Earlier this month, about 100 C-level execs from portals, agencies, software firms and major brands crowded into a conference room at the law offices of Morrison & Foerster (MoFo) in New York City. They had come to hear a panel on “the year’s most talked about technology trend,” according to the program: social networking sites.
“Talked about,” is the key phrase here; social networking software has so far generated enormous buzz but not much revenue. It’s certainly not for lack of trying. A number of recent deals and initiatives reveal an Internet industry eager to work with these sites (and their massive user bases).
Today alone brought two big deals in the space: InterActive Corp. announced it had acquired business networking site ZeroDegrees; and Tribe.net, a networking site with a classifieds model, partnered with CareerBuilder.com to give consumers access to job listings. Tribe.net’s move echoes Monster’s recent decision to offer networking services to job seekers. Meanwhile, Lycos has transformed itself into a social networking portal, and Yahoo CEO Terry Semel revealed he is closely watching Friendster and its ilk for any sign of a business model.
So is there one?
The panelists at MoFo’s event — comprised of CEOs representing Ryze, LinkedIn, Tribe.net and other top social networking sites — held forth for over an hour on the business potential of the social networking software. The ideas were many and various, ranging from job resources of the sort announced today to premium business networking to ad-supported models and even branded “affinity networks.”
The latter two hold the most interest for marketers. Ads already have a strong presence on many social networking sites, which makes sense considering their stunning viral growth. As of this writing, AT&T Wireless is running ads on Friendster and a rotation of half-page ads for DirectTV, Netflix and a new film, “Club Dred,” are cycling on Friendster clone Myspace.com’s home page.
Going a step beyond pure advertising, a handful of networking sites are developing branding partnerships or even completely branded networks that leverage the affinity-based “culture” of their sites for marketing purposes. This notion calls to mind some of the efforts launched by wireless community Upoc and even the political organizational resources Meetup.com has brought to the campaigns of Howard Dean and John Kerry.
There are a few examples out there. Adrian Scott, CEO of business networking site Ryze.com, says he’s talked with several companies eager to tap the affinity groups that comprise social networks.
“We’ve been approached by companies of different sizes that want to leverage the connection this kind of interaction creates,” he said.
Scott won’t name names, since he says the relationships are in their early stages, but he’s adamant that within a matter of months Ryze will announce branding initiatives with major technology and consumer products companies. Some of these packages will be under the Ryze umbrella, while others involve licensing the software to an agency or company that would then create a branded version of it for customers and fans.
“The great thing from a brand marketer’s perspective is that if you can tie into the viral growth of social networking, you’ll have members’ bringing in new members and spreading the word of the brand,” he said.
Six-month-old social network MySpace.com has its own marketing-oriented plans. Owned by eUniverse and operated out of L.A., MySpace has enabled several record labels and other entertainment brands to create affinity groups on its site. The company struck a deal with Interscope Records to feature the label’s top talent.
“We’re featuring their bands in our music area. Users are forming around those bands, commenting on them and stuff like that,” Chris DeWolfe, CEO of MySpace, said. “It’s part of a package. We like doing deals with advertisers where they’re able to offer an interesting product that we think will be of value to our users. In this case, they get to hear the music of a new group.”
The site will also create an affinity group on its site for Sony Pictures, featuring sweepstakes and some original interviews.
The Limits of “Affinity”
Of course, companies wishing to tie into existing social networking sites, or thinking of launching their own, will likely face challenges. With social networks multiplying at a dizzying rate, one has to wonder how many social networking sites, or affinity groups within sites, a Web user can reasonably be expected to join. Some in the blog world have dubbed the condition “social networking fatigue.”
Critics of would-be viral marketers also say networking sites face the same basic problem that has always plagued affinity-based marketing. Viral awareness tends to happen on its own, because of the worthiness of a product or brand rather than any special effort on the part of a product’s marketers. Every social network has a Mac group, for example, formed without the knowledge of Apple’s branding folks.
“At times when [viral marketing] happens, it’s spontaneous. Apple doesn’t have to do anything,” said Gary Stein, a senior analyst with Jupiter Research, which shares a parent company with this publication.
There are exceptions, such as 2002’s wildly popular BMWFilms, but they remain exceptions — and usually expensive ones at that. The key obstacle to social networking sites’ ambitions to rally their users on behalf of brand partners is simply that users aren’t interested.
“Sometimes users resent corporate intrusion. They’re not looking for a branding experience,” said Stein. “I can see the attraction for the brands. All these people are in one spot, they’re connected to each other, and they’re all in a mindset of receptiveness. I just haven’t heard anyone come up with a very elegant way of doing it.”
While networking sites and eager brand marketers gradually build relationships, bigger companies, like Yahoo, are watching carefully from the wings. Some have criticized social networking sites for failing to take into account these behemoths, which could pull the rug out from under their feet. However, the keen interest of Yahoo’s Semel may not be a bad thing, according to Stein, especially if they can’t find a way to monetize their huge user base.
“Maybe this is the exit strategy for the social networking guys,” said Stein. “Yahoo could buy [a social networking site], launch it under Yahoo Groups, and leave the connections intact.”
In fact, Barry Diller’s InterActive Corp. has already swooped in to acquire ZeroDegrees, without its having to demonstrate a profitable business model.
Jupiter’s Stein points out that this fate is certainly better than what has befallen certain other crazes launched by Web technology: “It’s not as bad, but this reminds me of seven months ago when marketers were trying to figure out how they could take advantage of ‘Flash Mobs.’ By the time they figured it out, it was over.”
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