Introduction

MySpace and Facebook satisfy a fundamental human need to communicate and be heard

Whenever the term Web 2.0 is mentioned, you can be certain that the phrase 'social networking' will not be far behind. Social networking websites like MySpace and Facebook are regularly topics of discussion in the general media, not always for positive reasons. Stories about the value and empowering qualities of these websites are being matched with negative tales of them enabling children to bully their classmates and for containing ultra-right wing political advertising.¹

Social networking has many similarities to the early days of texting, when adults were amazed why young people spent so much of their time keying messages into their mobile phones. The same bemusement exists about the ability of MySpace, Facebook and Bebo to attract over 184 million unique visitors in a single month.²

The ability of social networking sites to generate these huge volumes of web traffic is proof of their huge popularity. But there must be a hard business rationale to these sites to persuade Rupert Murdoch, somebody who avoided investing in web companies during the dot.com era, to pay $580m for MySpace.

This paper investigates what is driving the fascination with social networking and how this phenomenon is likely to develop. In particular, the paper proposes and will hopefully prove the hypothesis that social networking is intrinsically age-neutral and will evolve to become a commodity application of the web.

What is social networking?

Social networking

Like all things related to Web 2.0, social networking has numerous definitions. These are three viewpoints from the perspective of strategy, research and technology companies.

The last thing that marketers need is for the author to propose yet another definition of social networking. What is far more useful is a checklist of the building blocks that constitute social networking functionality.

The contents of this list are based on an article by Danah Boyd that is in preparation for the Journal of Computer-Mediated Communication.⁶

The overarching thing about social networks is that they are driven by their members. The website owner establishes the style of the network, provides the functionality, creates/imports content and sets the rules. But it is the ongoing levels of activity of the network users that determine the site's continuing success.

Social networking's short but eventful life

History

The use of the internet as a networking mechanism has its origins long before the birth of the web. Usenet is a distributed messaging system that has operated since 1979, providing a forum for people to discuss online. It also enables rich media file sharing. Unlike today's social networking sites, it is an 'open' distributed system that is not owned or controlled by anyone or any company.

The first web-based social network site (SixDegrees.com) was launched in 1997. This site allowed users to create profiles, list their friends and to contribute messages to bulletin boards. At the height of its success, the site had 1 million fully registered members. The site was sold in 2000 for $125m.

The UK's first major experience of social networking came in July 2000 when Friends Reunited was launched. This site allowed people to create a profile of themselves based on the schools they attended and to establish contacts with old classmates. At the end of the first year of its life, it had 3,000 members. A combination of intense press publicity and the human fascination of learning what happened to old school friends drove the membership to 4 million members in 2001 and 8 million by the end of 2002.

In 2005, Friends Reunited had over 15 million members and was sold to ITV, the British TV company, for £120m.

MySpace has a similar story of mega growth. The site was launched in 2003 and was initially used by the music community and its fans as a networking mechanism. Teenagers began joining en masse in 2004. As the site grew, three distinct populations began to form: musicians, teenagers and an older urban audience. By mid-2006, the site had over 100 million members.

Facebook has emerged as a competitor to MySpace. Unlike the other social networking sites, its origins are in academia rather than the commercial world. Launched in early 2004, it was a networking forum for students at Harvard University. Membership was expanded to other universities and then a separate network was created for US high schools. Since late 2006, the network has been available worldwide to all users. In July 2007, the site had over 34 million active members. This amazing growth prompted Microsoft to take a $ 240 million equity stake in the company, valuing Facebook at $ 15 billion⁷

All these websites started life with a narrow target audience. The explosion in their user base was matched by a broadening in the profile of their audience. MySpace and to a lesser extent Facebook have become generic networking sites with no discernable market focus.

All these social networks are profile-centric sites. At their core is the personal details' database of the members. Not all social networking sites are so ego-centric and based around the individual's profile.

The following three popular websites contain some elements of social networking functionality but are based on a primary application that is not associated with the individual's profile.

• — Del.icio.us (now part of Yahoo!) was launched in 2003 to provide its users with the ability to save and share their website bookmarks on the del.icio.us site.
• — flickr (now part of Yahoo!) was launched in 2004 as a website where people can store and share their photographs.
• — YouTube (now part of Google) was launched in 2005 and provides a website for users to upload and share videos.

