One of the most interesting changes that is effecting the social networks market is due to some multinationals that have altered the classic concept of advertising with a series of marketing strategies.

In the landscape of social networks, the monetization model is currently well-defined, and the main elements are:
• Advertising
• Sponsorship
• Partnership
• Micropayments
• Subscriptions to premium services

Even though the phenomenon of social networks has reached global dimensions, the leading companies in the field, Facebook and Myspace are struggling to reach turnover objectives. In particular, Myspace, has failed to achieve the 1 billion dollar turnover for 2008, although in 2006 it signed a three-year arrangement with Google for a total of 900 million dollars.

Advertising, which is currently the main source of income for almost all social networks, still fails to have a strong enough impact: on average only 0.04% of users click on advertisements. Motivations lie in the fact that the average user of a social network is highly fidelized and rarely attracted by advertising in a world where the purpose is to expand one’s network of relationships. Just think that to date, the best returns in terms of records are obtained through word of mouth and buzz marketing, rather than, for example, the visibility obtained through SEO.

Economic returns below expectations, however, do not remove the big advertisers and sponsors from social networks, since it seems clear that in the near future advertising revenues for traditional media will fall for the benefit of the network of networks. Illuminating, in this regard, were the words of the Australian tycoon Rupert Murdoch, who in 2005 bought Myspace for 580 million dollars. According to Murdoch, the Social Network user database, “self targeted”, thanks to the meticulous construction of profiles, would in the following years become an indispensable asset for the realization of viral marketing campaigns. .

One of the first notions that large corporations are beginning to grasp is that the concept of marketing that made it master in the web 1.0 is not entirely suitable for social networks; portals count on the dynamism of its contents for their success, also need to develop dynamic advertising.

Currently, Facebook has about 150 commercial agreements with companies like Red Bull, Victoria Secrets, Mazda, BMW etc.
One of the most interesting instruments made available to these companies are the “fans page“. The idea of sponsored profile is simple but highly successful as it fully complies with Web 2.0 philosophy. The company appears not as an advertiser, but as a community member with whom you can interact. The results generated by these campaigns are excellent. The CTR is in fact about 10 times higher than average.

One area that will be followed with great interest by social networks, is the virtualization of social objects: products that can catalyse the attention and become a topic of discussion, and that the user can buy for himself or give to other members of the network .
Through micropayment forms, it is possible, for example, to send a virtual cake to a user of the network on his birthday. The Facebook “gifts” turnover was estimated at 15 million dollars annually.

One of the first multinationals to believe in this form of marketing was Heineken, which closed a deal with Facebook that allows users to get a virtual bottle of Premium Light.

Another valid means of monetization for a social network, is to provide its users tools that enable them to develop applications that can be reused on the portal, for example browser games and games of various kinds. The development of applications not only increases the volume of overall traffic in the portal, but it can also be used as a powerful marketing weapon. The development of a successful application where a particular brand appears, certainly grabs the attention of advertisers.

A pioneer in this sector was Facebook with its Graffiti application, and which in collaboration with brands like BMW and Mazda, launched a contest with prizes that gave users the ability to customize the design of certain models of cars.

We at Ciaopeople are moving in this direction, immediately after the official release of version 1.0 of our social network, many will be devoting their energy to the development and distribution of the tools that will enable our users to create applications on the integrated portal.

Programs, variety in content and news, and never failing to remember that the at the heart of Ciaopeople are the users - these are what we believe to be our winning policies.

Social networks are destined to become a sort of “social containers“, macrocomunities where the pivot remains the interaction between users, but where there are also areas dedicated to a new form of entertainment, produced by users for users.

U.S. media claim that one of the reasons for the unexpected victory of Barack Obama in the primary race for the White House can be attributed to the incredible amount of work that the staff of the presidential candidate carried out on the larger Social Networks; the future always runs faster on the network, and when we talk about a sector, one relating to the Internet, that in the last 8 years has seen an increase of 350% world-wide, with peaks of 900% in nations like Brazil, it is to be expected that the future is very near.

Ferdinando Cirillo
Webmarketing Manager

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