Revenue and social networks

Facebook ads often hang in the awkward place between dating sites and online lotteries.

At South by Southwest 2010, Danah Boyd explained how the web mashes up social networks which rarely intersect offline. They mix up people who just ended up in your email address book, family, colleagues, friends from different situations and stages of life.

Conclusion? Maybe Facebook-like social graphs are a mediocre indicator of tastes, or more to the point, of the kind of content a person is willing to accept at that precise moment in her online activities. Accurately targeting an audience is difficult. It is not by chance that Farmville, Mafia Wars have a generic, blockbuster-ish vibe.

Being a mass market negates some of the advantages of the web, except that now you can target the mass market more cheaply. But if you are after ad revenue, you will encounter the same difficulties as TV prime time advertisers.

Target, target, target

In his keynote interview, Spotify CEO Daniel Ek mentioned how Spotify increases conversions by studying user music listening habits. Some campaigns have reached rates of 2% (still apparently not enough for some music labels).

The obvious suggestion is that narrow aspects of individual behaviour (musical tastes), match more closely what people like to see (and hence, act upon).

We all suffer from multiple personality disorder. You need to focus on one personality at a time.

Build on top of what’s already out there

This does not mean, though, building a slew of niche communities from scratch.

Rather, sift through the data from established communitites and use API tools to focus on subcommunities. Build your 80s metal community on top of Spotify (or LastFm, or Facebook). Now you can serve the subcommunity targeted and profitable ads, while the main social network earns money by licensing the subcommunity management.

Unfortunately, the tools are available only in embryonic form. The licensing model does not exist anywhere that I know of. Nevertheless, it may be a good time to experiment. For instance, geographic location is a perfect example of vertical market (which will allow you to tap into the money of local businesses), but existing apps are not integrating very well with the big networks (location aware iTunes, anyone?)