Home » Business, Entrepreneurship, Features, Innovation, Investing, Startups, Strategy, Technology, Venture Capital

Social Networking is Growing Up

5 April 2008 10,800 views 7 Comments

Social networking has thus far been primarily about connecting with lost friends, playing simple games, and gawking at strangers. Aside from the amazing ability to reconnect with buddies from middle school, the rest of social networking mirrors normal human behavior in real life. Lots of people need an avenue for rest and relaxation. Dumb games like Pirates vs. Ninjas on Facebook replaces old time-wasters like watching TV. Who hasn’t been to the mall or the park watching people pass by? We’re all voyeurs to some degree but social networks like Myspace (NWS-A) make us Peeping Toms powered by technology.

It’s been great fun, but social networks have ambitions to be more than just a digital playground. They want to be super hubs of e-commerce where people go to buy stuff. Even on that front, current efforts have been less than inspiring. Facebook has had some success getting people to spend micro amounts of money sending small digital images as gifts for their friends. This is much like the candy grams I bought for all the pretty girls in middle school, juvenile and bound to lose its novelty. Of course, new generations of kids are always going to join social networks, so the “digital dollar” gifts will always be in demand. It is a valuable business, but one that could evolve into something greater if Facebook or competitors figure out more useful applications for micropayments or “digital dollars.”

I believe that it’s perfectly fine for social networks to remain as fun hangouts but if the Zuckerbergs and DeWolfes of the world want their networks to be much more, things will have to change. The future of social networking requires much more elegant thought leadership that will lead to much more robust applications made by much more skilled developers and managers.

A big change has already begun. Corporations are slowly dipping their toes into the waters. While they’ve been big advertisers on the networks, they are beginning to interact directly with the community. Some are leveraging existing networks. Others are building their own networks so they can customize that interaction.

Let’s take a quick survey of what some grown-ups are doing today in the social networking space. This is by no means an exhaustive study, think of it more as a sampling of some of the more interesting and unique approaches. It remains to be seen which of their differing approaches will succeed, but a careful watch of their efforts might give us clues as to what that elusive future of social networking might look like.

Starbucks LogoStruggling Starbucks (SBUX) has seen its stock price fall over 40% over the past year due to slowing growth, customer apathy, and fierce competition from the likes of McDonald’s (MCD) and Dunkin’ Donuts. It recently announced the launch of its own social networking website called My Starbucks Idea. In what looks like a valiant corporate effort in crowdsourcing or leveraging the wisdom of crowds, the website attempts to engage the audience to share ideas on how to make Starbucks better. Not sure if the company has ever used fancy pants MBAs and consultants who think in terms of profit margins, market share, and brand extension, but any attempt to get the average Joe to opine about his cup of Joe makes sense. These are presumably the people who feel the strongest about their daily java fix, an emotional connection that ought to lead to insightful ideas. Therein lies a natural problem; the most passionate fans of Starbucks who share ideas are not the bulk of customers who feel that Starbucks has lost its way but wouldn’t be motivated enough to tell anyone why. While I’m at it, here’s my suggestion: brand extension usually does not work – get rid of the tastefully compiled music compact discs.

Cisco LogoNetworking giant Cisco Systems (CSCO) has always excelled in growth through acquisition. By acquiring technologies developed by small startups or budding competitors, the company has been able to keep its technology edge and maintain market leadership. However, this strategy has always been a tad expensive; after all, the venture capitalists that backed the acquisitions need to be paid off for making good bets. Now Cisco has launched a competition called I-Prize that could help the company identify good ideas long before they become pricey startups. The I-Prize competition allows the company to reach out to its community or ecosystem and motivate submission of ideas for rewards. The best idea gets funded as a new business unit and the idea generators get a big signing bonus and employment. The social networking aspects of I-Prize include the ability for entrepreneurs to comment on each other’s ideas and network with each other to form collaborative teams. Recently, Cisco released a blog post describing the demographic details of the semi-finalists in the competition. It appears Cisco is having a successful experience with this program.

Overstock LogoOverstock.com (OSTK) has seen its stock price follow the trajectory of a roller coaster over the past year. The online retailer suffers from negative margins and a supremely competitive online landscape. It recently launched a community portal on its website that allows users to blog about their interests, write product guides and reviews, discuss auction items in online forums, and read the latest articles written by CEO Patrick Byrne. Byrne has been pilloried by the vicious financial press for his unorthodox behavior, but I love his independent, contrarian, and defiant style. I think the attempt to engage its most loyal shoppers to contribute product guides and blog about favorite products makes sense, but I would implement the strategy differently. Instead of Overstock hosting the blogs and reviews on its own website, it should attempt to build a loose network of affiliate bloggers and guides similar to blog networks such as Know More Media, b5media, and Pajamas Media. The separate network approach would result in less control but better search engine rankings, increased traffic driven by external sources, and a more active affiliate program fueled by a rewarding incentive scheme.

