Anatomy of a Successful Social Network

I wake up – check MySpace, take a shower – check MySpace, check MySpace after lunch, before and after dinner, and twice before bed. MySpace, MySpace, Myspace…

Social networks suck. There is a new social network launched every other day, and they suck as well. Somewhere along the line, the evolution of social networks took a wrong turn, and we the consumers are left to choose bad from worse. Every new social network created today imitates the mistakes of the predecessors before them. For instance, it has become a standard to make site maps difficult to visualize because their primary demographic, teenagers, have all the time in the world to figure them out [1]. Fortunately for us startups, though, we can pay attention to the failures of the existing social networks and figure out what not to do the next time around.

The Nobel Prize winning free-market economist, Milton Friedman, believed that when left alone, people will intelligently act in their own best interest, and that the market will coordinate their actions to produce outcomes beneficial for all. In other words, the wisdom of crowds depends upon the rational wisdom of the individual. Friedman was a genius, but he never came across MySpace or he would have retracted his belief on consumer rationality. MySpace and its cousins are bacteria feeding off the irrationality of the wisdom of the crowds. MySpace has taught us that even though the customer is not always right, it is, nonetheless, detrimental to prove them otherwise.

MySpace Garbage

If my statistical software is correct, 80% of the people visiting this page will leave within the first 30 seconds of their visit [2]. Such is the attention span of today’s web user. Now, as I glide through the many social networking sites, I can hardly come across one that is inherently easy to navigate through [3]. I have an incredible attention span of about 5 minutes; if I can’t figure out how to edit my profile within that time frame, I will simply leave the site. I wonder how many potential members Friendster has lost this way. Well who cares, they have plenty already, right? [4]

Social networks these days are under the misconception that user activity can be increased by providing wide variety of features, such as blogging, polls, whiteboards, flash videos, etc. This pattern is recurring in major players such as Bebo, Friendster, MySpace and Facebook. In reality, though, the majority of users try features such as blogging or polls just once or twice before moving onto something more fulfilling. These extra features end up putting extra burden of information on the already overloaded users. In order to increase user activity, social networks need to circle their users around common grounds that make sense to their bottom line.

These days, once I sign up for a social network, I sweep through various corners of their network to examine what works and what does not. For the most part, I haven’t found anything remarkable; almost each of these has the standard features, i.e. a blog, comment area, album, song/videos widgets, etc. Once in a while, though, I do find something worth noticing. In this article, I will reveal the good, the bad, and the ugly.

In the land of trolls, spam, choice and infinite features, there is an opportunity to make a social network that works. Here is a compilation of a few thought provoking ideas:

Users don’t think what we think they think

Women are the chief consumer officers of the house. Evidence suggests that these primates evolved primarily for the purpose of shopping [5]. For instance, the other day, I observed my mother spend half an hour on deciding what color tissue box she should buy. After pondering over the hard choices between pink, blue, green, and rainbow for a considerable time, she finally gave up and decided to buy them all. The point is, if a choice is present, perfectionists spend a ridiculous amount of time over simple decisions. Such is the mentality governing users of today’s social networks. We are caught up in a web of choices; indeed, the core reason behind MySpace’s success is that users rule. The fundamental driving force behind the success of many social networks is choice. MySpace might suck, but it gives its users ample of choice. Once a user has invested an hour of their life customizing their profile, they are not likely to leave the site anytime soon. Not surprisingly, MySpace has become the Internet’s equivalent of crack; after a few doses of it, users just can’t stop using it.

On the other hand, while choices make a social network addictive, it also undermines the advertiser’s ability to monetize the site. The ability to monetize profiles is inversely proportional to the square of chaos within. As Wired Magazine puts it,

In an online advertising market increasingly dependent on the Net’s ability to precision target ads, MySpace offers no sure way to hit the bull’s eye. Google decides which ads to show based on search terms and page content. By contrast, a typical MySpace pageview doesn’t offer much of a clue about anything. What conclusions can you draw when kid A bounces onto kid B’s profile and leaves the message ‘Wazzup?’

