I am working on some ideas for my course at Oxford University next week about Web 2.0 and user generated content .. And here is one ..
It is motivated by two articles:
Firstly, a business model for Web 2.0 is elusive .. Yes, we can talk about the advertising business model .. But that has not yet worked as the financial times argues in the article Web 2.0 fails to produce cash and secondly – this great article from the MIT technology review articulates the problem brilliantly ..
Synergies between advertisements and social networking / web 2.0 are yet to be found ..
As facebook found out much to it’s dismay with it’s Beacon program – that advertising on social networks is not easy .. and I summarise the problem from the MIT technology review article ..
Yes, sites have impressive user numbers ..
Ning has 267,787 sites, Bebo sees 22 million visitors a month, Club Penguin sees five million, LinkedIn gets nearly five million unique visits. Facebook saw 33.9 million unique U.S. visitors in January 2008, and MySpace saw nearly 72 million unique visitors in the same month.
However .. getting revenue is a problem .. although facebook is valued at $15 billion dollars, it is still likely to lose money and Google has been unable to monetise it’s $900 million investment in MySpace . CPMs on social networks are also a problem .. Facebook sets a minimum CPM of $0.15 for its “social ads,” and the MySpace banner ad rate stands at a CPM of less than $2.
The problem has four facets:
a) Unsuitable metrics – CPM may not be the best indicator of social network analysis
b) Attention(rather lack thereof)
c) Privacy and
These problems are well known and well discussed in the above article .. for instance – unlike with Google – users do not go to social networks with a specific intent. Hence they are not very receptive to advertisements and are in any case distracted by a wide variety of communication tools(such as microblogging). Privacy is also an issue as facebook found out recently and so is the content(i.e. user generated content may not be always suitable for advertising and it is necessary to have at least a moderation function – if not more for it)
Traditional approaches have been based on targeting but targeting alone is not enough since it hits only a small target but ignores the wider audience(long tail).
One idea I am exploring is as follows . It is based on the following concepts
a) Social networks by their nature can be segmented over the long tail – this idea is explored in the concept of the Long tail is chunky
b) The profile on social networks is one dimensional – it can be enhanced in many ways for instance by including social(relationship/network/social graph), behavioural(incorporating roles) and demographic profiling(traditional segmentation)
Such a rich/multidimensional/dynamic profile(I call it dynamic since it depends on social relationships and changes over time) – actually maps well over the segmented long tail. So, the end result would be still to advertise against the profile but such an advertisement will incorporate a lot more than the static profile .. it will include an element of the user’s digital footprint(hence their intent) which is dynamic
This still leaves the problem of metrics .. but mapping a rich, dynamic profile to a segmented long tail may lead to advertisements that may reflect the user’s social intent (just like Google captures the transactional intent) .. and hence provide higher revenues – and consequently a business model for Web 2.0 by making the advertisement model profitable