Dell LogoDell (DELL) operates a website called IdeaStorm that resembles My Starbucks Idea. The mammoth computer manufacturer wants its customers to post and discuss ideas. One large component of the interaction design on the website involves the ability to “promote” or “demote” ideas posted by others. In this way, the site imitates the crowdsourcing methodology pioneered by Digg, the news aggregator community. For corporate executives that have been tasked with the daunting responsibility of building web communities with the potential to feed the parent company with business intelligence and game-changing ideas, check out Salesforce.com’s (CRM) Ideas platform. Dell’s IdeaStorm is built on the Ideas platform and appears to be a good implementation. My Starbucks Idea is also powered by the same platform. The platform is definitely a more cost effective solution than building a platform from scratch, but care should be given to customization and integration with existing websites or properties.

Dell has also been experimenting with innovative forms of advertising on social networks. Instead of what I call “passive advertising” on the margins such as banner ads and margin text ads, Dell is putting its name directly on web applications that social network denizens interact with. In partnership with Federated Media, Dell conducted an art competition on the Graffiti application on Facebook centered around the question “what does green mean to you” which ultimately drove traffic to another one of Dell’s social networking sites, ReGeneration. The ReGeneration campaign is an early example of what I call “appvertising,” a more direct and intimate form of advertising made possible through social networks.

General Motors LogoOur favorite whipping boys, the American auto industry, might well need to try anything and everything to stem its losses to the relentless Japanese auto companies. In other words, in times of desperation, throw everything at the problem including the kitchen sink. General Motors Corporation (GM) has decided that social networking might be one way to persuade American consumers to buy Cadillac Escalades, Buick Enclaves, and Chevrolet Corvettes instead of Honda (HMC) Accords and Toyota (TM) Corollas. GM Next, the company’s attempt at social networking, is a content rich site that includes blogs, podcasts, and a healthy serving of videos. Unfortunately, the site feels too promotional and not focused enough on carrying a genuine conversation with car enthusiasts.

We’re witnessing the early stages of corporate involvement in social networking, both on the mass consumer social networks and on specialized corporate social networks. The operators of popular social networks desire to be more than just massive collections of frivolous games and applications. They’d like to move beyond the amateur and simple coding exercises haphazardly thrown together by weekend programmers with illusions of getting rich off their tiny applications. I think that’s a dangerous change in direction and few social networks will succeed in growing up and surviving the coming shakeout. It would behoove some savvy social network executives to heed Geoffrey the Giraffe of Toys “R” Us fame and consider that “we don’t want to grow up.”

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)


  • jeri said:

    very interesting ideas and insights i enjoyed and learned.

  • John said:

    Great post Allan. The Cisco results are very impressive. I’d be willing to bet those business ideas they are getting are more valuable then all the pokes and vampires on fb put together!

  • Joann said:

    Hi Allan, Thanks for your great post!

    social networking features have been added to the site in order to get some support behind an individual’s suggestions. Members can vote on items, discuss them, and really show Starbucks how serious they are about a particular idea. Those ideas that are being worked on by Starbucks will show their own progress reports on My Starbucks Idea as well. If only Wal-Mart could be so transparent…

  • Guy Fawkes said:

    If you look at the volume of Patrick Byrne’s work on his deepcapture blog, you will have a pretty good idea of why his company is tanking, and why it will probably cease to exist in the next few years (unless Bryne dips into his ancestral wealth to float the company… again).

    Byrne has devoted a significant amount of company resources to this ‘blog’, not to mention his own time. I would hypothesize that he might be better off spending his own time and his company’s resources towards turning a long sought after PROFIT.

    I’m no CEO, but that’s how I would do it.

  • Fast Forward to Video Future said:

    […] many skateboarding dogs and Obama Girls can we watch? As with all things social on the Internet, we will grow up. Granted, I think the future will be kind to a creative combination of the amateur and the […]

  • Facebook Fatigue said:

    […] and social networks will survive the coming shakeup. Already, savvy corporations are looking at different approaches to social networking. So unlike the lemming-like companies that just “had to be” on Facebook who comprised […]

  • Raam Dev said:

    Great rundown of how the big-boys are trying to get into the social networking world. I really feel that businesses need to concentrate on finding ways to engage and enable communication if they want to gain a serious attention from the consumer. Informed consumers always feel safer about buying.

Leave your response!

Add your comment below, or trackback from your own site. You can also subscribe to these comments via RSS.

Be nice. Keep it clean. Stay on topic. No spam.

You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This is a Gravatar-enabled weblog. To get your own globally-recognized-avatar, please register at Gravatar.