Four factors

The short eventful life of social networking is characterised by four factors.

1. Frenetic growth: According to the Hitwise,⁸ the online intelligence service, the market share of internet visits to the top 20 social networking websites grew by 11.5 per cent between January and February 2007 to account for 6.5 per cent of all internet visits. If YouTube is added to these figures, it would increase the figure to above 10 per cent of the internet's traffic.

2. Rapidly acquired by other web companies: Social networking sites have become acquisition targets for Media and web companies.

Google, Yahoo, News International and ITV have bought themselves a presence in the social networking arena. The detailed rationale for these acquisitions differs but all have a common theme of wanting access to the enormous audiences these sites command.

Not surprisingly, these site's high valuations has attracted scores of new market entrants, all looking for a similarly large capital appreciation.

3. Fast migration from specialist to generic audience: All the large social networking sites were created to cater to specialist audiences but rapidly broaden their appeal and loosened the constraints on who could become members. Up until recently, the one characteristic of the target audiences that remained constant was the implicit age of the user. All these sites, with the exception of Friends Reunited, were aimed at a young market (under 25 years old).

4. Dominance of a few players: The Hitwise research shows that in the US, MySpace is by far the most popular social networking website. Figure 1 shows the dominance of the top three sites, attracting over 90 per cent of the traffic. More importantly, MySpace and Facebook attract over 70 per cent of all US advertising revenues to this category of site.⁹

Figure 1.

Market share of visits in the US to the top social networking sites
Source: Hitwise

Full figure and legend (16K)

The analysis of the worldwide use of social networking shows a greater distribution of traffic over multiple sites. This is illustrated by the comScore¹⁰ research in Figure 2. Even this analysis shows MySpace as being twice as popular as its nearest rival.

Figure 2.

Worldwide daily visits to selected social networking sites

Full figure and legend (14K)

There is a significant difference at a national level in the importance of the different websites. In the UK, Bebo¹¹ is the most popular of all the sites with, 10.7 million unique users, ahead of MySpace's 10.1 million and Facebook's 7.6 million.

In August 2007, Bebo became the most popular website in the UK,¹² attracting 8.6 billion page views, compared to Google's 8.46 billion.

Social networking is becoming an age-neutral commodity

Social networking websites are becoming age-neutral

In the August 2007 edition of BusinessWeek, there was an article titled: 'Fogeys Flock to Facebook'.¹³ This is an amusing way of stating the most significant trend that is affecting social networking websites — they are becoming age-neutral.

The age profile of the two largest social networking sites (Facebook and MySpace) is shown in Figure 3.¹⁴ Contrary to popular belief, the largest age group for both sites is in the 35–54-year age group. The numbers of Facebook members in the 55+age group are similar to the percentage aged 12–17 years.

Figure 3.

The demographic profile of visitors to Facebook and MySpace. August 2006.
Source: comScore Media Metrix

Full figure and legend (70K)

This rapid change in the age profile of the sites is further illustrated by the analysis in Figure 4 that shows the age profile of MySpace moving from the 12–24-year-old age group to those aged 35–54 years.¹⁵

Figure 4.

The change in the numbers of MySpace users by age group during the period August 2005–August 2006.

Full figure and legend (51K)

There are four reasons why these sites are attracting an audience with a wider range of ages.

1. For the past two decades, there has been a tendency for an early adopter of technology to be young. Often the technology is associated with fashion, fad and a sense of belonging (ie Texting, VoIP, Instant messaging). Where these technologies have an underlying ability to deliver real benefits, then they soon migrate to older age groups. Social networking is following this pattern.

2. A few social networking sites were established for the business community, the best example being LinkedIn.¹⁶ Some of the consumer sites, especially Facebook, are evolving to facilitate networking in both an individual's personal and business life. This has led to Facebook experiencing an influx of older people, in their 30s and 40s, mainly in the high-tech sector. The reasons for these people to use the site are partly driven by fashion; however, to attract 16,000 members from Ernst & Young and 8,500 from Citigroup suggests that there is a real business application at work. It is rumoured that Microsoft, Facebook's largest business partner, is involved in extending the site to become a tool for professional business networks. Increased advertising revenue is the carrot driving this development. A recent article in Business Week (The Water Cooler Is Now on the Web¹⁷) provides a graphic description of how companies are rushing to add networking functionality to their internal systems.

