Guest Post by: Charlie Osmond
What joy. This week, The Economist, every Capitalist’s favourite magazine, has published a special report on on social networking.
A World of Connections, provides an excellent overview of the current state of social media for those still trying to get to grips with it. You can download a free pdf of the report here. Or check out my summary of key highlights below.
Introduction: A world of connections
- “Online social networks are changing the way people communicate, work and play”
- Facebook users post over 55m updates a day. 70% of users live outside the US.
- Social networks are superb tools for mass communication [NB the report is a bit light on their strategic use as a driver of 1-to-1 customer-to-company communication]
- “the most avid online networkers are in Australia, followed by those in Britain and Italy”
- Social Networks have “become important vehicles for news and channels of influence”. Indeed, they “played a starring role in the online campaign strategy that helped sweep Barack Obama”
- To sceptics all the “talk of twittering, yammering and chattering smacks of another internet bubble in the making“. Social networks still “need to prove to the world that they are here to stay”
“This special report … will argue that social networks are more robust than their critics think … and that social-networking technologies are creating considerable benefits for the businesses that embrace them, whatever their size. Lastly, it will contend that this is just the beginning of an exciting new era of global interconnectedness that will spread ideas and innovations around the world faster than ever before.”
- How the network-effect can drive lightning fast growth on a relatively modest marketing budget.
- An openness to external developers helped create thousands of apps. These apps provide part of the service and additional reasons to spend time on Facebook.
- Social networks have been beneficiaries of a fall in the cost of data storage and have also been “able to use free, open-source software to build systems that scale quickly and easily”
- In a feat of technical wizardry, Facebook’s engineers “quintupled the performance of an open-source memory system called memcached, which allows frequently used data to be retrieved faster than if stored in a database.
- Facebook Connect is one of the firm’s most important innovations as it allows members to take their social graph wherever they go on the web.
Twitter’s transmitters: The magic of 140 characters
- A key difference between Facebook and Twitter comes from the nature of relationships that underlie them. “On Facebook, users can communicate directly only if one of them has agreed to be a “friend” of the other. On Twitter, people can sign up to follow any public tweets they like”
- The most prolific 10% of Tweeters account for 90% of all tweets
- Another big difference between Twitter and Facebook is in the kind of content that gets sent over their networks. Facebook allows people to exchange videos, photos and other material, whereas Twitter is part-blog, part e-mail [I disagree with this. On the surface Twitter looks like a text tool, but many tweets link to videos, photos or other media].
Social Networks making money: Profiting from friendship
- When it comes to turning users into profits, social networks face two issues. Firstly, users are taking part to spend time with friends, so they do not pay attention to ads. Secondly, brands are nervous about appearing alongside unregulated comments and other content.
- Click-through rates are low, but the amount spent on adverts is increasing despite the recession.
- In part this may be because Marketers recognise the value that personal recommendations can have on buying behaviour. And social networks provide an opportunity for viral marketing.
- During 2009, Facebook turned cash-flow positive on revenues thought to be in the region of $500m.
- Games, virtual gifts, premium services and search rights are becoming an important part of some social networks’ revenue streams
Social Media for Small Business: A peach of an opportunity
- They cover the well known Kogi BBQ social media success story and mention that according to Razorfish 44% of people follow brands on Twitter for deals [NB the methodology used in this research was rightly brought into question by Susan Braton in a recent DishyMix podcast]
- Social networks can provide a great launchpad for startups thanks to their reach.
- This article then randomly veers off into social gaming. A subject that deserves it’s own dedicated piece. But you can’t have everything.
Internal social networks: Yammering away at the office
- Social networks are being used to break down internal barriers in the corporate world.
- Informal conversations they allow can be a catalyst for creativity and new ideas.
- “The networks are also a great way to capture knowledge and identify experts on different subjects within an organisation”
Recruitment in a social world: Social Contracts: the smart way to hire workers
- Social networks, such as Linkedin and Xing help firms cut search costs
- Business social networks help improve the efficiency of the labour market
- They have also made recruitment more transparent as recruiters go onto social networks to check up on candidates ahead of making an hire
As an aside, if you’re interested in social media for recruitment here are a few relevant posts from our sister company, FreshMinds Talent:
Privacy in social media: Privacy 2.0
- Privacy could be the Achilles heel of social networks. Users could decide to start reducing what they are prepared to share with the world online.
- Social networks have been developing privacy controls that give users the ability to edit what can and cannot be seen. However these are often hidden away within sites and social networks are making blatant attempts to encourage more sharing of data not less.
The Future of Social Media Towards a socialised state
- Social connectivity could become ubiquitous
- Mobile adoption will fuel future growth in social networking
- Facebook says that mobile users of the site are almost 50% more active than regular users
- Geo-networking apps may be the next big thing [unsurprisingly, the Economist can’t resist a fleeting mention of Foursquare, the social network tipped for big things in 2010]
It’s great to see social media and social networking getting reported in such depth by mainstream media. This Economist report is not exactly cutting edge when it comes to social media insight or analysis. However it does provide a great base level for the 99% of the business world who do not spend their days glued to Tweetdeck.
Even if the above is not new to you, I recommend you read the report purely for a lesson in good business writing. As ever, The Economist delivers on elegant prose that neatly and efficiently flows from point to point.
Was there anything in the report that leapt out at you?