Why Not To Start Your Own Social Network

I’ve had 2 calls in the last week from businesses looking to build their own Social Network and over the past several months, similar inquiries. When I ask them if they have about $40 Million to invest in getting it going I either get dead silence or a nervous chuckle. My advice is “forget it and invest elsewhere.”

The space is well established now. The leaders are Facebook and NetLog followed by MySpace and MyYearbook among others. Perception-wise Facebook is leading internationally. The others vary by country (these come from a simple but good site for this data.)

One might and I emphasize “might” succeed with a micro-Social Networking site that caters to a specific ethnic, cultural or special interest group. But often those are well supported by services like Ning. Of course it’s one thing to build it, then you need to attract people. Even in ethnic/cultural group terms, they’ve tended to have found their piece of turf inside Facebook or other services. For clubs and organizations there’s services like Qlubb – well, there’s over 60 of them out there. In the business world it’s a fight now between LinkedIn and FastPitch.

Only about 5% of people spend more than a few hours a week inside a Social Network and less than 3% belong to more than one Social Network (our research, March 2009). Once they have established a presence and entered their personal data and made connections, it’s very hard to move them. Porting the data over is hard enough to do, but porting their connections? Almost impossible.

Venture Capital companies are not financing Social Networks. Raising debt to finance them is personal financial suicide. And quite frankly, you’ll need at least $40 Million to build a presence. If you can figure out a very compelling reason to switch for a person (porting over data and friends included) then you might have something. Over time, opportunities might present themselves. The one sector we see some opportunity through our research is better ethnic/cultural focused Social Networks in countries like America, Canada, England and Europe. Possibly. But there are services for those markets (BlackPlanet and Migente are two) and the revenue opportunities may be limited based on demographics and adoption.

Our advice then is, work within a Social Network to build community if that’s your goal (here’s an example). For big brands, I’ve yet to see a sustainable model – the reality is, once the brand has accomplished it’s marketing objective, are they really going to want to spend the money required to maintain that presence? Not likely.

Expectation, Anticipation & Brand Value in Social Media

In the pre-Social Web days, a brand and it’s components and assets could be fairly well managed. The company determined the design elements, packaging, promotion, channels of communication and shaped the message. In large part a company could also control the message. Feedback to assess effectiveness of the marketing was via focus groups, various forms of surveys and sales.

Ultimately however, the consumer shaped the brand. But there were controls in place for the brand owner to shape the perceptions and expectations of the brand. Not anymore. Once a brand decides to engage actively in Social Media, a conversation begins. This means a two-way, far less controllable medium. This situation also means more work to manage the brand. As social media usage increases brands big and small, will have no choice but to engage. The days of didactic one-way advertising only are fading. Some claim brands are dying altogether.

This puts some inherent new issues for brand values and management on the  brand owner. I see this as two key areas;

1. Expectation: By engaging in a conversation (whether I’m conversing or just reading/viewing) as a consumer of a brand, the brand is now setting a certain set of expectations.

2. Anticipation: Now the brand ha engaged with the consumer, a certain anticipation about what will happen with the brand in the future is set.

These are two huge considerations for a brand looking to engage in Social Media. But they have little choice as social media usage grows and consumers want to engage the brand.

(Author: Giles Crouch, Principal)