3. Like any social meeting place, people congregate together with like-minded types. While this sounds like a statement of the obvious, it created considerable controversy when first articulated in an article by Danah Boyd.¹⁸ The fact that the article's title contained the words 'class divisions' probably explains the extreme reaction.

As these profile-centric social networking sites mature, they have to develop to reflect the heterogeneous nature of their users. There is a short window of time that they can be all things to all people. As sites develop their own culture, some will target the young teens (eg Bebo) and others will naturally evolve to appeal to an older age group.

4. Social networking functionality is being adopted by the corporate sector. McKinsey's survey¹⁹ of the way companies are using internet technologies found that 37 per cent of the executives interviewed were using or planned to use social networking functionality within their companies. The research study conducted by Melcrum²⁰ found a slightly higher penetration of social networking within corporates (41 per cent).

Social networking is also being adopted by Government agencies. This is illustrated by the announcement from The Director of National Intelligence, the agency that oversees all of the America's 16 intelligence agencies, that it intends to launch an 'A-Space', described as a 'Myspace for intelligence analysts'.

Profile-centric social networking functionality appears destined to become standard functionality within large companies, resulting in users of all ages being connected.

Surge in social networks aimed at older audience

As is discussed in the next section, the potential commercial benefits of capturing a Web audience of older users are creating a surge in social networks that are aimed specifically at the older audience.

Eons — Social networking for an older audience

Jeff Taylor founded Monster.com in 1994 and grew the company into the largest global online employment business. In August 2005, he left Monster to start Eons, the world's first venture capital-funded social networking website for the over-50s. The site was launched in August 2006.

There have been other websites providing online forums for older people. The US's premier organisation for the over-50s (AARP) has had this functionality for the past 3–4 years.

Eons

Eons was the first profile-centric site, aimed at an older audience that adopted the same technologies and marketing approach as MySpace and Facebook. This excerpt from the press release,²¹ issued to commemorate the first 12 months of the operations, describes the company's purpose and its performance. 'Eons defined the market for online social networks for 50-plus when it launched last summer,' said Jeff Taylor, founder and CEO of Eons. 'More than 5.5 million people have visited Eons since its launch and the growth in that time to more than 560,000 profiles and nearly 2,500 Eons communities sends a message loud and clear that online social networking isn't just for kids. Boomers are loving life online, and Eons is the center of gravity for everything 50-plus.'

The value proposition of Eons is very simple and is similar to most sites aimed at a younger audience. Users of the site can do two things. They can network with other users and contribute and consume content. These applications are shown in Figure 5.

Figure 5.

Components of functionality on the Eons website

Full figure and legend (73K)

Networking

The users can:

• — search for other members and establish contact
• — send and receive messages from other members
• — append message to the profile of other members.

All of the communication is under the control of the user, who can decide to receive or block messages. This type of dialogue looks (and is) very similar to e-mail. The big difference is that at the moment, it is limited to the 'walled garden' of the social networking website.

Content — user generated

Eons

User-generated content provides the individual with online mechanisms for expressing themselves and other website members with fresh and original content.

This content can take the form of:

• — Blogs (which operates in a similar way to Blogger and Typepad)
• — Special interest groups (Over 2,000 groups ranging in subjects as diverse as Fun, Flirting And Sex After 50 Through to Cajun Cooking)
• — Commentary on articles
• — Videos and photos.

Content — added value

User-generated content

This content is divided into three categories. The first is articles and commentaries, sourced by the site owner, that are thought to be of interest to the users.

The second type of content is games (eg Mahjongg, Black Jack and Scrabble). The games can be played by the individual or simultaneously by multiple members.

Finally, there are Web Widgets. These are small computer programs that are added to the member profile (eg Calendar/clock, real-time news).

