DigitalWall - Way to China Internet/Telecom

Viral marketing will be the key word for marketing in the Web 2.0 time.

[+]The history of SNS

Last month, AOL's purchasd Bebo, the largest social networking site in Britain, for USD 850 million in cash. That once again highlighted the value of SNS (Social Networking Service). In the United States, Bebo is the No.3 social networking site, behind MySpace and Facebook, with more than 40 million users around the world.

Further back, News Corp acquired MySpace with USD 580 million in 2005; Microsoft paid USD 240 million for merely 1.6% stakes in Facebook. The first deal seems to be too hasty for MySpace and too juicy for News Corp. What, indeed, is the most attractive aspect about SNS to investors?

SNS is really a confusing concept when mentioned together with dating sites, community sites or Blog. Even SNS operators do not view themselves as dating sites, community sites or Blog sites. While those sites have been in place since the Web 1.0 time, or at least the end of that time, SNS focuses on inter-personal relations, and therefore is a mixture of all above.

Finally, it seems that only ambiguous terms such as "personal space" could differentiate SNS from those traditional concepts. In terms of functionality, SNS enables blog, photo album, friends, community (or group) as basic functions. With the intentional guide of the operators, users could visit the blogs and photo albums of others, eventually activating the social networking function.

In terms of social networking behavior, SNS depends on the migration of offline personal relations to online platforms to combine with those of others to build a larger relation network. While using the service primarily to interact with acquaintances, users might meet strangers for deeper communication intentionally or unintentionally, resulting in larger social communities. Hence, interpersonal relations could be maintained by paying attention to the activities of each other.

[+]How to convert page views into revenue

With more than 40 million users around the world, Bebo is worth USD 850 million. In China, the largest social networking sites, e.g., Tecent Q Zone and 51.com, have more than 100 million users, yet none is deemed to be worth that much. What, indeed, is the commercial value of the social networking sites? At the present time, it seems, the value lies primarily in being purchased.

Thanks to the high interactivity among its users, social networking sites have far more page views than conventional portals. What's more, each user would keep an eye on the presence of his/her friends, resulting in a much longer average online time. Many SNS users log onto the site as soon as they get off work/class, and remain connected until they go to sleep. How to convert the addiction into revenue?

There are 3 possible ways: 1) through Internet advertisement; 2) by providing users with fee-based value-added services; 3) by offering e-commerce services in the communities and collecting commissions from transactions. In the foreseeable future, any social networking site is expected to reap revenue through all of these 3 approaches. The only difference lies in the revenue proportion because of different primary users of each SNS site

One of the most distinct features of SNS is its distribution by word-of-mouth. An article by a common person on MySpace or Facebook would get widely spread through his friends, or friends of friends. Such effect is what advertisers have been dreaming for, as distribution by word-of-mouth is the most cost-effective approach.

In the Web 1.0 time, however, this kind of viral marketing was only a result of sheer luck, rather than deliberate planning. Without a platform to operate on, most advertisers had to pay for the views of their ads, allowing their budgets to be washed away by the visit traffic of the portals. While the focus of Internet advertisement in Web 1.0 time was target advertisement, it would be viral advertisement enabled by SNS in the Web 2.0 time.

At the 2008 Annual Conference for the New Economy hosted by iResearch, I gave a speech titled "The Key Word for Marketing in Web 2.0: Viral marketing". You can find and watch the video at: http://v.iresearch.cn/data/20080425/79812.shtml

[+]Impacting the traditional Internet advertisement model

However, the business model has trouble facing advertisers, who generally accept it as a cost-effective approach. For example, one million clicks at a portal or one million users' interaction at a social networking platform, which one do you prefer? For online advertisers, the answer is the latter. The question is, however, how do you charge them for the one million users' interaction?

Currently, SNS is still not able to compete with portals by means of CPM or CPC. With surprisingly good results but no billing method available for SNS, there has appeared a weird phenomenon of "free interaction for ad exposure or clicks purchased". Unable to generate income from its most valuable part, SNS is not yet ready to compete with portals for users by means of CPC.

For advertisers, word-of-mouth-based distribution is the most cost-effective marketing method, as well as one of the reasons for them to move their budgets from portals to SNS. In addition, there's not yet a unified standard in the industry for billing by results. An event might have one million participants, however the extent of involvement varies substantially. There is not a simple and intuitive measurement like CPM or CPC.

Currently, advertisers are still testing SNS marketing, while SNS operators are exploring new billing methods. Therefore, there's a huge potential. Eventually, it becomes a process of negotiation between sales reps and advertisers, and the final result depends on who is going to convince whom. The criteria for advertisement effect in the Web 1.0 time is no longer able to keep up with the market changes, but the Web 2.0 criteria are yet to be developed.

Viral marketing will be the key word for marketing in the Web 2.0 time, as SNS will become a platform enabling word-of-mouth-based distribution among advertisers. Share and recommendation by friends would enable higher market awareness and better marketing effect. What we don't have yet is a set of criteria to measure the marketing result, as CPM and CPC, which derived from traditional media, are obviously out-of-date. ( 2008/05/11 - By Digitalwall.com - Way to China Internet/Telecom )

- Read More

Prev : Initial Experience of Widget's Profit Model

Next : New Landscape in China's Telecom Market (1) Winner Takes All

- Today in History

Glimpse into Profit Model of SNS-based advertisement - 2008/05/11

3G Time Comes (8) Who Are First Users of 3G? - 2003/05/18

Each time the Widget site receives a "delivery call", it is expected to generate revenue.