MySpace and its counterparts have taught us a lot about the new economics of the social network, and people in general; people choose when given a choice. When given the choice to embed videos or put up animated GIF backgrounds, guess what happens? Even the savviest geeks avail that choice. Choice depresses us. According to ‘How Shopping Works’ leading research indicates that the many choices women must make on daily basis is the prime reason why they are more likely to be depressed than their male counterparts. So unless your market is the boobless teen, there shouldn’t be a dozen choices available for every decision. Make the key UI decisions yourself, and leave the rest to your users. It’s good for the advertiser and even better for your user.

Ads, ads everywhere

One thing I particularly dislike about Web 2.0 startups is their Web 1.0 approach towards displaying advertisements. It shouldn’t take an Einstein to realize where Google ads are appropriate and where they are not. For instance, after I click on “My Friends” tab in Hi5, I am displayed an ad of “Become a nutritionist” and “Should the government regulate gas prices?”. These ads are absolutely irrelevant to my interests, and there is no way in hell that I am going to click on them. Simply put, they are pointless and annoying. Note that there is nothing wrong with displaying ads as long as it makes sense to do so. If you have no ads on your site, you will not make money off of it. If you have too many ads on your site, nobody is going to click on them.

Hi5 Useless Advertisement

It is unfortunate that nearly every social network spam’s their own users with unwanted ads. The users are less likely to notice advertisements as the frequency of ads increases within a site. Even worse, because the users are so used to seeing ads popup, they might ignore them even when they do make sense [6]. Usability should always be prioritized over revenues. When a user chooses to spend 20 minutes of their life on your website, they could be spending that time anywhere else, but they chose your site. Don’t reward their loyalty with spam [7].

Business Plan

“Our business plan is to have no business plan”

- Unspoken Web 2.0 Rule

After a period of relative calm, the end is nigh. Religions are clashing, carbon emissions are increasing, polar bears are drowning and revenue less web based companies are making a comeback. As it turns out, there is such a thing as free lunch; countless startups offer it every day [8]. We Internet dwellers are victim of a generation of startups that have conformed their entire business model according to Google adsense’s Terms of Service.

A company that makes $100 a month off advertisements is a hobby, not a business. Most startups fail to even meet that target. Instead, startups these days rely on selling out through exit strategies. While it is a nice thought to sell out for millions to Google or Yahoo!, it is likely never to occur. The bottom line is that a business is not a business if it is not making money.

An interesting business model on the rise is revenue sharing. As more and more startup founders hit instant millions through quick sell outs, the users are beginning to revolt. In Web 2.0, the user is the programmer; so it is likely that the future social networks will democratize revenue sharing models. Between the year 2004 to 2006, people contributed content because they found it enjoyable. But as we transition into year 2007, users have increased expectancy. The user is beginning to demand compensations [9]. For the sake of survival, many startups will eventually have to pay their users or perish. So not surprisingly, companies that have introduced revenue sharing models have achieved instant success [10]. As this business model evolves, some very interesting economics of the web are going to come into play…in fact, God forbid, the Internet might just reincarnate for the third time.

Too many features, too little time

“First off, it’s hard to navigate – after much clicking around, I still can’t figure out what the structure of the site is. There are profile pages with a photo, a Hot Issues section, video clips, breaking news and polls, but no cohesiveness to the feature set.”

- Pete from Mashable discussing HotSoup

The biggest risk to all social-networking players is the flighty, unpredictable behavior of Internet users. Nobody can quite tell how long each affair is expected to last. A very short history tells us that if there isn’t enough happening at a site to keep visitors entertained, even a hugely popular site like Friendster–which skyrocketed to more than a million visitors per month during the fall of 2003–can lose steam quickly [11].

