Of Social Nets & Business Models

28 Comments

By Robert Young

Last week at a conference in New York City, the head of Fox Interactive Media, Ross Levinsohn, told the audience:

“More mainstream marketing on MySpace will be kept to the “well-lit” areas of the site, like the Books, Comedy, Film, and Games sections rather than on individual profile pages, which have less strict content controls–something many advertisers have expressed concerns about.” “We want to make it easier for marketers to work with us,” Levinsohn said.

I like the way Scott Karp reacted to the announcement when he wrote, “Sounds more like advertising will be roped off away from the action, like protesters at a Bush rally.” Heh.. funny! My reaction was similarly skeptical, because it seems that a traditional media mind set might be nudging them (FIM) in the wrong direction.


As most now realize, the fundamental problem that social networks face when trying to monetize through an advertising-driven business model is the lack of trust.  To be more explicit, while brand advertisers have historically trusted people as consumers, they do not trust them in the new role of producer (e.g. uncontrollable content).  Likewise, people who are armed with the power of interactivity are also demonstrating that they are increasingly distrustful of brand advertisers (e.g. ad-skipping).

In many ways, social networks today, at their current stage of evolution, are much like the currencies of underdeveloped nations… or countries that are politically unstable.  In such circumstances, governments must do all they can to create and engender trust among its nation’s constituents and institutions. After all, what is money without the people’s trust… it’s just a devalued piece of worthless paper.

MySpace, and thus other social networks, are in a similar predicament. MySpace in particular, needs to be a catalyst for trust among its users and advertisers.  While taking a strategy of segregation (e.g. “roping off” brand-safe areas) might satisfy conservative advertisers and yield some dollars in the short term, such efforts will actually serve to undermine and limit the long-term viability of its business model by further exacerbating the distrust between users and advertisers.  Instead, what MySpace needs to do is to tackle the problem head-on by launching programs that ultimately create new levels of trust between its constituents where none existed before.

Given that broad, high-altitude view, let me now zoom in by proposing a specific program idea along the lines of what I’m talking about. Whether the idea, in and of itself, has any merit is not the point here; the objective is to demonstrate a direction that exemplifies how trust can be created between users and advertisers.

Imagine the following scenario:

A teenage girl is checking her MySpace profile. She notices a new video ad for Old Navy on her page. But this particular ad jumps out at her because she immediately notices that the person in the ad is actually someone from her high school!! Without hesitation, she hits the “play” button and watches her friend talking and dancing, while modeling Old Navy’s new line of Madras casual wear. The ad seems homegrown in some ways, yet professional overall… a feel that was intentionally designed into the creative execution by Old Navy’s ad agency. Excited, she notices that her cousin (who’s attending college) is online so she IMs her to describe the ad she just saw. Her cousin IMs back to say that she saw the exact same Old Navy ad on her own MySpace page earlier, but in her case, the girl in the ad was someone she knew at her college.

Now, let’s step back and digest the implications of what just happened. In a broad sense, this type of program is no different than what advertisers do when they sign-up mega-celebrities (e.g. Catherine Zeta-Jones and T-Mobile) or superstar athletes (e.g. David Beckham and Motorola) as spokespeople for ad campaigns or for product endorsement deals. When it comes to advertising in mass media, a big name is required since such campaigns are only effective if the viewer already knows who that celebrity is. But in a social network, micro-celebrities who are well known within their network of micro-communities could prove just as effective and potentially even more so, particularly if such campaigns are able to generate buzz, excitement and a cool-factor.

As for MySpace’s role in all this, they are in the unique position to know better than anyone (as the owner of the platform with all the user data) who the “brand-safe” users are within its network.

Thus MySpace can effectively play the role of talent agent by aggregating a list of users who would be appropriate for advertisers within various categories. In fact, the incentive “to be discovered” is likely to spur many users to express themselves in a manner that will position them favorably for consideration. The result is a win for everyone involved.

By enabling advertisers to partner with users, this is the type of program that would create trust between the parties. This trust, multiplied by the number of ad campaigns and the users enlisted, could then be propagated throughout the entire social network in a manner that is completely native to the medium itself. In this vein, it’s worth noting that a campaign like this cannot be implemented efficiently or cost-effectively in any form of mass media.

Remember, social networks are a new medium for self-expression and, unlike traditional media, the content is being produced and owned by the audience itself. This is a new model that requires new rules… and for advertising, the most important rule is to launch programs that *integrate* users and advertisers, not segregate them. By aligning their interests, trust will be created and social networks will be able to offer advertisers, and users, benefits that are truly unique to the new medium.

So as is the case with money, trust will enable social networks to develop business models with sustainable value.

Robert Young is a serial entrepreneur who played a major role in the invention & commercialization of the world’s first consumer ISP, Internet advertising (pay-per-click ads), free email, and digital media superdistribution.

