How social networks make money

by Josh Bernoff

We're arguably 10 years into the social network phenomenon (Friendster was founded in 2002). By now we should know the main business models. But popular sites like Tumblr (no visible means of support) raise the question, are there really any other good ways to make money other than advertising?

Here are the significant models:

1. Advertising. Facebook is already making multiple billions on ads on pages. Networks without ads on pages make money form ads on search (Twitter promoted tweets, for example).
2. Brand pages. Twitter has started to roll these out. As I understand it, you don't have to pay for the Facebook brand page, you just pay for ads to drive people to it.
3. Premium accounts. The freemium model is in place at sites like Flickr and DeviantArt. Charge members more for extra storage or to avoid ads.

There are others you hear about that haven't gotten big yet. Second Life created an economy around selling land. There are virtual goods. Merchandising the vast amounts of data that these networks collect is a possibility, although obviously it has privacy implications (Is there a market for behavioral data in the aggregate? Is it legal to sell targeting data at all?).

And I'm discounting the "get a lot of users and then sell to a bigger company" model. This just shifts the revenue question to the new owner. (YouTube's model is advertising now, even if that wasn't that big at the time it was sold.)

I'm interested in what you've seen -- what other models are out there, and how promising are they? When this finally matures, will it all be advertising based?

Five stages in dealing with Google's control of your data

by Josh Bernoff

There's plenty of serious analysis going on about Google assembling all your data (and using it to improve your experience across devices). This is going to make Google stickier and harder to live without, ramp up the pressures on how they expose controls on data collection and use, and increase the seriousness of possible data breaches. 

But most of all, it's raised everyone's consciousness about just how much data Google collects, and made us wonder if we should be worried.

As we're all grieving the loss of our privacy, maybe Elisabeth Kübler-Ross can help us to get through the five stages of dealing with Google's knowing everything about you.

1. Denial. Wait a minute, Google. You're customizing search results based on my queries about erectile dysfunction? You read my gmails and are offering me vacations in Tijuana and criminal defense lawyers? My social security number is in some of those emails. You won't use that, will you?
2. Anger. How can I stop using these indispensable Google tools? Everybody already knows my gmail address, I'm lost without Google maps on my iPhone, and I gave up my newspaper subscription for Google News. Untangling this will destroy my productivity. I hate you but you're so useful I can't live without you. Dammit, Google, how could you do this to me?
3. Bargaining. Let me see your privacy controls. I guess I could turn personalization off on some of those searches I did for untraceable poisons. I'll tell you what, let's just hold onto the last three months data, then I'll feel better. And if you promise you won't boost your Google Plus search results over Twitter, we'll be fine. I guess. Let me try this for a while and see if it bothers me. Just promise me you'll let me opt out and delete everything later. And don't tell my wife. OK?
4. Depression. I guess I'm stuck. My choices are to give up Google, spend hours tweaking privacy settings, or just live with you knowing everything about me. I'm just going to curl up and stop clicking and tapping now. I have no friends in real life and my wife already left me since I spend all my time on the smartphone. This has gone far enough. Right this second, I'm googling how to give up your devices. Oops! Damn!
5. Acceptance. I admit it. I can't live without you. I love you more than anything else in my life. Just collect everything. I guess I trust you. I can live with this. You're a good friend and helper to me, and all you need is data I don't use much anyway. What the heck. Go with it. I feel so much better now.

Photo "Angel of Grief" by Konrad Summers via Flickr.

We are all pirates -- SOPA-inspired stories from 15 years of media analysis

by Josh Bernoff

With SOPA blackouts all over the news, I wanted to take a step back and ask: do we know what piracy is? Sounds like a simple question, but here are a few stories that show just how confused people are.

In the 2000s, I wrote a Forrester report about file sharing. Our reports are available to paying clients or for a fee. But we share the reports with the people we interview as a courtesy. Among the people I interviewed was one at a prominent media-company lobbying organization that represents copyright owners -- one of the very organizations that is right now pushing SOPA and ridiculing the opposition. So when the report was done, I contacted the staffer at the organization to send him a copy of the report. "Don't bother," he said, "We already have a copy." "How did you get it?" I asked. "One of our member companies, a movie studio, had a copy and they emailed it to us."

I had to point out that our reports are copyrighted content and cannot be shared indiscriminately. Slowly, the staffer realized that he had revealed something embarrassing -- that to his organization, movies or music were worthy of protecting but Forrester's report, since it was just print, didn't seem to require the same protection. There was no further comment from him or his company. And there was no apology, either.

In 2003 I interviewed an executive at LimeWire (since shut down), a company that produced file-sharing systems used by many to trade copyrighted music, obviously mostly without permission. LimeWire was free, but made some of its revenue by selling a premium version. Waggishly, I asked "Are there any copies of the files for LimeWire's premium software on your file-sharing service?" Suddenly, he became shocked. Creating software is a lot of work, he explained, and the results are valuable -- sharing it this way would be very wrong. I pointed out the hypocrisy of his position, he couldn't see it. When we published what he said in the report, he again objected to my telling the story and sent me a blistering email in protest.

