Revenue Models for Social Networks
Mike Palacios, Managing Director, Havoc Digital
The Philippines first-ever online promo on a social network: Sprite Magpakatotoo Ka on the Net (2000). Sprite, through McCann Erickson, contacted Pinoy Exchange to advertise this promo: “Post your Magpakatotoo Ka Moments for a Chance to Win a Palm Pilot III”.
Social networks are redefining the traditional “portal” phenomenon. Social networks are now all about the person. YOU. YOUR friends. YOUR photos. That party YOU attended last night. YOU, YOU, YOU. And we, Pinoys, are jumping in. The most active web pinoys are consuming social media at an unprecendented rate. This social network growth MUST BE harnessed.
The advantage of this SN boom: Exponential grown in user data and available ad inventory, more volume reduces churn and makes the social network experience more viral. The disadvantage: Rapid growth leads to infrastructure problems, monetization issues to support the network, and decentralized management. For example, Friendster and Multiply are dominated by the pinoy market, even though the original creators are in the US.
The idea is to take advantage of the market, and cater to where the market is. i.e. Multiply tied up with ABSCBN. Friendster recently appointed a CEO in the region.
The most commonly sold on a CPV or CPM basis is Display Advertising. The key selling point is the fact that social networks know a lot about their users so they can deliver targeted ads (earlier, Hans also discussed about Facebook’s ad network.)
Ad positioning greatly affects CTR exponentially. i.e. Facebook’s redesign shows better and more visible ad placements.
Mike discusses some of the ad gimicks being done in Friendster, like Nescafe’s clickclique “alien” campaign. (Cute!) Why did it work for Nescafe? Each profile who opted-in, each person who thought the aliens were cute, automatically submitted data. Nescafe got branding on tens of thousands of profiles.. and counting. (Much like all those cute and senseless applications that we waste sleepless nights on over at Facebook).
There are other alternative models for social networks / communities, like for gaming sites — some lets you to play for free but you get more functions and features if you have a premium paid account.
Another case study, Rexona on Friendster. Rexona created a virtual community where users redeemed promo codes to earn virtual world currency, which they can use to fill their own online rooms with cute little stuff of their choice.
The fundamentals of monetization is this: Online advertising = premium content + partnerships.
Social networking sites will find increased commercial utilization. SNs are well-positioned to execute commercial activities because of high traffic and behavioral targeting.
He discusses some of the myths in social networks:
“SNs have low CTRS.” — The largest variance of CTR comes from quality of creative, freq cap, ad relevance and positioning, not on whether it’s SN or not.
“All I’ll get is negative comments.” — It is possible to deplay a modertaed presence in a Social Network. Nescafe reviews all comments before approval.
He also sights some expectations from various sectors:
- Brands — redefine organizations to thrive within a social media ecosystem.
- Media Planners and Buyers — go beyond banner planning into platform planning.
- Creatives — use social networks as a palette for a client’s business objectives.
- Publishers — create an open space where partners and advertisers can play. Open up APIs. (Multiply still doesn’t have one.) Open as a platform for people to enhance their communities.
To conclude, Mike leaves this challenge: Ask not what a social network can do for you.. but what you can do on a social network!