Social networking is big business, as we all know. MySpace has now become America’s most visited website with 4.46% of all web traffic in the week ending July 8th, putting it ahead of Google Search, MSN and Yahoo!. Bebo has reputedly turned down an offer of $552mn for its network, (not true – see post above) and is allegedly holding out for $1bn. What is less clear, is how these sites will evolve over the next few months, as an interview I had yesterday with ecademy founder Penny Power revealed.
Ecademy is all but unique in the social networking space in that they charge a subscription fee for their service. There are two major reasons they can get away with this. First, their network is geared towards business people. The typical member is male, in their 40s and self-employed. There aren’t too many networks targeted towards these people. There is LinkedIn, but as Penny points out, members regard this as a tool for finding people rather than a community. The second reason is that having a subscription model creates a different kind of community.
The majority of social networks are free. This means that their revenue model is based on advertising. The way to make money is to drive more traffic to their network. Ecademy has much fewer members than the big names – 80,000, with around 10% paying a subscription fee. It carries some advertising, but this isn’t really the main focus of their business plan.
Ecademy gets the money up-front – a year’s subscription costs £25. But if they are to keep this money, it means that they have to deliver customer service. The people who join the network have to feel that they are getting their money’s worth or they will ask for it back and never return. The main way to deliver this value is by giving members the connections they need. Since they are self-employed, it’s likely that they will need the help of other people – lawyers, accountants, designers, writers, PR people and so forth. Making relationships with these people through the network breeds a trust that isn’t nearly so quick to form with someone you picked from the yellow pages. Since many are home workers, the social contact with peers also has considerable value for members. Secondly, members are encouraged to donate articles to the community, giving advice and retelling experiences from their own area of expertise. Events are also a large feature of ecademy, with over 800 offline events a year where members can network with others.
Having taken £25, another responsibility is for ecademy to deliver a safe, professional atmosphere. In many respects, this is likely to be easier than it is for the larger teen sites. With fewer members, most of whom are ‘old enough to know better’, serious incidents are relatively rare, and only around 20 people have had to be banned from the site. Most of these treated the community badly, spamming members with business and investment opportunities. Nonetheless, it is moderation, of one kind or another, that eats up Penny’s time and the site has recruited volunteer mentors to ensure submitted content is professional and non-abusive (the term “moderators” was thought too harsh-sounding by the community). She points to the fact that site, and its appointed mentors, would be liable for slander actions were this allowed to get through unchecked.
Which brings me back to the larger sites. Firstly, what will keep members loyal to a particular network? Paying a subscription encourages users to search for and create the value of their investment. This doesn’t apply to a free site. If their owners focus on numbers rather than service, what will stop their members migrating to another network with a fresh gimmick. At the moment, the top sites have all the social capital – everyone’s on there because everyone’s on there. But the youth market is pretty fickle – ‘everyone’ used to be into Friendster, or taking things further, Girls Aloud. TechNewsWorld reported last month that MySpace’s appeal maybe waning among the cool kids – an overly pessimistic judgement, as last week’s figures show, but the threat is there.
The second issue is moderation. When social networks become billion-dollar businesses, and they already are, their owners will be forced to ensure that they are creating a safe environment for their users, whether these be children or adults. This is not just a question of professional responsibility, but of legal liability. MySpace is already in some trouble over the alleged grooming of children by paedophiles. I would suggest that the current cases will not be the last. But how can they moderate 90mn users? And how can they moderate their communities without destroying the anarchic, creative vibe that made it cool? They already have no choice about whetherto moderate; it is how they do this which will decide their future.
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Social tools, devices and web evolution are creating epochal change in media, society and business. The plan is to 
What will keep members loyal to a particular network?
Members invest in networks. It takes time to build a network, learn the tools, build a reputation and an online identity. Perhaps these are less of a concern for kids and I do agree that when something becomes too established for them – it will be time to leave. The cool trailblazing kids will find and support ‘the next big thing’.
Hi there David,
Good point. But isn’t a key ingredient of the successful sites that they are very, very easy to pick up and use, and make it very easy to contact people with a similar profile? Since competitor sites to MySpace and bebo, etc. (if they are any good) will have similar strengths, and hopefully a couple of new USPs, the speed at which people could migrate is high.
In my book, Bebo should have taken the offer. As much as social networks have been seen as important, their appeal might possibly die down at some point.
Must take nerves of steel. Imagine being remembered as “the man who turned down half a billion dollars”. I am scheduled for an interview with Birch, the owner of bebo, and will write it up when that happens.
Turns out the $1/2bn offer is not true, despite reports on techcrunch and the rest. Spoke to Michael Birch today. Post above.
Needless to say, like the rest of us, he wishes it *was* true!
[...] With a hard revenue model and the danger of your users migrating to the next big thing, the attractions of starting your own social network may seem small. But the issue that has hit the headlines is child safety. High profile rape and assault cases in the US have led to considerable anxiety over MySpace and other social networks. In February 2006, a 14-year-old New Jersey girl was found dead in a dumpster after arranging a meeting with a stranger on MySpace. Connecticut police claim that as many as seven girls from Middletown, were assaulted by MySpace men who lied about their ages. Two further cases, in Issaquah and Snohomish County were dropped after investigation, but still hit national headlines playing up the dangers of the network. Penny Powers told me during my interview with her that her daughter’s school had written to parents saying that any child with a profile on bebo would be suspended. MySpace is banned from dozens of US school districts. The website MySpacewatch has been set up to allow concerned parents to pry into their child’s activity online. A ‘Pro’ account for $6 a month will allow you to watch up to 100 of your child’s friends, as well. I am drawn to wonder what a ‘pro’ amounts to under such circumstances. [...]
The business is growing day by day, Bebo is now tying up with lonelygirl15.