I’m heading back out to the water, just in case the last of the surf swell we’ve had this week is still pushing in this afternoon. There’s a stiff breeze off the water, so there may at least be some minor wind-slop. Who cares – it’s a sunny day in January here in the ol’ MIA, air temperature 78 degrees, water temperature 71 degrees – good day just to get out in the water for a bit.
That being said, I wanted to quickly post on something I’ve been thinking about since speaking with a friend of mine the other day about the guys in Orlando recently selling MyBlogLog to Yahoo! for an estimated $10 million. The first thing asked by my friend – who is, like most people, much more astute than I – was “so, what’s the value in it?” After explaining to him the concept of the site and its application(s), he responded with: “That sounds really cool. So how does it make money (other than by selling to Yahoo)?”
Ironically, my friend also had a similar question when I first brought to his attention the concept behind ThisNext.com several months ago.
If you’re not aware, ThisNext, as well as Crowdstorm and others, are also social networks. However, these “social shopping networks” refer users to products by measuring the buzz around said products. The users view the rating on the sites or via widgets, and they can see recommendations from friends and other people they trust. There have been a number of these “social shopping” sites sprouting up around the internet, and it seems that more are trying to break into the crowded space every day.
Admittedly, Crowdstorm and ThisNext base their model on a proven aspect of eCommerce, that Customer Reviews increase sales. I understand the concept and indeed, I myself was contemplating pursuing something similar last June. However, there have been a number of questions raised concerning the viability of such networks, as “they are great for SEO as they bring some UGC (user-generated content) to shopping sites, but are not that useful to choose a product.” Moreover, myself and others still don’t fully understand the business model behind these sites. As aptly noted in the latter cited article:
Great, sounds fun and will most likely lead to more people buying products online, although the more likely effect is the same people buying more products online.You are able to recommend items, blog about them and search for the product on eBay, but unless there is some behind-the-scenes revenue sharing with eBay, this site seems to have the same chance of turning a profit as Digg.
Similarly, the same can be said for the other social networking sites noted above – such as my favorite, MyBlogLog. However, the effect is even more pronounced with respect to these networks since there is apparently no way to monetize on these sites, as there potentially is with respect to ThisNext, CrowdStorm and other “social shopping” sites.
Don’t get me wrong, I am extremely happy for the guys over at MyBlogLog, one of whom recently visited this little train-wreck I’m driving. I congratulate them on quickly building out a project and successfully executing on an exit strategy (with regard to their ownership interests, at least). However, I’m with another commentator, who noted that while “[t]hey took an okay stats system and made it into something pretty interesting[,] I just have to wonder what Yahoo is going to do with the data.”
The bottom line, and the problem with all of these sites, is that like many other social sites functioning on votes or reviews, all of these companies really only provide value to companies and/or persons besides themselves.
The gent at Varien asks Yahoo the rhetorical question “what are you going to do with all these great technologies to make our lives better?”
I would ask that question, but I would also follow up by asking Yahoo, ThisNext, CrowdStorm, and the other “social networking” companies a much simpler question:
“How do you plan on making money off of these technologies?”
So sweet of you to visit and ask how my weekend was going! Hope yours is also good.
Yahoo! is asking itself the same question. I recently attended a conference on Creative Rights and while the business model is currently based on ad revenue it’s going down with the enormous number of sites being created every second all vying for a piece of the pie. They’ll have to think up something else but I don’t think they more than we do.
Thanks Tisha nice to here from you too. Interesting about the conference. I’m heading out to surf, but I’m curious to learn if anyone there discussed the renewed problem of paying such amounts for unproven quantities. More importantly, I’m curious if anyone has any answers as to how to stem the tide or how to instead adequately monetize on the technologies.
Hey Matt, thanks for the link. I haven’t received any comments from Yahoo or MyBlogLog, which IMHO isn’t a good sign for things to come.
For the most part, generally speaking, the value or commidity of a ommunity driven site is the content provided by the users. Information, about whatever, localized.
The accumulation and aggregation of that information is valuable to marketers specifically. It’s like the car dealerships of 70s and 80s selling off their mailing lists . Which is now illegal. This time around, we’ve agreed through terms of use clauses and the mailing list is more then just an address.
If you’ve ever used a Find/Replace feature in a word processing program then this might make sense,
A company can, because users tag their information and content, search for users with keywords. It’s like a reverse lookup for performing a case study about a proposed product or book, or whatever a company might sell.
Companies can data mine a consumer instantly. For the first time ever, information is relevant to the moment.
As for making money, access and information now allows marketing and advertising agencies to literally commidify dissent, pleasuer, interests, products, hobbies etc. Some believe ROI can be gauged down to the dollar.
Just a thought. Nice post.
Tris, thanks, yours was a good article – needed linking. And as for Yahoo & MBL, that’s interesting. We’ll see.
Marc, I had considered the option of these networks getting mailing lists, etc. out of this (with some really good demographics as well). However, is that, in fact, the underlying model with respect to any, or all, of these social networks? Many times policies and T&C’s are written to handle contingencies, even if not tied to a current business model. Is list sourcing actually the model any, or all of these guys are using? And if so, what’s the ROI? And is it sustainable? Or am I irrationally thinking that it feels a bit like its 1995 again?
Umm–Good point. Here’s the thing, I could prove without a doubt, x% of the market will be interested in your product. Without giving you specific data. Only exact percentages. Myspace was quickly turned into an advertising machine. Blogs adopted this method quite nicely long before a social network was developed. As an adman myself, I look forward ( on some levels ) to this model getting bigger.
I can create more relevant messages and be less intrusive overall. Ideally more ethical with my communications. Because the web is multi-tiered, without a pinnacle ( which is great ), targeting is very difficult. Companies want real-time data. Hopefully, this will be about creating relevancy for tomorrows products and services. Not recycling the techniques of the nineties or pawning of shit consumer goods because the market is still ignorant on some levels regarding technology. A fear perpetuated in the late seventies and early eighties by boomers.
Since the market is trying desperately to keep up with the pace of internet technologies ( which is silly ), I’m not sure ROI has to be sustainable anymore. The market is beginning to expect a new product, service or campaign every three months. Consumers are expecting a quick turnaround. They want it.
A more positive spin on all of this, aside from business. Is that that thoughts and ideas will inevitably succeed and fail on their own merit. No one authority approving or dismissing ideas but, a collective effort, like dropping black and white pebbles in the vase. Communication and education leveraged, without socio-economical/language barriers of the past. Products and services forced to be beneficial. People can’t be lied to anymore. Here is where I still draw a blank. What happens then? It’s like a quasi-division of labor/profits model.
And furthermore, companies don’t have the control over the perception of their goods and services anymore. They need a place to listen to consumers.
Let’s put it this way, the had more questions than answers and all these very important issues you bring up were precisely those they raised.
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