Attitudes vary. A friend of mine gave me a gift of a hard drive full of pirated music and movies from Bittorrent -- obviously he didn't see a problem with it. (I have never used it.) I also have a 12-year-old son who regularly creates YouTube videos and watches them. Once I explained that music was subject to copyright and using it without permission was stealing, he removed copyright music from his videos and started asking a lot of reasonable but very difficult-to-answer questions. He is attempting very carefully to do the right thing, but the online world he lives in exists because people don't obey the rules.

What have I learned?

Digital piracy is frictionless and nearly riskless. We all do it. And all of us who create content are victims. Go ahead, comment on this blog if you never do it. Never share a copyright article. Uh huh. I thought so.

We all value our own content more highly than content from others --that's clear from the stories I've heard.

Here's the difference between fair use and a copyright violation: When I use your content it's fair use. When you use mine, it's a copyright violation.

Whatever you can say about SOPA, it is an attempt to give copyright owners tools to interfere with copyright violators, tools that are easier to use than lawsuits.

Since we all violate copyrights, there are far more violators than copyright owners. All those users rose up yesterday, goaded on by the companies and organizations that have built their popularity on frictionless digital activity, like Google and Wikipedia. Their awareness tactics worked brilliantly and will water down SOPA or kill it.

The forces behind SOPA want to create friction. The people who consume Internet content -- all billion of us -- hate friction. And we're scared about giving the power to create that friction to people who may make arbitrary decisions.

Interactive marketers aren't the only ones who'll suffer if SOPA passes. Copyright owners: I think you're going to have to find another way.

Photo from OakleyOriginals via flickr -- used through Creative Commons license, of course!

Do people care about the data you collect? Now, more than ever, they do.

by Josh Bernoff

Today Forrester published survey results intended to answer the questions "Do people care if companies collect their data, and does it affect their decisions about the companies?"

The short answer to both questions is, yes.

In a survey of 37,000 US and Canadian online adults, we first asked how concerned people were with companies accessing their personal information. More than 70% were concerned about social security numbers and credit cards. Less than half cared about their phone number, and only 19% were concerned about their online reviews. This proves people are at least thoughtful, and distinguish between extremely sensitive information and other information.

The second big conclusion is that age matters, and young people are more open. For example, 47% of 55-64 year-olds were concerned about access to their behavioral data, compared to only 33% of those 18-24. Young people were also far more willing to give up information in exchange for discounts.

Finally, 44% of consumers say they have not completed an online transaction because of something they read in a privacy policy. Again, this is far more likely to happen to older consumers, and the percentage has increased since 2008.

Marketers -- especially direct marketers -- love data. But now, over 15 years into the Web, consumers are becoming far more aware of how data collection can go awry, and are voting with their pocketbooks. You can collect and use this data broadly and hope you don't run afoul of an angry consumer with a lot of Twitter followers ready to destroy your brand with your own behavior. You can exploit young people's willingness to part with data -- they have so much less to protect, after all. Or you can adjust your policies based on this rising level of awarness. It's up to you.

The report, by Forrester Customer Intelligence analyst Fatemeh Khatibloo, is available here. (Non-Forrester-clients will see an excerpt.)

The Global Social Takeover

by Josh Bernoff

I recently pointed out that Social 2012 is Web 2000 -- in the hype that surrounds it, and the reality that social interactivity, like the Web, is becoming embedded in everything people do.

Forrester Research just published its annual global review (for clients) of participation in social interactivity, and it bears this theme out on a global scale. Even more fascinating are the variations around the world.

If you've read Groundswell, you know that we analyze participation on a ladder, with different consumers reaching different rungs. At the top are activities that demand a lot of participation and creativity, like the Creator group that blogs or uploads video. In the middle are activities that are easier, like reacting to content (Critics) or Joining a social network (Joiners). Near the bottom are the people just consuming the stuff, the Spectators. The Inactives do none of these activities. The groups overlap -- most Creators are also Spectators, for example.

This year's numbers from the US and Europe are very similar to last year's, because social has stabilized and saturated. Now 73% of Americans and 69% of Europeans are in the Spectator group. Only the Joiner category grew significantly, reinforcing the idea that Facebook has replaced the Web as the center of online attention for many.

But the really spectacular numbers in this year's results came out of Asia. Among the people we survey in metropolitan areas in China, 96% are Spectators and 76% are Creators, people who actually generate social content. In metropolitan India, 96% are Spectators, and 80% are creators. Can you imagine living in a society where eight out ten online adults were blogging, publishing Web pages, or uploading video?

What can you learn from this? A few reflections:

• Online social activity reflects a universal human connection. We are all social. Facebook and its regional comparables, like Sina Weibo in China, are now part of the social connective tissue everywhere there is Internet (or smartphones).
• Strategies aren't the same everywhere. The more active social consumers in India demand a different strategy than the more passive ones in, say, Germany, where only one in three online consumers is in a social network. Creative approaches treat these cultures differently or even connect across borders, like Smirnoff's Nightlife Exchange Project.
• Look to Asia for innovation. The next big social trend -- the next bend in the road after Twitter and Facebook -- may be emerging from those Chinese consumers. Watch for it.