28 Comments

Tom73

The social networks are here to stay, and the advertising into these networks are just a part of the “online evolution” if you could say so. I use a great ad blocker called AdMucher, you can custom make the blocks so you don’t need to read a single advert in any social network site :)..

Mickael

I think it’s a great idea. I’ve been using Facebook now for about 4 months. With close to 300 friends, and 40 groups I understand the system pretty much.

If it’s done in a cool way, it would work.

boomersrec

“A teenage girl is checking her MySpace profile. She notices a new video ad for Old Navy on her page. But this particular ad jumps out at her because she immediately notices that the person in the ad is actually someone from her high school!! Without hesitation, she hits the “play” button and watches her friend talking and dancing…”

I don’t think that advertisers should be preying on teenage girls on Myspace, there is already too much controversy with young girls being targeted on that site for other reasons, it’s the last thing any of us need to have a sexual predator trying to create “familiar” images for young girls to click on and potentially cause more problems than we already have.

thinsurface

It’s all interesting in theory, but how well can these things be implemented? I agree with those of you who say it’s all too complicated, it’s a bit confusing.

kittyjack

It is just all too complicated, and not to mention costly. Sure there are a lot of businesses out there with tons of money to spend, but it seems recently there are more companies willing to gamble their profits away in hopes of becoming the next big internet craze. Hopefully this will even out soon, as more people begin to wake up and not click on everything they see, and realize that there are scams out there ready to make you feel like the ad is speaking directly to you. There’s a great article on this here: http://www.peoplesearchnews.com/social-networking-/how-can-social-networking-help-your-business-succeed/

Matteo La Rosa

I agree with Andrew when he says that the very poor design of Myspace will not ever match with big fashion companies for selling products.
I am working with a big italian fashion company, and here the image is all, I do not think that they will ever mix with a web site like Myspace.
This obviously will not exclude that, in the near future, niche fashion social networks will born and that advertisement could be done by people too, but the ‘place’ where to put the advertisement is as important as the advertisement’s content, even on internet, on my advice..

Paul

Classic thinking on brands is all based on creating a consistent identity / meaning for that brand in their consumers minds.

As big a problem with consumer involvement (apart from trust) is that getting the brand to be created (or recreated) with user generated content could be a bit hit and miss – there will be a reasonable number of ads totally off target even with good intention. Good advertising combines a great creative execution with a message that will drive the consumers to action. Thats a level of precision hard to hit with advertising profesionals let alone consumers.

It might be possible to come up with a new brand (or model), that has as part of its DNA consumer involvement (as indeed these community sites have), like threadless etc… for mainstream consumer brands (the Cokes etc..), but it would need very careful thought and masses is at stake.

As part of all of this, Old Navy etc… rely on production values in commercials to reinforce brand value – hard to do on consumer generated content.

And of course they want to see their clothing in the ads – so there needs to be some meccanic that allows this to be done cost effectively and be compared against the traditional media equivalent.

I’m still thinking around this area to get my approach straight on how to connect with the audience, so may have more to say later…

Mick Liubinskas

Yes to trust. It’s the ying/yang that people (real people) are flocking to sites that are not big brother so they can hang out and be themselves without being sold to or lectured or limited. That’s the My Space beauty as I see it.

When they get gobbled up, even if they only say ‘A part of Global Corp’ it doesn’t take long for the champions to realise that things are amiss if the freedom is pushed. Yahoo did well with Flickr, but even then the ‘Do More with Your Photos’ made me irk. MySpace looks like it’s going to get banner added and the subtelty will be Newscorp Hammer-Like.

Interesting to see though, especially with FaceBook and 100 me-too’s hitting the streets.

http://zapr.typepad.com/michael/2006/06/nokialive8_ad.html

93South

Sounds very interesting and in the offline world they are trying to work this magic through comapanies like BzzAgent. However, besides the potential backlash, I’m not sure if the concept would scale.

dave

i’m a little confused: in most states, i’m allowed to snap a photo of anybody in public, given the right that i have based on the subject’s forfeiture of a ‘reasonable right to privacy’ while in public (actually may include his/her front lawn)…but if i use the same photo in a commercial implementation, have i broken a rule? also, if the subject was not given a “reasonable right to privacy” within an online community that is itself wrestling with user privacy issues, what happens next?

here, let’s continue your scenario: that same teenage girl who saw the cool old navy ad blogs about it within the site…she’s connected to her older brother (20’s) and in turn, a few of his friends (also 20’s)…they use the 1st degree connection to the viewer to contact the teen’s girlfriend and solicit her for sex, using the ‘funny ad’ as a social bridge. next thing you know, we’re all reading about her on http://www.mycrimespace.com, and old navy is pulling the campaign and pointing fingers at myspace…

Deirdré Straughan

Re. micro-celebrities generating buzz, I’ve just seen this in a small, local way with my daughter – see http://www.fotolog.com/rossella/?pid=12660897 for a series of photos she posted on Fotolog of a “private” birthday party she and a friend had at a local disco (we live in Italy). “sBarbie” started out as an in-joke between her and her friend, but the t-shirts they had made created buzz at the disco and beyond – now everyone wants one. A rival disco then asked Ross to photograph a “fashion show” event and to bring in a posse of friends – for free – and this time he paid for the t-shirts (see http://www.fotolog.com/rossella/?pid=12918474). People were begging for the shirts, of which there were only 8, but many others paid to join the party at the disco. The disco owner astutely exploited a micro local celebrity who had started a mini-trend (while Ross got a free party and her first “professional” photo credit).

