1. ADTELLIGENCE GmbH
Mannheim, Germany
www.adtelligence.de
info@adtelligence.de
“Cashing in” on Connections – Monetizing Today’s Social Networks
White Paper (2009)
Chapter 1 – Introduction

2. Authors
Michael Altendorf Thomas Mehls
Dipl.-Volkswirt, Dipl.-Kaufmann,
Managing Director Consultant and
Member of the Advisory Board
ADTELLIGENCE GmbH
the future of advertising ADTELLIGENCEGmbH
the future of advertising
michaelaltendorf@adtelligence.de
Phone: +49 (0)621/87204066 thomasmehls@yahoo.com
Fax: +49 (0)621/87204068
Connect!
www.xing.com/profile/Michael_Altendorf
www.linkedin.com/in/michaelaltendorf
www.twitter.com/Michael1980
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3. ADTELLIGENCE
Company Profile
Founded in May 2009, ADTELLIGENCE GmbH is an innovative German start-
up business, located in the Rhein-Neckar valley about 30 miles south of
Frankfurt. The company strives to…
…offer today’s Social Networks and other Web2.0-related Web sites with
an on-demand / SaaS targeting engine for precise modulation of online
advertising campaigns
…provide a thorough analysis of anonymized user data in Social Networks,
communities, e-commerce, and gaming platforms
…respect the privacy rules of all Internet users and groups
…offer the “next generation” of marketing intelligence, social media
monitoring and web analytics
…enable real-time targeting and the possibility for any brand name to
freely define and directly reach their individual target groups
…minimize wastage with the modulation of online advertising and
maximize the effectiveness of advertising campaigns
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4. Executive Summary
Within the past two years, the amount of Social Networks and online communities has grown faster than
anything else on the Internet. The number of people associated with these networks continues to dominate the
Internet space. Unfortunately, almost all Social Networks today endure very high costs with very low
monetization rates. Monetization occurs either directly through monthly subscribers, “Freemium,” and virtual-
goods models; or indirectly though advertising based business models and first attempts to include e-commerce.
Only vendors in Asia and some western platforms have started to implement a virtual economy with goods and
currency.
Most Social Networks today are unsuccessful in their advertising strategy because they target an enormously large mass of
heterogeneous users. First-generation targeting models (including semantic, contextual, or behavioral targeting) do not
help because these models are not tailored to the needs of Social networks. Social Profile Targeting on the other hand,
leverages the demographic and geographic user information as well as the interests of the user. It is built around the
information within user profiles such as their connections to other users and the data entered by the users themselves, to
provide more exact data with which to reach target audiences.
ADTELLIGENCE offers exactly this kind of targeting technology, which provides an interface between individual user profiles
and classic target-group descriptions. Through a simple user interface based on the newest Web 2.0 technology,
advertisers can easily define their target audiences/groups and get reports on the success of their campaign and target
delineation in real time. ADTELLIGENCE’s targeting technology not only helps increase advertising revenue for Social
Networks, but can also implement other effective revenue channels such as ecommerce, gaming monetization, marketing
intelligence, social media monitoring and web analytics.
There is no universal business model for Social Networks. Nevertheless, the best business model will always be a mix of
different approaches that can be continuously developed and combined. The users will decide which model they like. Ask
them, they will tell you what they want: to have user generated content delivered.
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5. Contents
1. Introduction p. 7
2. The Global Market of Social Networks p. 12
3. Business Models for the Internet of the Future p. 44
4. Targeting Technologies for Social Networks p. 81
5. Future Strategies for Social Networks p. 129
6. Summary and Conclusions p. 144
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6. Table of Contents 2.0
Tag Clouds
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7. Contents
1. Introduction
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8. Understanding the terms
For the purpose of this white paper the terms ‘Social Networks’ and ‘community’ shall be
conveyed as synonymous concepts.
Social networks and today’s community websites are almost always characterized by identical,
yet essential features:
 Users can present themselves on their own personal “profile page”
 Users can directly connect with one another by becoming “friends”
 Users can communicate with each other through internal messaging systems
and/or messaging services (e.g. instant messaging)
The term “social networking services” has established itself as the standard Anglo-
Saxon definition for these Internet services, but in the mainstream English language,
the term “Social Networks” is more commonly used.
Social networks are just one of the many manifestations of ‘Web 2.0’. This is the vast online
world of increasing user-generated content such as images, text, and video, where users
continue to interact and communicate with each other on a daily basis.
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9. Social Networks
How will they cash in ?
 In just a matter of years, Social Networks have become ranked at the top of Internet
user statistics. About half of the top ten most visited Web sites (based on page
Strong impressions) are Social Networks in most of the countries in America and Europe
User Growth
 “Traditional websites" are now building more community-oriented features into their sites to
increase traffic, user growth, usage, and page impressions
 Combined with rapid growth and billions of page views, Social Networks continue to
increase costs
 These companies continue to add resources by maintaining networks and building
Increasing out IT infrastructure; all for the care of their end-users. This leads to an extravagant
Costs amount of unplanned costs
 Most Social Networks, especially ones with enormous user bases, haven’t yet been
successful in monetizing these masses
 Only in specialized areas are subscription models successful
 As the single source of revenue for most networks, the current ad model is insufficient,
Marginal resulting in high scattering losses and putting even more pressure on CPMs
Revenue
 Today the debate within large Social Networks continues; the fundamental question of
"Growth vs. Monetization”
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10. Social Networks
Monetizing the value for the Future
 The success of Social Networks is not based on traditional editorial content, but the
Success of essential communication elements between its users: personal news, photos, and
communication and other user-generated content
user profiles  Through increased communication and social pressure to “get involved,” users have
created detailed profiles about themselves
 Unlike traditional and professional editorial content, content from Social
Networks has never been geared towards advertisers/marketers, even though
Difficulty to identify the reach of social media is potentially huge.
target groups
 In years past, specific target audiences within Social Networks were difficult to
directly identify, leading to marginal advertising revenues
 The core of this white paper deals with the future monetization of these special web
pages - and takes the perspective of the business behind the social network
Future Monetization  It aims to answer the questions: How can a “product” consisting essentially of user
profiles, personal messages and photos, sell? And: Is it growth OR monetization, or is
it perhaps a combination of both?
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11. How to Optimize Marketing for
Social Networks
Social Networks Today Business Models Today Targeting Technologies
 Overview of German  Overview of current  Optimization of marketing
and international monetization approaches through “targeting”
Social Networks and their successes
 Presentation of targeting
 Quantitative and  Identification of different technologies the first
qualitative international approaches generation
classification
 Opportunities and risks of  Introduction to social &
the approaches profile targeting
Focus
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