In addition to all this functionality, Eons provides features like:

• — A Politics microsite with online presences and profiles of the 2008 presidential candidates. This website brought together Hillary Clinton, Barack Obama and John McCain into a single discussion forum.
• — The Longevity Calculator, which is a web-based life expectancy calculator specifically targeting 50-plus adults.
• — Obits is an online obituary database that sends out alerts when people die and allows individuals to create obituaries for their loved ones.
• — Cranky is an 'age-relevant search engine' that identifies websites that are particularly relevant to an older person.

The high-profile launch and first-year celebrations of Eons's birth have been followed by less glamorous headlines. In mid-September 2007, the company announced that it was making between 35 and 50 per cent of its staff redundant.²² The reason given by the company for this sudden change in fortune was the need to 're-focus' on the core application of social networking, which really means it needs to radically reduce expenditure. It is impossible to know whether this is a regrettable 'hiccup' on the company's growth path or reflects a more fundamental flaw with the business model. Eons might be the first casualty of the faulty marketing premise that age is a sustainable way of grouping people together.

How will social networking develop?

Added value content

Social networking is here to stay. The process of people communicating and exchanging information is one of the oldest applications of the internet. Since it has been given a name and subsumed by Web 2.0, it has taken on the same totem symbol of sexy youth-centric technology that texting once held for mobile phones. Even though it is still evolving, it is possible to speculate about some of the ways in which it will develop.

The most often asked question concerns the hype surrounding MySpace and Facebook and whether it is creating a valuation bubble that will burst in a similar way to the dot.com companies. There are numerous MySpace 'look-alike' sites appearing. Most of them are aiming at the youth market but in 2007 there have been at least two new websites a month targeting older people. The highest profile launch in the UK was SagaZone. This site had achieved 27,000 member profiles within nine months of launching in March 2007.

Who and where is the audience for these new websites? Is it reasonable to expect people to have multiple memberships of different networking sites? All of evidence suggests that the 'first mover advantage' principle applies to generic social networking sites. Unless the new sites have real, tangible advantages, or appeal to a new or highly vertical sector of the market, it is hard to see how they will reach the critical mass to survive.

An example of a new website that focuses upon a sub-segment of the market is grandparents.com.²³ This site is aimed at the same age group as Eons but focuses exclusively on the issues that are relevant to grandparents (ie what birthday present to buy the grandchild). The site contains generic social networking functionality that is focused on making life easier for the grandparent.

Social networking is here to stay, but many of the websites attempting to follow the mega growth of the founding companies may not be around for too long.

Development of social networking

As MySpace and Facebook try and broaden their appeal, by evolving and becoming multi-age, multi-interest and multi-everything, they run the risk of stretching their appeal too far. Yahoo and MSN provide an example of how companies started by providing dedicated service (a search engine) and continually added functionality with the goal of becoming multi-service portals. The risk they ran was that a new market entrant would capture the audience for their prime application. In the US,²⁴ the 'new' entrant Google now has just under a half of all search engine traffic. MSN and Yahoo combined have approximately a third.

So far, the channel of delivery for social networking has been limited to the web. This is already changing with the announcement by MySpace that it plans to launch advertising-supported versions of its web platforms on cell phones.²⁵

The following are some of the other ways in which the type of users and the business model of social networking are likely to develop.

It will become a commodity application

Over stretch

The great majority of the 50-plus will use social networking functionality and be oblivious to the fact. Unlike the current crop of generic social networking sites, real volume adoption will result from it being part of an interest/industry/company/activity website. It is likely that most large, web-literate companies in retail, travel, healthcare and consumer electronics will be considering how to use social networking to increase eye-fall and the networking effect of their web presence. If they are not, they should be.

There will be pressure to make the networks 'open'

Facebook, MySpace, Bebo are 'walled gardens'. This means that communications between users and access to information are restricted to members. This is very different from the 'open' nature of e-mail and the web.

Companies are starting to create more open and accessible platforms, allowing personal data to be shared with other networks and making it easier to interface with other web service providers. For example, Facebook is making its member profiles available to search engines so that non-members can find out who has a profile on the site. The company has allowed Amazon.com to create an application that enables Facebook members to write book reviews, share them with their Facebook friends and buy books from Amazon. Bebo has parterned with Microsoft to create an instant-messaging service that will have some compatibility with Microsoft's own services. E-Bay is talking with both Facebook and MySpace about making it easier for their members to access the auction site.

