The Social Mine
2008-06-02 11:37AM PDT/Work
Social Networks like Facebook have not yet generated a significant amount of revenue, not compared to search. And everything gets compared to search these days. The many-billion dollar question seems to be, can they? And if they could, how?
With those questions in mind, some interesting research on how the neighbors and family members of lottery winners spending changed appeared in the The Economist which references The Social Effects of Unexpected Income, which in turn references the original research The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery. Could this "keeping up with the Joneses" effect be the major revenue source for Social Networks? The most interesting quote was this,
"Still, we do find that households’ consumption of visible, durable goods (and only such goods) are affected by genuinely exogenous shocks to their neighbors’ incomes. We find these effects intriguing and deserving of further study..."
Note the emphasis on visible durable goods. In particular they were able to isolate car purchases and exterior home renovations. So clearly, the effect is real and I think we've all experienced it to some degree in one form or the other. Just this weekend for example, my kids, after playing on a neighbor's Wii, started asking for a Wii of their own. It happens.
You could argue that Facebook in particular has already tried to exploit this weakness of ours with their beacon network by making the purchase of a product or service "visible" to a user's "neighbors". The privacy implications of beacons aside, it would be interesting to compare the impact of say, the purchase of a car on physical neighbors vs. the reporting of the purchase of a car on a social network.
In a similar vein, according to TechCrunch Like.com is matching ads to items which appear in profile pictures on Facebook. And again it would be interesting to compare the physical vs. virtual impact. As an aside, I've been reloading my profile again and again to see if an ad for Red Sox caps appears, but so far no luck.
So the first attempt, beacons, has been a failure because of the privacy issues. Promoting what would normally be non-visible purchases as visible without expressed consent created a backlash, and for good reason. Matching products in public profile pictures is too new, and I know of no reliable data on the results of a campaign but at least it won't run afoul of privacy concerns. It'll be interesting to see what gets tried next.
Update 2008-06-25: Venture Beat Are social ads getting too much? Try "FriendRank" looks at SocialMedia's "FriendRank" offering, an attempt to monetize social network sites. Apparently it relies on interacting with an ad, ranking it, or suggesting it to others. The example they give is a movie trailer. Unfortunately I'm having a hard time seeing this work on anything but a movie trailer and perhaps a few Superbowl class ads. But it wasn't clear what exactly they were up to, I'm sure there's more to it.