Markus

Sounds to complicated, you would need a staff of several hundred sales people, why not slap up adsense and have no staff?

At the end of the day no amount of tricks is going to increase the CPM that myspace can charge for their site. If people could design backwords systems like myspace where it takes 10 pageviews to read a message everyone would crank out useless pages and stuff them full of advertising.

What myspace is going to have to start using the site as a platform to drive traffic to other services or things like video with ads from where they can get huge CPM’s. $40/cpm for video vs 5 cents/CPM they currently get on average.

Robert Young

Eric,

The early days of MySpace in the LA music scene (which, like you, I followed avidly at the time) is, of course, no longer the MySpace of today. The vast majority of MySpacers now are pretty much the mainstream crowd… the same ones that consume music, films/TV, athletes and other media products featuring those who have “sold out” to the major labels, Hollywood, and sponsors of all types.

While I completely understand your point, and emphatize with your desire for artistic integrity and purity, I am quite confident that giving MySpacers an opportunity to “sell out” to Madison Ave will actually be considered incredibly cool by most of them. As you pointed out, narcissism is a key motivator in this day and age… and from a marketer’s perpective, a potential goldmine.

Though we disagree, I’d like to thank you for your valuable thoughts nonetheless.

Andrew

Scott, interesting concept in theory, but in practice it would never work. In addition to the negativity associated with “selling out”, after the initial excitement of seeing a friend in an ad wears off (after a few views), people will become irritated at familiar faces trying to push products on them.

I think contextual ads would work fine in a social network – MySpace was so poorly designed, however, so I’m sure they couldn’t calculate any decent context off a page.

zhonghuarising

I’ve seen firsthand what happens when an entity tries to “purchase” credibility or allegiance through an online community leader. The backlash was worse than anyone anticipated… so I really don’t think that’s the way to go.

Om Malik

Mr. Kaiser,

thanks for the correction – i updated the post to reflect the corrections.

best

Eric Eldon

Purchasing the allegiance of popular people in communities to increase trust in a brand? For any community that believes trust needs to be earned and not bought, this idea will backfire. “Micro-celebrities” risk hurting their own credibility by being co-opted by corporate advertising.

The irony of the MySpace example? MySpace was built on the indy rock scene in LA, where “selling out” for many of these bands is the surest path to killing the fan base. In fact, MySpace’s growth was in part because these bands used the network to circumvent selling out. Well, maybe this form of advertising would help these communities figure out who the sell-outs are before they get too much respect?

If the idea here is to buy thought leaders who can maximize impact on consumers, then wouldn’t another parallel be the idea that a company could purchase a leading journalist or blogger? I’m thinking Mark Cuban’s forthcoming finance blog here — controversial, to say the least.

Or another parallel: companies could buy politicians to increase their, ahem, influence. I’m taking that idea to the bank.

All that said, this idea could be a hit with communities where wealth, fame-by-any-means and other materialistic forms of social status rule (a large and wealthy cross-section of social netwokers, if not damn near everybody in this day and age).

rodrigo

In a sense this has already been happening. Do you remember the dynamic trailer for the wedding crashers that allowed users to upload photos that were then super-imposed on the bodies of the main stars complete w/ moving lips? There’s going to be lots more of this kind of thing and myspace is an ideal platform for this kind of thing. Some of these will work but some are almost certainly going to backfire painfully.

Ed Batista

Very thought-provoking, Robert. From some further thoughts at http://attentiontrust.org/node/303:

This has a number of implications for attention and raises some interesting questions. Users’ attention data will be essential in determining who qualifies as a “micro-celebrity” from an individual user’s perspective. That same attention data will also determine what products and services are of interest to that particular user and whether a particular “micro-celebrity” is a good fit with a particular brand.

The whole concept is entirely driven by our attention data–and who owns/controls/manages/has access to our data? Young’s post speaks to marketers and to social network operators (who “own the platform[s] with all the user data”), but it doesn’t really speak to us as individuals, and I think that’s short-sighted.

We all participate in multiple social networks, and the depth of our involvement with any given network varies over time. Rather than look only to the social network operator as the source of user data, marketers should also look to the users themselves. I realize that we’ve just begun building the infrastructure that will allow us as individuals to maintain our attention data across sites, services and platforms. But “micro-campaigns” will be much more effective if they’re based on attention data from a broad range of sources–which will require putting the individual user, not a given social network, at the center of the equation.

Ed Batista
Executive Director, AttentionTrust

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