InterneXperts

At InterneXperts, we’ve recently come across two interesting companies which reflect an emerging trend within the social networking space. While early social networking sites focused on massing, a large audience (e.g., think facebook, MySpace, etc), the new iteration of social network sites are frequently specialized niche networks, focusing on specific issues, interests and activities. Although their audiences tend to be order of magnitude smaller, their users are very hands-on and highly-engaged. These social network capabilities can either be standalone sites or integrated into a popular, existing destination site.

One thing to keep in mind is that social networks are just the latest embodiment of a function that has always existed on the Internet: Whether they are usenet user groups, blogs, bulletin boards, newsletter lists, forums, or social networks, they represent a collection of users who share a specific interest or avocation. The truisim that “everyone is passionate about something” lives. There are more than 40 million such groups on the Internet today. The challenge is that these groups are highly fragmented; making it very difficult and inefficient for Internet advertising purposes. KickApps and Ning attempt to address this issue by offering a platform on which moderators can construct their own networks, and then monetizing that aggregated inventory that spans the social networks on their platform.

Now, we’re seeing the emergence of the social network intermediary. Essentially, these are entities that seek to identify and link all the fragmented user groups for specific constituencies. Similar to the manner in which Federated Media aggregated blogs into an ad network, these new intermediaries strive to build relationships with the group leaders, and then help those moderators either directly or indirectly monetize their groups. The first example is a European-based startup, whose founders come out of the online community development. We’re under a NDA but hope to share more specifics in a follow up post. Essentially, their goal is to provide a range of value-added services for these group moderators.

The second startup is an interesting Cambridge-based startup called WEGO Health, backed by General Catalyst. They are identifying/recruiting health experts in a variety of health information categories. Frequently, these experts are responsible for forums, groups, newsletters, social networks within their specific area of interest. Over time, WEGO Health will likely want to offer tools and resources that contribute to the success of these consumer health advocates. By identifying and linking these experts, WEGO Health hopes to extend the health marketer’s branding message, in time, to these distributed and fragmented groups: This would offer a pharmaceutical or health provider marketer efficient access to a very engaged, social media audience on a scale of reach and frequency that is not currently available.

While this is a very early-stage market, the business requirement for aggregating niche community groups and networks remains clear: Brand advertisers need reach, frequency and efficient access to an engaged audience for their campaigns.

InterneXperts, as always, welcomes your feedback and opinion.

Thanks!

At InterneXperts, we’re frequently asked by our clients about advertising opportunities on social networks, particularly facebook, and to a lesser extent, MySpace. There’s a great article in March 18, 2008 edition of The Economist, called “Online Social Networks – Everywhere and nowhere“. The article echoes the increasing doubts the industry is having about whether these large social networks can be monetized effectively in a broad scale. We share these doubts and generally steer our clients away from these high-reach, social networks.

One of the most promising Internet trends in the past five years has been the increasing focus on peer interactions and the increasing ease at which loosely-coupled social, political, and economic interests and be identified and linked. This is one of the fundamental benefits that Internet technologies offer. But somewhere along the line, we became fixated with the current notion of a social network. Since many brand advertisers require mass-market audiences (i.e. “reach”) to make effective use of ad budgets, these two concepts were linked and just assumed to be the next great business opportunity. From our perspective, there are many ways to enable people and consumers to share information and opinions among like-minded peers. We are only in the first of many product cycle iterations of social network concepts and very early in the learning-curve of how to effect social interactions in a compelling way, much less figuring out how to monetize these interactions. Early experiments frequently fail, but our learnings from these failures is critical to ultimate success.

We are beginning to conclude that these large-scale generic social networks are not effective for most advertisers. These networks are generally focused on social interaction with limited economic intent. It is difficult for advertisers to inject themselves into the discourse without appearing self-serving and intrusive.

Some opportunities are emerging for advertisers, though, on social networks. These networks reflect the next iteration of social network models. Typically, they are more specialized, niche-focused with passionate, active participants. Successful examples of these social networks are often not standalone, but well-integrated into an existing brand, or “mid-tail” vertical website. These sites may not offer the reach of a facebook or MySpace, but the audience is highly relevant and engaged. A good example in the US is with the DIY cable network (part of the Scripps Networks media conglomerate), which focuses on home improvement projects. They have successfully incorporated social network capabiliites (using KickApps’ system) and have created an imaginative and highly-interactive forum for their viewers to share and learn from each other’s home improvement projects. It’s also been a commercial success as they have successfully sold ad inventory within the social network area, at a premium CPM rate.

The adage that “everyone is passionate about something” holds true for these niche, social networks: They may suffer from limited audience reach, but they can offer advertisers a high-quality and engaged audience. So, while we share The Economist’s generally dim view of the current generation of social networks, InterneXperts remains more optimistic about the commerical opportunities for future iterations of the social networking concept.

We welcome your comments and ideas. For more information about InterneXperts and our Internet Marketing Strategy and Management Services, please visit us at http://www.internexperts.com/