time spent on social networks is declining, for whatever reason – one could of course be increased advertising on these platforms. So this could be a problem for advertisers in the near future. Secondly: social networks need advertising, the same way media has always been ad supported.

But it’s not only the fact that user numbers are going down, ads on social networks are also less effective than on regular websites:

Many of the people who hang out on MySpace, Facebook, and other sites pay little to no attention to the ads because they’re more interested in kibitzing with their friends. Social networks have some of the lowest response rates on the Web, advertisers and ad placement firms say. Marketers say as few as 4 in 10,000 people who see their ads on social networking sites click on them, compared with 20 in 10,000 across the Web.

The solution to this is new targeting mechanisms, to serve users more relevant messages.

Last fall, both rolled out programs allowing marketers to pitch products to people in hundreds of categories of interest, such as fashion and sports. News Corp. President Peter Chernin said on Feb. 4 that response rates on MySpace improved as much as 300%.

Could be a solution. But at the end of the day, this whole approach still tries to use old answers to new problems. How about taking an approach that looks beyond plain advertising? How about introducing branded widgets, services, or exclusive whatevers to these platforms, so that brands can provide an added value to the interaction between users?

I am thinking of such things as the Red Bull Rosham Bull Challenge in facebook, which is a game that two users can play against each other. Or even just plain and simple things like the fact that you can sponsor digital gifts in facebook. There still is lots of potential for these kind of approaches.

Oh, and from a business model perspective: I don’t think social networks need advertising support. At least not to the extent that their business models are in danger if there is no proper ad solution in place.

Think about the German platform Xing.com. There you have a choice of paying a monthly premium for additional services – one of which is the fact that you don’t get to see any ads.

There could also be other models, like changing the business model slightly and starting e-commerce around certain product groups (i.e. certain information-based, digital products or even real products).

These problems are not really new. But what this whole discussion shows, is simply the fact that social networks have, all of a sudden, exposed the need for new marketing approaches much clearer than any of the previous developments on the web.

4 types of communities

At the Church of the customer Blog, there is an approach of how to categorize communities, which I found quite interesting. The build a square, one axis being size, the other being devotion. Most communities can be aligned along these axes:

  • Little Devotion, little in size: Clique, like a small world. (Anyone who can invite me?)
  • Little in size, but high in devotion: Cult, like Maker’s Mark Ambassadors. (Never heard of them!)
  • Low in devotion but large in size: Network, like LinkedIn or Xing.
  • Large in size and high in devotion: Nation, like Netroots Nation. (Never heard of them either!)

So what does that tell us? Size and devotion are the two main things affecting any community. Question is, whether it is possible to increase both at the same time, or if it is better to focus on one at a time?

Links & News, 12.11.07

https://www.youtube.com/watch?v=WeYMoz0zdag

Google and the liberation of mobile phones

Clever, very clever indeed. Google announces the Open Hand Set Alliance and liberates the 33 participating mobile phone operators from the claws of proprietary systems. From the Google Blog:

Android is the first truly open and comprehensive platform for mobile devices. It includes an operating system, user-interface and applications — all of the software to run a mobile phone, but without the proprietary obstacles that have hindered mobile innovation. We have developed Android in cooperation with the Open Handset Alliance, which consists of more than 30 technology and mobile leaders including Motorola, Qualcomm, HTC and T-Mobile.

It appears to carry very similar objectives as OpenSocial which was announced only last week. Google seems to favour open standards, so that the web as a plattform and mobile phones as the future personal device for everything will stay open and free. This should enable innovation to the benefit of the user, no doubt about that! But it might also serve Google quite well.

Why? I can only guess: Googles revenue models are still mostly built on advertising. So Google needs scalability in customer reach, which they can only keep increasing with ready access to information and users. As social networks are obviously becoming the dominating platforms for users to interact with, and mobile devices probably being the first choice for going „online“, then Google needs to be able to freely play on these grounds.

In the future, I think the key to revenue will most likely not reside in just delivering content, i.e. producing or transporting it, since there will be soooo much of it. And it is very labour intensive to produce it. Instead, it is much more efficient to

  1. intelligently aggregate and sort content (which Google already does)
  2. adequately aligning this content to the needs, preferences – and most importantly: intentions of the users.

Regarding the second point, I think it is fairly obvious that Google should be way ahead of the competition in gathering the necessary user data. Think about Google Toolbar, Google Analytics and Google AdSense, nevermind the main site, the search engine itself. They should have better tracking data than anybody else, which they can put to work for solving the second point above.

One thing that can stop the (nearly) endless scaling of Google’s model into the long tail of every single social media profile and mobile device is „artificial“ restrictions such as walled gardens and operating systems. So: very clever to launch initiatives to at least partially open up social networks and mobile phone operating systems.

A vision of students today

Michael Wesch of Kansas University has published his third video on the effects of modern society&technology on (young) people

To quote Mitch Joel, who nailed it down nicely:

I know that most people will see this as a wake-up call for their industry, but I find it especially relevant to the Digital Marketing industry. Young people are learning about Marketing in the types of environments depicted in A Vision of Students Today. We need to empower and power them better. From the looks of things, they are already using the tools needed to succeed, but are stuck in „industrial complex“ like systems. They are mass collaborating, they are engaged in online social networks, they are spending more time with communications like email. Overall they are primed to be excellent professionals in the Digital Marketing space.

The other two videos have been around for a little longer already, you might have seen them:

Web 2.0 … The Machine is Us/ing Us

Information R/evolution: