As an example, Lundeen cites WebCrossing customer Edmunds.com, which publishes automobile buying guides. On Edmunds' social networking site, CarSpace.com, members can post profiles, ask other members for car advice, discuss features of various automobiles, and search for others with similar interests. Lundeen says, "Edmunds had a message board before rolling out CarSpace. They found that the networking site generated higher traffic that translated directly into revenue, as well as giving them better market research."
He points out that a properly implemented B2C network can act "like a canary in a coal mine. Customers will post about bugs for new software releases, for example, well before any customer support calls would come in." This allows a company to react more quickly to problems, an invaluable help in reputation management.
When asked about the ROI of a collaborative customer site, Lundeen says his customers have found that "having an interactive support forum may not save a company money, but it will give you a happier customer base and higher brand awareness," which translates into higher customer satisfaction and retention rates. Cerado's Carfi concurs this, saying, "Customers are tired of the corporate website as a ‘virtual collateral stand.' Social networks enable a shift from a vendor-controlled interaction to one where the customer is in control," and that these networks encourage relationships between vendor and customer to flourish. Indeed, Lundeen mentions that many WebCrossing customers have NDAs in place with his firm, because they consider the customer-facing aspects of their social network as key competitive advantages.Get Together
Beyond the role that social networks can play for an organization's internal and customer communication, online professional communities like LinkedIn and Ecademy encourage connections between peers in different enterprises. These sites, playfully referred to as "MySpace for Grownups," allow members to set up detailed personal profiles, usually presenting work skills and experience, and invite known contacts into a network. Profiles can be searched by name, company, function, and so forth to facilitate business deals, to locate prospective employees, and to search for functional expertise. Members can also request introductions to others connected by mutual acquaintances; free membership to the sites usually includes a small number of facilitated introductions, and additional introductions are available to premium subscribers.
According to Kay Luo, director of corporate communication for LinkedIn, the company's initial focus was on building a network of business people with whom others would want to connect. With more than 10 million members, and growing at a rate of 100,000 new members each week, the company has now turned to delivering business applications on top of that network to bring the connections that traditionally took place offline into an online environment. And connect they do: According to Luo, "The most connected job titles are founders/CEOs, with 76 connections, then board members, directors of product management, and product marketing," all roles that would seem to place a premium on peer-to-peer interactions and knowledge exchange.
Luo observes that "one of the most common uses of your offline network is asking colleagues for recommendations," whether for job candidates, expertise requests, or problem solving. LinkedIn has recently introduced an Answer feature that allows members to exchange questions and answers within their online networks; Luo says this Answer functionality will soon allow members to query across the entire membership community.
One of the main components of LinkedIn's revenue model is corporate subscriptions. "Many companies pay for bundled packaging, which provides premium memberships to seats in their staffing or HR group, and includes job listings," says Luo. "LinkedIn's value proposition is that it allows companies to reach out to the ‘gold' job candidates, the ones who are already employed." Rather than hoping that these prospective employees will hear about a job opening and contact them, LinkedIn allows a human resources manager to use advanced search capability to target qualified candidates, saving time in the hiring process and producing an improved pool of candidates.
This ability to selectively target a large and engaged userbase is the primary reason businesses are turning to social networking sites as part of integrated advertising campaigns. George Krautzel is co-founder and president of ITtoolbox, a professional network comprising blogs, wikis, groups, and user profiles for IT professionals; he says social networks are attractive to advertisers because of the engagement factor offered by online collaborative communities. "Over 1,500 pieces of user-generated content are added to our site by members each day," notes Krautzel. "A non-registered member on our site visits an average of three pages, while a registered user visits 9.5 pages."
The high volume of user-generated content, paired with ITtoolbox's contextual matching engine that tags such content on-the-fly gives advertisers laser precision for targeting an interested audience. For example, if a user posts to a blog about CRM on demand, other members reading the blog entry will see ads related to CRM platforms and technology. Krautzel says that "this ‘pull' marketing environment allows our advertisers to present ads as follow-up information," making it more likely that an interested user will respond. As proof of this approach, Krautzel notes that click-through rates for ITtoolbox advertisers are up 50% for display ads using the contextual matching than for those that don't.
Ramu Yalamanchi, founder and CEO of hi5 Networks, a 50-million-member social network with a decidedly international flavor, says that advertisers are demanding integrated campaigns to leverage the interactive nature of social networks. "T-Mobile ran a promotion on hi5 in 2006 for the Sidekick 3 that invited members to send in an original rap song," says Yalamanchi. The winning song was used in a rap concert by hip hop artist Chingy, popular among the 18-25 demographic that frequents hi5's network. "Advertisers like the strong measurability that social network advertising provides, and the granularity of targeting we can offer, based on member profiles."
hi5 differentiates itself from other social networks by its embrace of an international audience from its inception; Yalamanchi says that 30% of its userbase is in Spanish-speaking countries, and the site has been translated into seven languages. "Advertisers consider hi5 a one-stop shop for an international ad campaign," he says. Communication is at the heart of the value that hi5 delivers to its multinational members; by enabling messaging and enhanced email capabilities, the company hopes to keep its members coming back and staying longer, so they can be exposed to all those targeted advertising campaigns.