Social networks represent the largest catchment areas that every company would like to have at its disposal to achieve the highest profits possible. In this post we will review some of the history and monetization tools starting with the two most powerful social networks, MySpace and Facebook.
The monetization of social networking is a topic of current interest, considering the high number of social platforms that has developed over the last two years and especially in view of exponential growth of users.
The question that social networks most likely had to answer before venturing into the difficult task of achieving a profit, had to have been: “how can the average user be involved in the monetization process?”
The key words are “average user”, as they define a series of characteristics and a certain behavioural types that must be taken into account when targeting a less social and more commercial approach.
In the beginning , the average user is lured into the social network by his desire to socialize, interact with others, play games, listen to music, upload videos, photos and so on. Entertainment is the key feature of a social network.
Consequently, the commercial objective, which would incorporate a precise target audience for advertising is completely lacking.
It follows that the first action to take for social networks, and many have done so already, is to “educate” the user. So how, then is it possible to “force” the user to be more involved in the business of social networking?
An interesting response in this regard was given by Paul Martecchini, director of Solutions For Meraki Networks Inc., in an article published on the site iMedia Connection: “Whenever you need to accomplish something, find out how each application can be used productively. Ask yourself, “if I had no alternative, how would I use social networking to complete a project.

One of the starting points of a social network is the range of applications that are continuously implemented to provide the user with an experience that is not solely entertainment: “They (social networks) do not exist for the sole purpose of maintaining contacts; they also provide the means and tools to do a better job, ” Martecchini adds.

Much has been written on the possible monetization methods of social networks. For sake of consistency and considering that we began this entry by referring to the user experience, we would like to mention the GigaOm blog posts in which Robert Young, in view of the social network situation of 2007, offered some tips on how to make a profit from social platforms.

“… It is vital that any innovation in brand communication includes the explicit and active participation of those people within the process itself. In other words, the people themselves are the platforms, capable of message amplification and network effects, and they should be treated as brand re-communicators, not just end-receivers. So do not just advertise for them, advertise with and through them“.
Among the various monetization strategies, Young suggested that the user be actively engaged in the advertising process. What the author stressed in the post is that the user’s role should not be passive, with respect to advertising, but rather contribute to it.

Young’s abilities as a communicator are surely recognized and are based on the grapevine process which is an essential element in the development of brand diffusion.
The user’s experience and involvement are fundamental issues in the course of social network monetization and easy as that may seem, in reality it is not, as demonstrated by the examples of the two largest social networks of the moment, MySpace and Facebook.

We analysed the business models of both social networks starting with the study of two different slide presentations on case studies. The first, realized by Summit Snap 2.0 was presented on MySpace, the second, a careful analysis of the Facebook business model was realized by the FaberNovel Agency.
The first slide summarizes the main issues addressed during the Snap Summit 2.0 held last March 25 in San Francisco, where discussion focussed on: “the business of social and design applications: how to attract users and keep them engaged, how to monetize and advertise, and what to watch out for in the future ” .
open
One of the chief aspects for My Space, described throughout the presentation is a high accessibility achieved through OpenSocial, the portability ‘through which developers can use more of their time to create a remarkable product rather than rebuild for each social network, with particular attention to privacy control guaranteeing a safe social network.

The part of this presentation which was particularly significant for our analysis on social network monetization concerns the hyper-targeted product overview, a tool used by MySpace to direct advertising to the right audience.

Users have a very important role in this ‘targeting’ strategy, because thanks to the opportunities they have for self-expression, it is easier to classify them based on tastes and interests, categorize them according to passions and therefore correlate them to a specific target.

The MySpace monetization activity is therefore very obvious: hyper-targeting sharply contrasts with traditional models, since the freely offered information in the personal profiles of users, offer merchants a much more authentic, powerful and direct target.

The case study on Facebook conducted by FaberNovel emphasizes the importance of the Facebook Platform for the social network, the opening of its own platform to developers of other companies considerably increased their applications and thus attracted a larger number of users. But as pointed out in the analysis, developers who wish to design an application for the Facebook platform must have a certain kind of experience that increases the degree of difficulty.

The FaberNovel case study stresses three fundamental aspects of the monetization of Facebook:
– Display advertising, managed in outsourcing by Microsoft with a CPM of 0,30 euro
– Sponsorship with over 150 industries
– Gifts, a limited edition of 1 dollar gifts.
Advertisers take advantage of Microsoft AdCenter system for filtering and targeting users who can see the ads through flayers located in the upper left corner of the Facebook page.
This monetization system, however, seems to be not very effective as shown by the percentage of Clickthrough rates equal to 0.04%, far lower than MySpace at 0.10%.
Both business models adopted by the two social networks in question focus on the creation of applications that engage and are able to categorize the user for targeting and on opening their platforms to the entire web, with some difficulty, however, particularly for Facebook.
In this regard, the analysis of Jeremy Liew of Lightspeed Venture Partners is very interesting and proposes two solutions to increase business growth of social networks.
– Become great: design multiple applications, multiple platforms
– Become expensive: devise specific categories (movies, travel, health, shopping), standard advertising units referred to a targeted audience.
The monetization hypotheses of social networks albeit numerous, seem to point in two well-defined directions: the opening of the platforms to the entire network and targeting the public, creating a series of applications that engage users in the first person. The argument is still subject to the constant evolution of the sphere of social networking and the developments in which it is deeply involved at this time.

Simona Fiore
Qbr Magazine Staff

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