Social Networking and User-Generated Content.

Five years ago, online content generated by individual web ‘surfers’ was seen as something done by the technically gifted – far-removed from mainstream online activity. Keeping a ‘blog’ was akin to being a computer coder, with the real benefits of the Internet being easy access to ‘official’ news sources and as an e-commerce portal. In recent years, we’ve seen an incredible boom in user-generated content. Wikipedia – for example – is a vast online encyclopedia written by thousands of global users. Even more recently, ‘social networking’ portals have become some of the most popular sites on the web, offering users a chance to connect with peers worldwide. Pearlfinders has naturally been tracking developments of companies at the forefront of this revolution; here we bring you our insights – and more importantly, those of the decision-makers we interview.

The Trend:

The boom in social networking has been quite simply unprecedented. Sites such as MySpace, Facebook and Bebo have now entered our every-day vocabulary, and are some of today’s most accessed sites on the Internet. By their very nature, social networking portals market themselves via word-of-mouth recommendation; users invite ‘friends’ or ‘buddies’ to connect with them directly. It’s not quite this simple however – Pearlfinders has been in contact with decision-makers who’ve given us insights into the key issues within the sector: –

We spoke to MySpace Senior Vice-President for International Operations, about the company’s plans to roll out local versions of the site in Latin America and Brazil (Pearlfinders US 05.01.07). He told us localization work for international expansion is key – users in different countries have diverse tastes when it comes to socializing online. As such, market research into local web browsing behavior is a key procedure prior to introducing the site in foreign markets. He told us most marketing at the company is handled in-house, as contrary to popular belief MySpace doesn’t have “exorbitant” money with which to outsource (the business doesn’t generate a huge amount of revenue). His advice for agencies is to very much focus on understanding “buzz marketing”, as well as showcase ROI for your fee.

Furthering our archive of intelligence on the international expansion plans of social networks, we’ve spoken to Facebook Vice-President Media Sales, who told us the company is looking to open a UK office to boost its international footprint (Pearlfinders UK 06.01.07). The decision-maker told us it really is a time of rapid growth for the company – it’s “working hard to reach out [to potential users] where appropriate”. We’re told the best course of action for agencies to introduce themselves to company decision-makers is to really get to know the sector by scheduling a presence at industry events, which reinforces our findings that an understanding of ‘traditional’ marcomms won’t necessarily translate to those within the social networking sector.

Industry analysts have often commented on the fact that social networking portals are not particularly cash-generative compared to their market value – News Corporation, for example, acquired MySpace for $580m, a huge valuation when you consider the business only turns over a fraction of this. Pearlfinders research has indicated that the major players are moving to address this. Facebook, for example, has been addressing this concern by introducing Marketplace, a service where users can buy and sell items over the site (Pearlfinders US 05.14.07).

In addition to the sector-giants such as MySpace and Facebook, a new breed of social networking startups is emerging. Twitter, for example, is a service that allows users to send ‘updates’ (140-charcacter long messages) to all other users, which are graphically displayed on the company’s homepage. When we spoke Twitter’s Co-Founder, he told us he’s “open to hearing what [agencies] can offer”. He stressed consultancies which can “open all the channels”, as well as showcase “new and innovative” approaches, are likely to be received favorably (Pearlfinders US 03.27.07).

Hybrids:

A number of online platforms are attempting to tap into the appetite for social networking by developing digital ventures with community features. One example of this is Joost, an online TV startup pioneered by the founders of Skype. Pearlfinders tracked the launch of Joost extensively – starting from when it went under its pseudonym The Venice Project – and we’ve spoken to the company’s Director of PR (Pearlfinders US 01.18.07). She told us Joost is aiming to capture the same target audience as conventional television – i.e. everyone! To further its appeal the offering will have a particular focus on social networking – viewers will be able to search for programs and channels as recommended by fellow users, and get involved with community features such as chat.

The Dangers:

It won’t come as any surprise that the trend for knowledge sharing between thousands of users poses a number of sector challenges. You may think that if brands are developing their business online, tapping into the seemingly relentless appetite for social content is the way to go. Our research, however, suggests you’ve got to be careful. We recently spoke to the Chief Marketing Officer for ManiaTV.com, a website featuring live Web-video shows aimed at young adults (Pearlfinders US 06.28.07). He told us the company is steering clear from user-generated content, explaining this approach has previously encouraged it to “try too many things”; it’s now sticking to its core strengths of professionally produced shows. In the UK, we’ve covered a number of companies planning to introduce community features to their websites including E.On and HMV (Pearlfinders UK 06.08.07, UK 05.25.07). These have come under criticism from some analysts who’ve questioned how social media can effectively be incorporated into more traditional brands.

Agency involvement: –

There are three things you may want to do here: –

Reach out to the dedicated social networking portals. Appropriate offers could well lie in localization to support international expansion efforts, or monetization – to move towards the ‘holy grail’ of being strongly cash-generative as well as popular amongst millions of web users.

Understand how “buzz” marketing operates. Can you offer companies looking to move into social networking, a true understanding of how to market ventures through word-of-mouth promotion?

Acknowledge the healthy dose of scepticism required surrounding ‘jumping on the bandwagon’. Can you offer strategic council as to whether companies should really be moving into social networking / user-generated content? As ‘social media’ becomes more of an everyday term, the danger is every company will have a social network that nobody uses. If you can help identify openings where an opportunity really exists, your services will certainly be of use to the sector’s key players.

For more information at http://www.pearlfinders.com