Monetizing the Social Networks

The social network I use most frequently is LinkedIn. It’s a perfect match for what I need and provides a great way to keep track of, and in touch with, all the people I know. I’m far from a power user — there are people with tens of thousands of contacts — but I’m connected with over 100 people in my personal network.

I wonder if anyone else would be interested in it?

I’m not thinking about selling my friends and associates in a cold-hearted capitalistic sense. But as I look through this list of people, I realize that the majority are marketing and advertising professionals, several of whom work at big agencies and brands. Many of them speak at events and write blogs. I’ve assembled a fairly valuable group of people, particularly if you have a product that appeals to marketers.

My network is only one of thousands, on LinkedIn and scores of other social networks. Each network has been crafted by an individual, and many focus on some particular interest or demographic. Each is an asset that has been created by an individual and enabled by a technology provider.

The question that social networks should consider, then, is whether they should allow their users to monetize their networks. Should LinkedIn set up a system by which I could get paid to advertise a product to my social network? Ads already show up on these pages, but they aren’t necessarily targeted in any particular way, and I certainly don’t get any of the revenue they generate.

There’s an aspect of this approach that smacks of multilevel marketing. The idea that I may invite you to join my network solely so I can make some money off you not only makes people uncomfortable, but also may inhibit someone from joining my network. Who wants more ads, right?

We’re starting to see a whole new crop of networks starting to spring up around us. And they’re being built from the ground up by people not necessarily looking to create sites that can share advertising, but a group of interconnected nodes that have something in common.

Advertising has always relied on networks to build efficiencies in reach and frequency — and in abilities. If I had to pick the single most important thing the IAB ever did, it was establishing standard ad sizes. When they did this, a network of sites could simply adopt the standard and suddenly the one rich media ad you slaved over could be placed on a hundred sites instead of one. Similarly, any retargeting technology that allows the advertiser to send multiple messages to a single consumer as he visits different sites is something that could only happen within a network.

This new breed of bottom-up networks represents an entirely new opportunity for advertisers, but we have to think a bit differently. Rather than view a network as a collection of sites that have been constructed for our use, we need to think about a network as a collection of people who have assembled in our presence.

The challenge remains, though, of how an advertiser can effectively target these new networks. This will be a significant source of discussion in the coming months, as companies and brands get serious about figuring out ways to make social network advertising effective and profitable. There are at least three approaches that will be explored.

Making It Personal

This approach is probably the most unlikely, but you can imagine a smaller network trying it. The publisher gives people the opportunity to market directly to their social networks, getting either a fee for the service or (more likely) paid on actions. Under this model, you would log in to your social network and see a list of advertisers who are willing to offer you some amount of reward if you send a message to your contacts. You choose one you believe is relevant and send it along. If someone clicks or buys, you get paid.

Emergent Ad Networks

Every person on a social network is connected to a group of people. That network can be valued based on its size, its activity, and (potentially) the type of people in it. The sales team can find these networks using analytics software and can sell inventory on them. The cost of the inventory can be set based on that value equation, and packages of variously valued networks could be offered as well.

New Targeting Technology

As more applications are loaded onto social networks and the amount of time that people spend on social networks continues to grow, the amount of data we know about people grows. Plus, there’s a large, new set of data about people’s interactions. As this data becomes more available, we may have the opportunity to target and retarget not only based on people’s interests but also on the communities that they live in.

Whichever direction we see this development, we can be reasonably sure that the increasing importance of and traffic to social networks will launch new approaches to advertising. Hopefully, this will take advantage not only of people’s attention but also of the unique community assets they’re building.

Meet Gary at SES San Jose, August 18-22 at San Jose Convention Center.