In an attempt to keep visitors hanging around, many social networks are integrating entertainment, such as videos, music clips, blogs, and instant messaging into their sites. But with each new update, social networks become harder to use and less interesting. “More is less” mantra is simply being ignored.

Most social networks trade traffic for usability. A feature, such as a blog, which many social networks seem to be adding, is pretty much useless if less than 1% of the active members will eventually utilize it! A big mistake people make here is implementing the feature set of the competition to get started. That’s a bad move; it’s like when you copy your friend’s homework you both end up with the same mistakes. Too many social networks are adding features that are interesting but not at all useful.

Reverse Domino Effect

While it may not seem so now, the consensus among the blogger community is that MySpace is a company doomed to fail; the giant will crumble upon its own weight and collapse. If this happens, its effects will ripple through every other startup. MySpace is the Google of social networks, so such an event will have significant implications on the future success of emerging startups.

There are dozens of popular social networking sites online and scores of others popping up everyday. The current trend in mainstream social networks will inevitably dry out as the market reaches super saturation. The perceived value of social networks, in general, is diminished with each new service entering the market [12]. Most startup bloggers are beginning to smell this awry state in mainstream social networks. There is no denying that something’s rotten in the state of Denmark.

User generated content sites, like Digg, are often rigged [13]; Facebook is no longer the exclusive community for students; MySpace has become a pedophiles source for soft porn [14]; Orkut is every spammer’s favorite toy, etc. The future of the big players does not look too promising. What happens when the tide begins to turn the other way and a few of my friends begin leaving? There is a very good chance that I will too. In fact, I already have on Orkut. This is the reverse domino effect. A social network brings about a tidal wave worth of users to the site but also has the potential to take them away. If most of your friends switch to Coke, what do you end up drinking?
If it is not vertical, then chances are the network will eventually reverse its momentum. When the bubble bursts, MySpace, Friendster, and most other mainstream social networks will hit the graveyard. As a means for prevention, most startups are either opening up to a larger demographic or introducing hordes of new features that are meant to keep their users interested. They are under the conception that more traffic equals more activity. So far, though, these moves seem to spike activity for a short duration. For the mainstream network, the long term solution has yet to be uncovered.

Niche is where the action is at

Within merely three years the web economics has drastically evolved, and it will continue to transform at ever increasing rates as we transition into the year 2007. For instance, it is no longer practical to develop the next big social network for teens or students…that was so 2005. Two things will change in the year 2007: First, the accumulative growth rate of niche social networks will outpace that of its much larger rivals, and second, some very interesting new models for online currency will emerge.

Zoomr Pickle minglenow Netvibes WeWin Pageflakes BlueDot dogster vibely flickr bebo orkut facebook YouTube

As of now, most mainstream social networks allow us to do pretty much the same things; contact friends, send email, post to forums, blog, etc. On the other hand, the niche social networks are expected to have these standard features in addition to services that are specific to that niche. For example, a social network for bookworms will have features that let its users showcase their favorite books. The generic social networks can never attain this goal unless they provide a framework to allow custom tools to be easily integrated (widgets on steroids). In the end, no one can predict where social networks are headed, but millions of people today still spend time on niche forums. This should be enough to give us faith in this market.

Moreover, it is likely that the real business models will emerge from the niche social networks. When you have something as massive as MySpace, it just becomes a giant playground with no real sense of community or belonging to anything. However when you are part of a smaller community it seems to provide a great value to the end user; that is, a sense of unity and purpose. A business product that caters to people with specific interests, say music, is much more likely to succeed in a niche social network for music fans than in MySpace.

Consequently, it has now become safer to favor companies that are specialist rather than generalist. A specialist is generally perceived to know more and have better chance at monetizing, than a generalist. But social networks require a critical mass to thrive. So it will be interesting to see how the smaller, niche social networks deal with their much smaller user base. Helping match people with content is a worthwhile pursuit. We’re already seeing a new wave of niche social networks that are building social-enabled sites around content-oriented channels – e.g. pets, books, music, cars, shopping, travel. Due to their focus, the niche startups seem prepared to tackle the potential social networking burst that lies ahead.

