Got a lot of great interesting feedback on my “problem with social networks” post and wanted to get more specific on a number of issues.
1. I do believe social software will become a big business.
Although banner ads don’t work well on social network sites that doesn’t mean a marketing solution doesn’t exist. As Jon pointed out in the comments, the right system hasn’t been created yet. My old pal Mark Jeffrey makes a very solid point that these networks collect tons of personal information that they will be able to market against in the future. Behavioral targeting (targeting based on what you do, not what you say you do) is clearly going to be big. If we know you search for people in Santa Monica and that you visited a English bulldog group we know that pitching you on a local dog food store in Santa Monica is a good idea.
2. Why don’t display ads work well?
Social networking sites, when they are at their best, are like the best party you were ever at when you were single. Imagine you’re at that party and you see five beautiful people you want to talk too. You start an amazing conversation with one of them, and in the background there is a commercial playing on the flat-screen monitor. Do you stop talking to the person you just met to watch the ad or do you focus your attention at the person you’ve just met? Exactly.
Now, let’s say that commercial was about the new Star Wars movie you’ve waited you’re whole life to see, or it is about a car you’re considering buying–in other words the ad is targeted to you. Do you stop talking to this new person to watch it? Maybe, but you’re still not gonna give it your full attention (unless you’re a rude idiot).
So, how do you marketing to folks at a party is the question. The answer, in my mind, is that you throw the party. So, you’re meeting cool people at a party for the new Corvette and there is a Corvette in the middle of the room, there are Corvette themed drinks, the staff is wearing Corvette tshirts, and on the way out they give you a gift bag with a little Corvette car in it. The party and the people at it have rubbed off on the Corvette, and Corvette knows that, at the very least, you’ve seen their car in person. Mission accomplished!
The problem with event-marketing is, of course, that it is very expensive (think $100-1,000 a person) and you can only reach a small number of people at a time (think 100-1,000 people). Compare that to a TV commercial, radio ad, or Internet ad where you can reach someone for pennies a person–and millions of people at a time.
Clearly the future of social networking is making online event marketing scale.
3. What about vertical social networks?
I think these are gonna be big winners. Linked in, filled with business folks, is more vertical then Friendster and MySpace, and as such they can tap Office Depot or IBM and say “hey, these are all business folks, and we also know that these 134,000 people are in sales positions–let’s sell them an ultra light portable!” That’s hot. Ted Rheingold from Dogster points this out in his comments.
4. Is social networking a fad?
Of course it is, but remember that fads are what we call revolutions before we know what they are. The Internet and jogging were both fads at one point, now they are huge activities with billions of dollars in revenue. Is MySpace a fad? Well, that depends on their execution. Clearly they have captured folks imagination, and the question now is if they take that opportunity and build EBAY or Geocities. Little things become big things quickly in our industry, and big things can die almost overnight. It’s all about the details.
My gut tells me MySpace will be here in 10 years, and that their success will be based primarily in pioneering a new, scalable, model of advertising (and I have a lot of inside info, so you should trust me on this one :-).