Photo : D.R.
Twitter, which allows cybernauts to post short messages (a maximum of 140 characters) for free, with the option of referring users to other web pages or videos, has quickly set itself up as an instant messaging system and micro-blog. During the demonstrations following the presidential election in Iran in June this year, Twitter made headline news. As foreign journalists were banned by the powers in place from covering the protest movements, this new tool not only played the role of an information site allowing Iranians to give a real-time account of events, but also that of a platform for opponents wishing to rally together. Roles considered by the US government as being so important that it requested that the Californian company delay web site maintenance, which would have rendered Twitter inaccessible for several hours. Emerging at the start of the 2000s, social networking sites aimed at the general public have turned into a genuine social phenomenon, which, ever since, has not ceased to grow.
A new member every second
On Facebook or MySpace, users can meet persons with similar interests, keep in contact with acquaintances or even get back in touch with long lost friends. Furthermore, professional applications have come to light, with specific networks such as LinkedIn or Viadeo, allowing members to put their work experience on display and lengthen their address books. And audiences of these web sites are reaching astounding heights. According to the Top 10 Global Web Parent Companies, Home & Work established by the Nielsen Online institute in June this year, Facebook records the world’s 6th largest audience on Internet out of web sites from all categories. In mid-July, this leading social networking web site even announced the registration of its 250 millionth user – with 120 million logging on every day!
Despite having more specific usages, the professional platform LinkedIn has nothing to complain about, offering services to 43 million members in over 200 countries and from 170 sectors of activity. With an enviable growth rate to boot: LinkedIn claims that a new member registers on the network every second! And yet… Despite these colossal audience figures, not all is well at the web site headquarters. In mid-June, MySpace – owned by Rupert Murdoch’s group News Corporation–, the social networking pioneer that was long number 1 before the explosion of the Facebook phenomenon, announced that it was letting go of 500 of its 1,600 employees. The Nielsen Online institute had in fact revealed several weeks
before that its annual frequentation rate had fallen by 31% in the United States.
Even if staff numbers at MySpace may appear excessive compared with those of its rivals – Facebook employs 850 persons, LinkedIn, 385 and Twitter, 50 –, this announcement brings home an essential fact: social networking web sites are still seeking a viable economic model. Based on a principle of free services – explaining the extent of their success with the general public – they do not always succeed in generating income compared with their audience figures.
The laconic confession on Twitter’s “About us” page attests to this fact: “Twitter has many appealing opportunities for generating revenue but we are holding off on implementation for now because we don’t want to distract ourselves from the more important work at hand which is to create a compelling service and greater user experience for millions of people around the world. While our business model is in a research phase, we spend more money than we make.” As for Facebook, this social networker, which celebrated its 5th birthday in February this year, refuses to communicate its turnover – estimated by different analysts as between 200 and 300 million dollars in 2008.
Members against personalised advertising
Even before taking off, one solution for earning money from audiences seems
to have stood out for social networking sites: earning money by developing personalised advertising thanks to data held about users. Facebook in fact knows everything – or almost everything – about its members: their age, sex, family situation, place of residence, favourite music groups and films, hobbies… The web site’s prospects seemed so promising that in 2007, Microsoft bought 1.6% of Facebook’s capital for the sum of 240 million dollars – conferring the company with a virtual value of 15 billion dollars! At that time, targeted advertising appeared well and truly to be the new Eldorado.
But this was before account was taken of the reactions of network users, more eager to protect their privacy than the sector’s professionals estimated. In this way, Facebook members united, in a first, to reject user conditions (which would have modified the management of personal data in a way they considered prejudicial to their private lives), and then subsequently, to reject the installation of the Beacon application.
Launched in November 2007, the latter was intended to link the profiles of Facebook members to the lists of purchases that they made on partner trade web sites – a list that could thus be consulted by their contacts. In the face of over 55,000 of its users – gathering together in a discussion group of the web site, “Petition: Facebook, stop invading my privacy!” –, Facebook had to go backwards and modify this system so that members have to explicitly state that they agree to this list being diffused.
The introduction of targeted advertising has thus stumbled over the principle of the protection of private life and personal data. An issue which, moreover, is viewed differently in different countries, depending on culture and regulations in force. Even if the sector giants pretend to ignore this issue – arguing that they are American companies and that their duty is to respect American law only – this controversy will not fail to arise. Therefore, a meeting is scheduled to soon take place, between European Union authorities and these companies, in order to tackle this issue of personal data management.
For the moment, online social networks have settled on more conventional advertising formats, such as banners, even though several studies have revealed that click rates on these web sites are much lower than those on portals. It’s only logical that a Google user is much more likely to be tempted by an advertisement corresponding to his or her search than a cybernaut logging onto Facebook to correspond with friends.
New advertising solutions tested
This has not stopped social networking sites from experimenting with new solutions. In this way, Facebook has launched its service “Facebook Pages”, allowing advertisers to create their own pages in the form of classic profiles, in order to broadcast specific information: special offers, applications to download, photos and videos… Members can not only consult these pages, but also add the brand to their lists of friends. This is a way for members to showcase their preferences, at a time when brands play an increasingly important role in defining identities, especially online. In particular, Facebook is discreetly giving targeted advertising another go, by gradually beefing up its “Social Ads” service. At the same time, social networking sites draw inspiration from the solution found by online professional networks which, for several years now, have offered paying services (see boxed text).
Twitter is thus testing its “Super Chirp” application, which can give subscribers scoops on certain information posted on the site (news on stars, of course, whose tweets earn particular attention – 1.4 million persons consult the tweets of Britney Spears!). MySpace, on the other hand, has launched into e-commerce in the United States, by setting up an online platform for downloading music.
Despite the numerous options tested, each web site seems to prefer to increase its user numbers while awaiting the emergence of a profitable economic model. A strategy which seemingly neglects the highly volatile nature of Internet users when it comes to social networks. After Friendster (launched in 2002, now fallen into oblivion), MySpace (founded in 2003 and free-falling), Facebook (created in 2004 and which, for the moment, is continuing upwards), and Twitter (established in 2006 and which, according to its exponential growth, may well rapidly overtake Facebook’s territory; time spent by American cybernauts on Twitter increased by an annual rate of over 3,700% in April 2009, according to Nielsen Online figures), perhaps it would be better for these companies not to wait too longer before capitalising on their audiences.
Professional web networks have opted for paying services
Unlike social web sites aimed at the general public, professional networking sites have developed a more lucrative economic model. Baptised “Freemium”, the latter consists of a blend of free services and premium services that come at a cost. In other words, access to the site may be free, but more advanced functions must be paid for.
For example, in March 2005, LinkedIn, the sector’s world number 1 launched its first premium service, LinkedIn Jobs Network, which enables recruiters to post job offers, diffuse them virally, and target potential candidates throughout the network. Today, LinkedIn offers several subscription formulas: a free mode for personal usage, but also diverse paying options – from 25 to 500 dollars per month (17 to 350 euros) – for professionals. In this way, LinkedIn draws its income, in equal proportions, from advertising, the publication of online job offers, and company subscriptions and solutions.
Viadeo, the sector’s worldwide number 2 with 8 million members, also earns money from its audience via the 3 same axes: subscription sales for premium members, the development of specific tools for recruiters scouting the network, and advertising. All the while based on a user logic urging users to opt for a paying subscription: while it is free to register on Viadeo,
a premium status facilitates networking, thanks to a multi-criteria search motor allowing contacts to be identified quickly. Thanks to this formula, members can also get acquainted with
the persons who consult their profiles, publish online announcements, or else create email alerts for job offers.
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