Dallas Lawrence is Chair of the Social and Digital Media Practice at Levick Strategic Communications, the nation’s top crisis communications firm. He blogs on emerging digital media trends and best practices for social media engagement on Bulletproof Blog. Connect with him on Twitter @dallaslawrence.
Social networks have truly come of age in the last year. No longer viewed as lonely outposts for youthful college slackers, the reach of these platforms has grown exponentially. Today, more than two-thirds of the world’s Internet users visit the social networking sites that reel in billions of eyeballs every 24 hours.
Yet, despite the staggering growth of social networking, determining how to monetize social media platforms remains a tough code to crack for even the savviest of companies. As such, identifying new revenue models will be instrumental in kicking off the next cycle of the social networking phenomenon in 2010.
FacebookFacebook, social networking’s acknowledged leader, has surpassed every platform on the market today, corralling more than 350 million unique users globally. If any social network is poised to design a winning formula for successful revenue streams in 2010, it’s Facebook. CEO Mark Zuckerberg has set an aggressive agenda for the company, publically stating that he “expects social networks to become as essential as web browsers and operating systems,” and he has set the lofty — yet entirely realistic — goal of 1 billion users worldwide.
In the less than five years since it expanded beyond scholastic audiences, Facebook has not only grabbed the lion’s share of users, it has engaged them like no other platform on the Internet. The average Facebook user visits the site at least once a day and spends an astounding 55 minutes engaging friends and family –- statistics that another Zucker (Jeff) would probably kill for over at NBC.
While translating such popularity into dollars and cents isn’t easy –- especially in an industry whose users have grown accustomed to getting something for nothing –- Facebook could potentially provide a monetization template that would revolutionize social networking as we know it.
Advertising has traditionally provided the simplest means of generating revenue. PricewaterhouseCoopers reported in October that Internet advertising revenues totaled $10.9 billion for the first half of 2009. It’s been estimated that Facebook alone took in $435 million of that total. But for a site with nearly half a billion users, a quarter of which spend more time within the network than watching television, these numbers represent just the beginning potential.
First, Facebook needs to admit to itself that it is in the business of selling ads. By better managing its advertising network, intelligently expanding its marketing options, and developing workable social ads that leverage the branding power of friends and connections, Facebook can begin to capture its rightful share of online ad revenues. The final piece is to increase awareness and understanding of Facebook ads among corporate decision makers.
For example, every executive in America today understands the value of purchasing GoogleGoogle ads –- and that didn’t happen by accident. Google understood that what caused it to dominate online search wasn’t going to ultimately position the company as a global corporate powerhouse valued at nearly $200 billion. Google’s aggressive marketing, communications, and lobbying shops have worked to ensure every ad buyer, political campaign, marketing executive, and public relations flack knows the value of the service and has direct and easy access to account executives who explain the much worshiped “ROI” Google ads provide.
Today, Facebook stands on the precipice Google inhabited just before it became a top money-maker. By taking a page from the Google playbook, and aggressively marketing — and explaining — its power to influence buying decisions, Facebook ads could become as essential to 21st Century marketing as the yellow pages were in the 20th Century.
The launch of Facebook as a true e-commerce site holds immense potential as a business solution and could forever change the way we shop. Online purchases through the first three quarters of 2009 totaled $98.3 billion according to the Department of Commerce. For the majority of companies selling products online who are also engaged on Facebook, opening Facebook fully to direct e-commerce transactions will dramatically change how businesses advertise and how consumers buy goods online.
Consumers and companies would flock to a Facebook storefront for one simple reason: We do everything else there. Imagine an integrated, one-click solution whereby your friends see your recent purchases (because you were incentivized by the brand to share your information) in their feed and are able to simply point, click, and purchase the same item.
With a few adjustments, companies can make timely offers of birthday gifts for friends, travel arrangements for event items, or the latest music from favorite artists –- and make the sale without forcing the user to leave Facebook or put in new login information.
Rather than driving their 350 million users away from the platform to “close the deal” with retailers and purchase the item on an external platform, Facebook could benefit financially by charging companies a percentage of sales, a fixed rate to have a storefront, or from increased advertising opportunities.