It will be easier and cheaper to acquire the functionality

The first generation of social networking sites was bespoke and expensive to create. This is changing. New generations of web software companies are providing inexpensive tools that enable new sites to be created and companies to embed social networking into their existing web platforms.

The main companies providing these tools are Affinity Circles, Social Platform, Joomla and Ning.²⁶

While the cost of web functionality is declining, it is only a small part of the cost of creating a thriving social networking presence.

Social networking is limited by the finite time users can 'socialise'

It is a statement of the obvious, but there is a limit to the number of social networks a person can join and the time they can spend online. There has undoubtedly been a 'fashion' element to explain the success of MySpace, Facebook and the other high-profile social networking sites. The demand created by the trendiness of online socialising is transient and will transfer to the next trendy technology innovation.

Research from Hitwise²⁷ provides an insight into the relative numbers of enthusiast and active users of these sites and those who are passive and casual users. The company found that only 0.2 per cent of visits to YouTube resulted in users uploading a video. An even smaller proportion of visitors to Flickr uploaded photos. Only the social encyclopaedia Wikipedia had a significant amount of participation, with 4.5 per cent of visits to the site resulting in content editing.

McKinsey's research²⁸ concluded that between 5 and 10 per cent of users to participatory media websites contributed 50 per cent of the content.

Social networks are only successful when the volume of members and content results in the users obtaining tangible benefits. As the number of networks increases, the chances of attracting a critical mass of users becomes increasingly difficult.

Key messages for marketers

Likely developments

The desire for people to network online is not a transitory fad. It is here to stay. The danger for marketers is to conclude that the first phase of social networking websites, like Facebook and MySpace, is the beginning and the end of the story.

As this paper has demonstrated, we are already seeing an increasingly diverse range of people using these networks. This is matched by an explosion in the ways in which the networks are used and the benefits they deliver. These trends will continue.

Marketers should be asking themselves: 'what is the best way for my organisation to react to the threats and opportunities of social networking'? The answer might well be that social networking is irrelevant to their business. It is vital that the question is asked and answered.

The following are a set of actions that will assist marketers to decide whether (and how) they should react to these new technological developments.

The only way to understand how it works is to get involved

There is no substitute for becoming an active social network user to understand the practicalities and the emotional factors that are driving their use. Wikipedia contains a list of the most important sites.²⁹

All the applications associated with Web 2.0 are moving so rapidly that the traditional marketing media provides little more than a historical snapshot of what has happened, rather than an insight into today's developments. There are numerous blogs that cover the subject. Subscribing to the RSS feed of Mashable,³⁰ which is the leading commentator about the industry, provides the simplest way of keeping informed.

Forget the stereotypes and assumptions and look at the facts

The image of social networking users being geek members of the Echo Boom Generation was a stereotype that was never correct, but is now dangerously misleading. Social networking users are a heterogeneous group that is becoming increasingly more diverse.

Age and social class is no longer a valid proxy for predicting how consumers will react to these websites. There is a constant stream of user research being published by Hitwise, Nielsen//NetRatings and comScore. Marketers have no excuse for not being well informed.

You must have a compelling proposition

The notion that all companies need to do, to exploit Web 2.0 technology, is to provide consumers with a website containing social networking functionality and a smattering of content is wrong.

Social networking is here to stay

For consumers to use a company's social networking functionality, there has to be a compelling proposition. The consumer is being asked to exchange a significant amount of their time to create and populate their profile and provide user-generated content. In exchange for this effort, the user benefits must be tangible and simple to understand.

There are similarities between the state of evolution of social networking and the growth of portal websites, during the dot.com boom. The success of sites like Yahoo resulted in numerous new portals being created, often with the financial backing of major brands. Few of these ventures succeeded because they assumed that portals were about clever web technology rather than delivering user benefits.

Technology and the design of the web application is only part of the consumer experience, when using networking online. The clarity and uniqueness of the marketing proposition and the quality of the execution is what determines success or failure.