 

[+]A new term: Widget

Widget is another popular new term after Blog and SNS. So far, there seems to be no proper Chinese equivalent to it. Literally, it can be translated into something like "small tool", or "fancy things", which somehow sound weird and cannot explain its functionality and impact.

On the sidebars of many blogs, particularly independent blogs, we can often see many fancy things, like a beautiful clock, or a weather forecast column, or news headline updates. These fancy things, which occupy small spaces on the web page and offer a variety of functions, are one kind of Widgets.

Of course, there are Widgets that can be downloaded and installed into your PC or cell phone. You also can download Widgets from many portals, including Microsoft, Google and Yahoo! and install them onto MSN Space, Google Personal or My Yahoo. These, however, are beyond the scope of this article, which only focuses on independent sites to offer Widget service like http://Widgetbox.com.

Why, then, do most of Widgets used by independent Blogs, rather than those empowered by large blog service providers (e.g., MSN Space)? The reason is most blog service providers do not allow bloggers to add Javascript into their blogs, while most Widgets were written by Javascprit code to be embedded into blog web pages.

In addition, it takes considerable expertise to insert Widgets. An ordinary Internet user would have to do a lot of learning before being able to put Widgets on his/her Blog. Most individuals who build their own Blog sites are familiar with such expertise. However, such difficulty is not yet to become an obstacle to the infiltration of Widgets across the Internet in many countries. There have emerged a lot of sites that offer Widget services.

In China, however, Widget is not so popular, mainly for two reasons: 1) given the Internet environment in the country, it is hard for an ordinary Internet user to build his/her own Blog site. In the United States, from applying for the domain name to leasing a host to activating the blog system to making the payment, everything can be done online. 2) Many international Blog service providers begin to allow embedded Javascript, which increases the possibility of Widgets being used.

[+]Operation model of Widget service

Widget service operators provide Widgets with diversified functions. To embed the Widgets onto their own Blogs, Internet users need to copy the corresponding Javascript onto their own Blogs. When the web page of a Blog is viewed, the Javascript code was triggered to retrieve the corresponding Widget from the service provider site and send it back to the web page where embedded.

This is the underlying mechanism of Widgets. A site offering Widget services is like a large warehouse, which sends a shipment whenever it receives a delivery call. Eventually, the goods are displayed in stores around the street. The problem is that nobody is going to visit the warehouse itself. Hence there appears a paradox of business operation: the sites of Widget service providers themselves do not have high traffic.

The traffic have gone to thousands of Blogs. The bandwidth budgets of the Widget service providers are used entirely for the transmission of Widgets to Blogs. According to my own experience in Widget service provision, Blogs that rank top 30% in terms of the total "deliveries" consumes 90% of the delivery calls, which is close to the proportion of the traditional 80:20 rule.

The website I build to offer Widget service is: http://www.rankwidget.com.

The function of this particular Widget is to show the Alexa ranking or the Google Pagerank of the Blog web page where it is put. I have operated the site for half a year now. At its peak, my site provided services to about 50,000 websites, delivering 200,000 times each day. (because advertisement was introduced later, the volume dropped to one third of the original level, with about 60,000 times delivered each day.)

Such niche market-targeted Widget cannot expect to have a lot of users, so 200,000 delivery times per day is a fairly satisfactory figure. The problem is that the site (rankwidget.com) has very low traffic itself - with less than 1,000 page views each day. We cannot expect to have many visitors to the "warehouse". The question is: how do operators of such an emerging application make money? After all, the bandwidth cost is a tangible expenditure every month.

[+]How do Widget operators make money?

You can take a look at a real operation of the Widget on: http://english.digitalwall.com. Open the web page and move to the bottom left corner, where your browser would bring out a pop up ad window behind your browser. When you move your mouse onto the Widget, a "bubble ad" appears. These are the operation models of the Widget I have tried. (Now the site no longer has bubble ads.)

With the 60,000 page views of the Widget site, the pop-under ad window ads would be displayed 2,500 times (most browsers have default pop-up ad blockers, which would significantly reduce the number of display time), resulting in a click rate as low as 0.2%. With the CPM or CPC-based billing approach widely adopted in the United States, I, as the operator of the Widget site, will end up in starvation.

The mindset is simple: each time a Widget site receives a "delivery call", it is expected to generate revenue, as each time there's a bandwidth cost. Hence advertisement becomes a model worth trying. However, as the Widget brings disturbing ads, many Blogger prefer not to use it.

The Internet is really an unreasonable business environment. Users don't care about what operation cost you have. When I used pop-under ad windows, I had to face tides of fury of many Bloggers. Later on, I replaced it with a milder model: bubble ad, which was a big innovation (it seemed that nobody had tried it before), but the income was far away from satisfaction.

I am still exploring profit models for the Widget. In this field, I can be counted as one of the pioneers worldwide. With the thriving of SNS, many sites are following the lead of Facebook along a path toward Open API. In the future, the focus of the Widget is expected to extend from Blog to SNS. How to help this emerging service to find a profit model has become an interesting topic. ( 2008/05/04 - By Digitalwall.com - Way to China Internet/Telecom )

- Read More

Prev : Great Changes in Wireless Internet Industry (4) Apple's Strategy

Next : Glimpse into Profit Model of SNS-based advertisement

- Today in History

Initial Experience of Widget's Profit Model - 2008/05/04