There may never be a site as big as MySpace again; so, not surprisingly, niche is becoming the new mainstream…go niche, it’s the future.

Conclusion

There are many sides to a successful social network, and the ones mentioned above are by no means a standard. In fact, a successful social network is one that breaks free from the standards, and in the process, helps alleviate the user experience by making the process as fluid as possible. It is the consumers who do all the work. Each individual consumer doesn’t do much, but, taken together, their efforts produce a remarkable resource. This is the principle behind social networks—to harness the power of the many. All else aside, the key factor impacting a social network’s success is content. User generated content is king.

Social networking can be great, as long as it can serve its purpose by connecting people in a meaningful way – and for a meaningful purpose. Design matters too, but not nearly as much as content.

Notes

1: As Alan Bennett put it, “standards are always out of date. That’s what makes them standards”

2: A typical MySpace profile takes at least 10 seconds to load. By that metric, I am guessing that most people simply leave the profiles before having a chance to look at them. Note that, short blogs and articles are a testament of the short attention span of the average web user. If they make them too long, people will simply not bother to read. I anticipate that most people will never read this article as well, simply because they can’t spare 10 minutes.

3: Exceptions include Digg and some other related sites. But many of these other sites, including Digg, are not really social networks in the traditional sense.

4: It is a commonly held belief that Friendster lost against MySpace because their page loaded a few seconds too slow. The bottom line is that users don’t like to wait, and they certainly don’t like to spend half an hour figuring out how to make something work.

5: This evidence is my own making.

6: The affects of this are quite noticeable. Many site owners, for instance, have noticed that traffic originating from Digg does not monetize their site, simply because Digg users are too used to seeing “Goooooogle Ads”. Not surprisingly, after witnessing a few dozen ads *misplaced* throughout the content, the user is likely to get frustrated, and simply leave.

7: I have seen some websites use clever tactics to camouflage text ads with content. Is this what Web .0 has become? Trick your visitors into clicking on ads because they can’t distinguish what is an ad, and what is content?

8: My guess is that if the startups that are sprouting up today were launched back in 1999, the dot-com burst would’ve have occurred much earlier and with a greater impact.

9: The compensations are not necessarily monetary. The concept of giving karma as an alternative to currency has worked out great for many startups.

10: A few examples include Netscape, Metacafe, and Revver.

11: Forbes Magazine, June 2006

12: Managing multiple profiles is an arduous task for most. Moreover, there is a certain opportunity cost attached with this market; a minute spent on Facebook is a minute lost on MySpace. The users cannot be expected to participate at the same level as they did two years ago. There are simply too many alternatives.

13: There is also a sense of political hate developing on Digg now. These days I feel a lot of negativity pointed towards Muslims on Digg. It does not matter how many times I explain to people their misconceptions, new stories against Muslims keep sprouting up. But that is okay; a social network that builds a media bias is not a bad thing, in fact, I encourage it. While you might alienate some of your visitors, you will build a strong loyalty with the others.

14: It is official, the only reason anyone registers at MySpace is to check out image galleries of hot teens – http://mashable.com/006/10/05/most-myspace-users-over-35/

2 Thoughts on “Anatomy of a Successful Social Network

  1. James Stewart on 28 May, 2009 at 7:15 pm said:

    I took the 12 minutes to read all of it (slow reader). I feel niche social networking sites are handling their small sizes by having the ability to cross integrate information (I.e. OpenID). This feature may help them stay afloat. I do feel you make great comments about problems such as ads, but you don’t include ways of having crafty/interesting ads. Facebook does this by having ads that barrage my interest. How else could they do it?

  2. James Stewart on 28 May, 2009 at 7:16 pm said:

    I never told you that enjoyed reading this. Thanks.

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