Finally, whether users like it or not, Facebook will do itself a long term disservice if it does not consider premium subscription options. Users (whether they are corporations or teenagers) are amenable to paying for even the simplest features and functionality, as evidenced by the success of Facebook gifts.
Nothing good in life is free. It’s a stark, mature reality that Facebook (and its users) need to face in 2010. By leveraging economies of scale, Facebook can churn a sizable profit without alienating users. Would you pay one dollar a month to share higher-resolution photos or upload higher-quality or longer videos? Last month, 2.5 billion photos were uploaded to Facebook. Even if only a quarter of the site’s active users opted for premium options, this one change would generate more than $1 billion in annual revenues.
Improving advertising, developing an e-commerce platform, and adding subscription services will not only generate the revenue necessary to make the transition from highly adopted to highly profitable, it will open revenue streams — as Google did before — for the next generation of digital developments.
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Image courtesy of iStockphotoiStockphoto, peterspiro
A significant factor in putting Barack Obama in the White House was the brilliant social media marketing of the Obama for America campaign. The Obama campaign realized that social media was a primary importance, not an afterthought. The number of people the campaign reached on the Web was staggering: Millions friended Obama on Facebook and joined the MyBO social organizing site. By election day, Obama had nearly 4 times more Facebook supporters than McCain and twenty times more Twitter followers.
The Pew Internet & American Life Project April 2009 report The Internet's Role in Campaign 2008 says some 55 percent of all adults–and 74 percent of all Internet users–said they went online for news and information about the election or to communicate with others about the race.
So it's fascinating to watch Martha Coakley's campaign for U.S. Senate in Massachusetts basically ignore new media in favor of the old playbooks that elected Ted Kennedy to the seat.
Of course there is much more to the race: Politics and platforms and personal connections are important. But didn't Obama for America teach us that the Web has the power to push a candidate over the top? Obama also showed the importance of young people (whose communications of choice is digital).
Let's look at a few numbers. As I compare the morning before election day, @MarthaCoakley has 3,520 Twitter followers compared to @ScottBrownMA with 10,214 followers. Coakley counts 14,487 Facebook fans to Brown's 76,700 fans. Advantage Brown by more than three to one.
Living in safe, secure blue state Massachusetts, I always envied those from Iowa and New Hampshire who got so much candidate face time in Presidential elections. Now that I've lived through a tightening race, forget it. The robocalls are crazy! I get a half dozen a day! And the television commercials! Don't get me started.
At the same time, why is social media ignored?
The event section on the Coakley site shows a dozen or so rallies and nearly one hundred phone bank events in the three days leading up to election day. Yet there are zero Tweetups and zero virtual events listed.
Massachusetts is a hotbed of information technology. People here are plugged in. Most of my friends don't even use the phone anymore except to call the plumber. It is a college town with young people who don't have landlines.
On Saturday I learned that President Obama was to rally for Coakley in Boston and wanted to go. But there was no mention of the event on her Twitter feed at all prior to the event. Nothing. What about telling fans first? Recall that Obama announced Joe Biden as his running mate via social networking tools like SMS and Twitter before he sent a press release to the media. Coakley seems to be on Twitter and Facebook as an afterthought, an item on a checklist. The Brown social media efforts seem much more active.
I did make it to the rally yesterday. It was the first time I had seen a sitting president speak live and I enjoyed it. Hoopla was generated. Television soundbites were secured. It seemed to be a success.
But wait. Look closer.
The event was held at Northeastern University and sponsored by the Student Democrats. Quick. How do college students communicate? Facebook and SMS of course! Yet these two forms of communications played absolutely no formal part in the rally. The brochure that was handed out had no web addresses or social media sites. At the rally, Coakley fans were asked to vote. They were asked to volunteer at phone banks. They were asked to talk to neighbors and friends.
But were the many college students in the crowd told to talk up the Coakley campaign on Facebook, the college student communications tool of choice? No. Were people at the rally asked to tweet? No. Were they asked to join Coakley's fan page? No.
The Coakley campaign is underestimating the importance of social media and the new rules of marketing and PR.
John McCain relied on what worked to elect George W. Bush and he lost mainly because of social media. Now Martha Coakley is relying on the playbook that elected Ted Kennedy and she may lose because of social media too.
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