“Can I make money from social networks?”
As an industry, print is beginning to understand the importance of social networks. Many companies are starting to dabble in the area, trying to understand how they can fit it into their business.
Personally, I have been involved in this space for some time, choosing to complete my Masters of Management Science on the topic. The reason I became interested in social networks is the same reason that many are still skeptical about them; I wanted to identify their use and, more importantly, their value.
What is a social network and how did this all start?
Social networks are a place for people to connect and display those connections – Facebook, LinkedIn and Twitter are examples. I have yet to come in contact with a person who doesn’t know at least one of those three sites. But why is it that it’s suddenly not enough to have your friends in a black book? Why is this a public experience?
Conceptually, there is one way to understand how this happened. First, there is the bandwagon effect. If you have joined a network recently, you will have noticed that all it takes is one click for the network to send a message to your entire email contact list to be invited to join your network. This had a big impact on me joining these sites. From a network design perspective, it’s really brilliant. I was getting several messages per day telling me that my friends wanted me to join the network. My friends, of course, weren’t sending the message themselves every day, but it felt personal enough that I felt compelled to join. Then the minute I joined, all of my contacts were emailed, and then theirs and then theirs — and there we have exponential growth.
How do these social networks keep getting bigger?
The second the bandwagon starts rolling, we get network externalities, which means that as the number of people who join these networks increases so does their value. It’s likely that the more of your friends you can find online, the better the experience is for you.
This is in part why displaying the network to everyone on the site is so important. It allows users to identify friends of friends to grow their network. If everyone’s network were hidden (which is increasingly the case on sites like Facebook), growing your network would be difficult. The network externalities and the exponential growth lead to statistics like Facebook being the second most visited site on the Internet, just after Google (alexa.com).
But what is the value?
There are many ways in which you can conceptualize the value of social networking sites. In order to do this, you have to examine them from a particular perspective. I will explore them from two perspectives: the individual and the company. There are some commonalities between the two.
First, the value for both companies and individuals is embedded in the connection. Second, the value is some sort of capital. Let us explore the individual perspective to begin with.
The value of social networking (interestingly both on and offline) for the individual can be seen as social capital. There are three primary forms of capital: economic (money), human (employees and their skills) and social capital (resources from relationships).
In the late 90s, there was a lot of concern for social capital decreasing in North America as articulated by Robert Putnam in his book, Bowling Alone. We were spending less time connecting with one another. Now, whether having online friends is actually connecting is another topic in and of itself.
Generally, we can build up an online network, then call upon to “withdraw” resources. For example, in a professional network like LinkedIn, you can find new business opportunities; on Facebook, you can ask your friends which company catered their wedding and get feedback quite quickly. Interestingly, the most valuable type of social capital is what is called bridging social capital existing between weakly tied individuals. Knowing friends of friends expands your pool of experience since it is likely that you and your friends and family have similar experiences. So to tie it up in a bow, individuals can use social networks to harvest their contacts for personal opportunities.
Let us now understand the value from a company perspective. First, I would argue that both perspectives should be important to today’s business owners and managers. Often, individuals use their network for company good. For example, you can post a question you may have about a product your company is buying — let’s say a photocopier — and you will get responses from trusted contacts that will be more valuable than a vendor search. Companies that are restricting the use of social networking sites are limiting this benefit, not to mention they are not placing trust in their employees, which can cause a backlash.
The other side of this coin is, of course, that if you sell photocopiers, you want to make sure that you are participating in this space to be able to join that conversation. This would allow you to change your involvement into economic capital (by way of gaining customers). This is really the tricky part. One of the most prominent characteristics of Web 2.0 is that the content is user generated. Simply trying to push product information is not particularly effective. We have to reposition the way we think about selling in this space…and like much of the shift in sales generally, this is all about relationships.
Why don’t we come up with an action plan?
First, you want to be present in the space as a company. One way in which to do this is to have a Facebook page, for example. Your presence can be a reputation builder as people start to acknowledge your presence in their own networks (by becoming your fans). User reviews are very valuable, even negative ones! They build trust in your brand.
The second step, is trying to change these fans into economic capital (customers). Here is where a lot of companies are struggling now. This is in part due to the fact that this space is new. We are all out there looking and hoping for a Pazzaz Printing miracle, where a video idea turns viral. I would suggest that this is a little bit like trying to make money off of a lottery ticket. I buy them, but I wouldn’t place my faith in them enough to think they will become my income. As such, we need a more promising plan.
In the coming months, I will share some success stories and case studies with you. For now, here is a task: reposition how you think about a social network and try to think of ways you can be a resource for your customers. We know that individuals seek to use resources from the network…you need to be one of them. This means pointing your customers to new and relevant information that will help them in some way. For example, update your status to tell them about a great article. Why don’t I start the trend and recommend some good reads: Inbound Marketing by Halligan and Shah and Six Pixels of Separation by Mitch Joel.