2 reasons most social networks aren’t successful and 3 things you can do about it
Although everyone has been amazed by the explosive power of social networks generally, many have been disappointed that their own foray hasn’t been successful. Moreover, even the most successful social networks with massive audiences have a hard time making money.
There are many reasons why this is so, but here are two:
The Problem of confirmation: While the successes are obvious, the failures are obscure. Everybody notices big successes like Facebook, LinkedIn, Twitter, etc., but there is little documentation of the many failures. Classmates.com has been around since the ‘90’s, and Yahoo! 360 was also an early entrant, while neither ever gained any traction. How many others? Who knows?
Low value audience: An impression on a social network can be worth as little as 1/20th the value of an impression on a top branded content site. While this is confusing for many, there are some good reasons for it:
– Eyeballs aren’t consumers: There is a reason that drug dealers hang out at rock concerts but not university libraries. Consumer value is derived not just from identity, but even more so from intention. While a woman might be a loving mother of three as well as an avid Metallica fan and an enthusiastic snowboarder, at the PTA meeting she’s focused on her kids and not her other interests.
– Intrusion: On sites with branded content, consumers understand that marketers are paying the freight. However, social networks are consumer driven and they resent intrusion (just ask Facebook!). People will accept ads in their TV, but don’t want advertisers breaking into their homes.
– Engagement: A media brand is valuable because people believe in it. Part of what advertisers are paying for is an association with that brand.
So while social networks are enormously powerful, basing a business in social media is far from a sure thing. There are three ways you can improve your odds:
Cluster targeting: Social media’s biggest successes started out in small communities. Facebook was initially limited to one university; MySpace became popular first in the incestual LA music scene. For a social network to be successful it first has to saturate one community before it can effectively spread to others (there are good mathematical reasons, but I won’t discuss them here).
Aggregation: By adopting open architecture and allowing people to keep their friends when they use competing social networks, you not only do your consumers a service you actually increase the value on your own network (again, I won’t go into the math).
Integration: By integrating social components into branded content, you get the best of both worlds. Audiences become more engaged and can add to the discussion, ad inventory increases and, best of all, advertisers will let you keep those high rates!
I’m sure others have ideas about this. I’d love to hear them!