Consider all of your options

Compelling proposition

The following are the main ways in which companies can exploit social networking.

• — Work with and use the functionality of the large generic sites. For instance, Facebook enables developers to build applications that work directly within the site (Facebook Platform³¹).
• — Create company or brand-specific sites.
• — Provide content to generic sites.
• — Imbed social networking functionality with the company's existing online presence.
• — Advertise on the generic sites. Both MySpace and Facebook enable companies to target their advertising to appropriate member profiles.

The final alternative is to do nothing. For many companies, this will be the most appropriate strategy, but should only be pursued following a rigorous evaluation of the alternatives.

Decide how you will measure effectiveness

How marketers measure the effectiveness of their social networking investment is becoming increasingly difficult. New techniques in the way in which websites are created and the channels used by people to access content have made it much harder to measure the volume and extent of user interaction.

The Marketer is not expected to understand the details of these technologies, with mystical names like AJaX, Widgets and RSS. What the marketer must understand is the changes they are creating to the usefulness of traditional web analytics — especially when related to social networking.

References

1. 'Advertisers quit after Facebook's BNP gaffe', Financial Times, 3 August 2007.
2. 'Traffic to MySpace, Facebook and Bebo in June 2007', http://www.comscore.com/press/release.asp?press=1555
3. 'How businesses are using Web 2.0', The McKinsey Quarterly, March 2007.
4. Social Networking Websites and Teens, 3 January 2007.
5. http://en.wikipedia.org/wiki/Social_networking
6. A work-in-progress introduction to the JCMC special Issue on Social Network Sites by Danah Boyd and Nicole Ellison, http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.html.
7. http://www.news.com/the-social/8301-13577_3-9803872-36.html?tag=head
8. http://weblogs.hitwise.com/leeann-prescott/2007/05/facebook_visits_up_106_since_o.html.
9. eMarketer Report: 'Social Network Marketing — Where to Next?'
10. http://www.comscore.com/press/release.asp?press=1555
11. comScore research about the popularity in the UK of Bebo, http://blogs.zdnet.com/social/?p=279
12. New Media Age announcement of Bebo becoming the UK's most popular website, http://www.nma.co.uk/Articles/34998/Bebo+takes+Google's+top+spot+of+most+viewed+website.html
13. Business Week article: 'Fogeys Flock to Facebook', http://www.businessweek.com/technology/content/aug2007/tc2007085_051788.htm
14. comScore research showing the age profile of Facebook and MySpace members, http://www.comscore.com/press/release.asp?id=1019
15. Change in the number of MySpace users during the 12-month period until August 2006, http://www.comscore.com/press/release.asp?id=1019
16. LinkedIn is a network of 13 million business people in 150 industries, http://www.linkedin.com
17. 'The Water Cooler Is Now on the Web', BusinessWeek, September 2007, http://www.businessweek.com/magazine/content/07_40/b4052072.htm?campaign_id=nws_insdr_sep21%20&%20link_position=link3
18. 'Viewing American class divisions through Facebook and MySpace', http://www.danah.org/papers/essays/ClassDivisions.html
19. How businesses are using Web 2.0 — A McKinsey Global Study, conducted in January 2007.
20. 'Social media adoption by large corporations worldwide: a survey of 2,100 companies', http://www.melcrum.com/pdf/press/SocialMediaResearch.pdf
21. Eons press release after 12 months of operations, http://www.eons.com/about/release/pr_20070813
22. Dick Stroud's 50-Plus Marketing blog, http://www.20plus30.com/blog/2007/09/eons-wobbles-what-lessons-for-50-plus.html
23. www.grandparents.com
24. Search Engine Watch, http://searchenginewatch.com/showPage.html?page=2156451
25. http://uk.reuters.com/article/mediaNews/idUKN2426299720070924
26. http://affinitycircles.com— http://socialplatform.com— http://www.joomla.com— http://www.ning.com
27. General Manager of global research at Hitwise,
28. 'How companies can make the most of user-generated content', McKinsey Quarterly, August 2007.
29. List of the most important social networking sites,
30. Mashable — the largest blog about social networking,
31. Facebook Platform,