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It’s easy to get carried away with all the social networking hype; one has only to spend a few minutes eavesdropping on the train to hear how successfully young people have latched onto the current tools for keeping in touch with their peers (think Bebo, MySpace and Facebook) as well as the proliferation of Instant Messaging. It’s fairly evident that as this young tech-savvy audience moves into the world of commerce, the networking tools they’ve grown to love will be put to new uses; job searching, candidate location, news & information gathering, even supplier research and contract negotiation will be second nature in the modern virtual world. This in addition to their existing love of all things Web 2.0 for the entertainment aspect of their lives - which already carries so much weight in setting modern music and film trends.

The difficulty for a web publisher is not in foreseeing the evolution of social networking technology, or in developing web applications in anticipation, it is surely in monetising the near infinite number of micro-networks that will evolve within a global networking platform. One example of corporate social networking today is Ecademy.com – a network enabling business people to create a profile describing themselves, their business, write blog postings, load videos etc. Ecademy provides the tools to enable its members to find ‘people like me’, add contacts to their personal network, create numerous field-oriented communities and organise / attend local face to face meetings.

But where do Ecademy and other social networks get their revenue from? The instinctive thought for the majority of web publishers is that it will come from advertising revenue (the on-paper answer to almost every web project!). Certainly there is some online advertising revenue supplementing the Ecademy coffers, but the scaled subscription model which was added around two years ago, is telling of the initial difficulty involved in monetising the social audience with online advertising.

Imagine for a moment that you own a social network with one million registered members, there are probably some major demographics in the mix which can be pitched to agencies for traditional web campaigns, but the world of online advertising is not geared up for delivering hundreds or thousands of micro campaigns for networks of ‘Golfers in Little Bedford’ (of whom there are perhaps just five associated members). There is of course a golf supplier near Little Bedford who’d jump at the chance of targeting this small audience, but not at the cost involved for a social network company to pay a salesperson to make a sales call, write a proposal (for targeting 5 people) and then arrange for the creative to be produced to spec.

SMEs are not typically geared up for online advertising, they need a lot of hand holding as they spend a massive… $50 (usually massive to them) and move away from a hotmail address on the side of their delivery vehicle to full blown digital marketing. Tapping into niche/local ad revenue is usually hard work with low profit margins.

It would of course be much simpler to find a global or national golf supplier to target advertising to all five hundred niche golf networks en mass, but this again would be a fairly major demographic of the whole network. There’s no doubt that social networking provides more accurate demographic data – profiles are less likely to be full of ‘other’ field selections as seen with traditional registration systems, but how do we tap into the ‘long tail’ of micro demographics? The larger fields will in all likelihood take care of themselves in the usual way.

If online advertising is your chosen medium then the answer to long tail monetisation really has to be through a global advertiser network containing a huge base of niche online advertisers - each looking for targeted advertising, no sales team involvement, paying out commission to it affiliates. Yes, that’s right it exists now and it’s called Google Adsense, the clever offshoot of that other niche advertising medium – search engine marketing. However, whilst Google Adsense is often seen as the answer to everybody’s online advertising problems, in reality the average affiliate CPM rarely exceeds $1.50. This CPM would increase with more targeted ad placement of course, but it would take a long time for each of the micro-networks to produce one thousand impressions or for all five of our golfers to click the golf advert.

For a publisher one solution is to build and own the ad network itself, giving them the full 90% of the CPM instead of just the 10% affiliate payout, however, it’s not easy to build and market an advertising network to target all of your audience niches. Ecademy have instead gone for a member subscription model as the basis of their income, with a complimentary advertising network generated by the members themselves (who are obviously already sold on the website and its benefits). This is probably the most sensible approach, since the niche advertiser could easily become a member of the platform and tap into the network in a much more personal way anyway.

Many web marketers have realised that it’s membership of a social network and participation itself, which generates leads and builds brand within a community. Social networkers enjoy the perceived trust they get from fellow bloggers and networkers, free of the more mistrusted marketing messages of yester-year. It’s no accident for example, that New Scientist magazine has a MySpace account with 737 associated friends – they have a perfectly good website, but Myspace is providing the opportunity to build more personal relationships to drive up magazine subscriptions. In light of the shift towards ad blocking on the TV and Web, social network participation is in all likelihood, set to become a marketing art in itself.

Monetising Your Social Network - A Summary:
a) Do your audience research; ensure that the tools are in place to enable the members to find your social platform irresistible and ‘sticky’.
b) Sign up for Google Adsense or other online advertising aggregators to provide some basic income during the member expansion period.
c) Continually carry out market research to measure member stickiness, use the resulting data to set a subscription price and launch date (or staggered pricing – where members pay more and get more functionality in return.)
d) Build an automated advertising network for your members to advertise their own company’s services, targeted keywords and network groups.
e) Phase out the aggregator campaigns to all but the most commonly visited pages of the site – home pages etc. - where targeting isn’t as easily applied before users have logged in.

Technorati Tags: social networking, google adsense, myspace, bebo, facebook, ecademy, web publishing, online advertising

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