ADTELLIGENCE_White Paper_Monetization of Social Networks_Chapter6


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ADTELLIGENCE_White Paper_Monetization of Social Networks_Chapter6

  1. 1. ADTELLIGENCE GmbH Mannheim, Germany “Cashing in” on Connections – Monetizing Today’s Social Networks White Paper (2009) Chapter 6 – Summary and Conclusions
  2. 2. Contents 6. Summary and Conclusions 2
  3. 3. The importance of Social Networks will persist in the future Lately, Social Networks have become some of the most visited sites in the 1 Internet and will be even more important in the future Social networks not only could replace The importance of 2 email and chat but also provide a Social Networks is platform for all internet-services still growing In Social Networks, otherwise anonymous Internet users reveal a great deal about 3 themselves and talk about their interests 3
  4. 4. Who is the Winner? Depends on “Global vs. Local” and “General vs. Specialized” Global/International  It has been demonstrated that technological innovation is the number one factor if you want to succeed  Global or local and/or general or Facebook, specialized: Social Networks need to LinkedIn continue to concentrate on technological MySpace innovations  Since fast innovation depends on capital, Specialized General capital coverage will have the last word and two things play an important role:  1) The perspective that investors see in a network and with it, the readiness to XING, allocate more money StudiVZ WKW, QQ  2) The actual situation of income of a Social Network, i.e. with positive cash flow as in the business networks  No matter what, the business model should be focused to key monetization factors Local/Regional 4
  5. 5. Is there a trade-off between growth and monetization? ? ■ Popular Social Networks, such as national networks in Germany, propagate trade-off between growth and monetization ■ The growth model of the past which aimed at getting new users through network effects will become more and more difficult through disruptive competition ■ The frontiers of the traditional growth model are already visible in most of the markets ■ The focus on growth will be substituted by the focus on innovation, since that’s the only way to keep current users and gain new ones ■ Only the future will tell if MySpace has made a mistake with setting the focus on monetization, as some people claim 5
  6. 6. Only Innovation Power and Monetization at the Same Time can ensure Success Innovation power Success- model Monetization 6
  7. 7. Social Networks that successfully promote innovations, could help monetize one another  Numerous users permit the implementation of innovative platforms for Social Networks !  Sponsored models build the basis  Virtual currencies and E-Commerce-Integrations could become a second pillar  Abo-/Freemium-Models could provide a price advantage for the user but the barrier of implementation is high  There is still a long road to reach a business model with various pillars, therefore quicker solutions are necessary.  In the specialized area innovations go hand in hand with monetization  Good examples are XING events or LinkedIn Premium Webinars  “Semi-specialized” Social Networks like or StudiVZ either have to expand their scope or have to use targeting approaches to distinguish their quite undifferentiated user group.  The more specialized a network is the more important are quality, individuality and exclusiveness as distinguishing features 7
  8. 8. Social Networks can use Topics such as Advertising, E-Commerce and Market Research to achieve Fast Monetization Possible Revenue Models of a Social Network Indirect Direct Virtual- & e- Market Advertising Subscription Freemium Virtual Goods Commerce intelligence  The major pillar of  Not only an affiliate  Integration  In competitive & fast moving  Very interesting in every online model but real possible relatively markets direct monetization the long term Community integrated e- & v- quickly through subscriptions or paid  Already cash cow  Great potential Commerce shops  Great potential content are possible. in online gaming with targeting with personal & with new  But they make sense only in and some  Online social technologies niches like “decision makers” or communities like Communities can recommendations communities with specialized Netlog or QQ leverage  Quick implementation focus groups & with high vendor  The better competitive possible lock-in effects alternative than advantage  Digital Goods like  Local communities could use subscription through detailed games, music & offline monetization through through pay as audience targeting videos could become events etc. you go & & reporting a second major  Nearly impossible for mass micropayment income stream market  ad revenue model is more attractive Targeting Technologies will help to gather “low hanging fruits” in the field of indirect monetization 8
  9. 9. New targeting methods rapidly help achieving profits in advertising and leverage other revenue streams  In the short term, advertising will continue to be the main income Sophisticated targeting, model of a social network – and in the long term the indirect pillar recommendation & that gets more and more important collaborative filtering  Through advanced targeting, the advertiser can access attractive target groups and gain higher revenues technologies are key to individualizing high  Also virtual goods and E-Commerce integrations can benefit considerably from targeting methods: Which user gets which traffic Social Networks product offer? for a sustainable  The yet untouched area of market research approaches gains development and a importance through targeting - clients get access to tailor-made meaningful business target groups model  Finally, targeting is a way to optimize the entire social network – to decide which user gets delivered which contents and information, and can be made considerably efficient.  Users of Social Networks likely to discuss their wishes and interests – data that has to be collected and evaluated in order to gain insight and to minimize the risk of false strategies In addition, indirect monetization models have a competitive advantage so that companies like Google (as they just did with the navigation sector) could not attack the business model through a “free” offering). 9
  10. 10. However, … ...there is no universal or perfect business model Remember… success lies in the appropriate combination of different revenue models and continuous innovation and development! 10
  11. 11. Get Connected! Phone: +49 (0)621 87204066 ADTelligence GmbH Julius- Hatry-Straße 1
 68163 Mannheim