In recent years, online Social Networking has revolutionized interpersonal communication. From Facebook to Twitter to MySpace, online communities are increasingly driving human connections and interactions through cyberspace. Learn what Harvard researchers are discovering about social networking trends and how online communities can be most strategically utilized as marketing tools.

rom news media, to email accounts to online entertainment, most of the websites we enjoy on the World Wide Web are free to users because they are subsidized by advertising. It is more than likely that any website you come across will display advertising banners, allowing you to “click through” to another company’s website. Now, with the proliferation of online social networking such as Facebook, Twitter, and MySpace, marketers are seeking ways to harness the profitability of these ever-popular sites. Interestingly, however, traditional online advertising doesn’t seem to be the answer, and recent Harvard studies are helping to explain why.

Trends in Social Networking

Harvard Business School professor Mikolaj Jan Piskorski has spent years studying users of online social networks, and he has developed key findings about the needs that these networks fulfill. Many online community users enjoy the social benefits of easy and speedy communication. For example, when friends are hard to contact, you can just log onto Facebook or Twitter, check their “status” and quickly see what they are up to.

Piskorski has also found differences in trends between male and female users. The biggest usage categories are men looking at women they don’t know, followed by men looking at women they do know. Women look at other women they know. Overall, women receive two-thirds of all page views.

When it comes to written messages, there are gender differences as well. “Women actually say things, guys give references to other things,” says Piskorski. But even accounting for these differences, the research still revealed differences between how men and women are followed, perhaps pointing to a fundamental representation of the role of men and women in society.

But perhaps the biggest discovery of Piskorski’s research was pictures. “People just love to look at pictures,” says Piskorski. “That’s the killer app of all online social networks. Seventy percent of all actions are related to viewing pictures or viewing other people’s profiles.”

Why the popularity of photos? Piskorski hypothesizes that people who post pictures of themselves can show they are having fun and are popular without having to boast. Another draw of photos (and of social networking sites in general) is that they enable a form of “voyeurism”. In real life there is a strong norm against prying into other people’s lives. But online networking enables “a very delicate way for me to pry into your life without really prying,” the researcher says.

From Social Media to Social Strategy

Corporate marketers often struggle with how to use social networking sites to reach potential customers. Following the success of Google, social networking sites such as Facebook have been trying an advertising-based business model, but this model has had only limited success. The problem is that execs think of online social networks as social media and treat them as another channel to get people to “click through” to a site. Research shows that in general, the click-through rate of ads on social networking sites is extremely low—simply because people don’t go to these sites to seek information about specific products.

Just as with offline social dynamics, people do not like to be interrupted while socializing through online networks. Sunil Gupta, Head of the Marketing Department at Harvard Business School and professor of Digital Marketing Strategy, explains the problem with click-through advertising. “A good analogy is to imagine sitting at a table with friends when a stranger pulls up a chair, sits down, and tries to sell you something while you are talking to your friends. You will not get far with a strategy like this.”

A social network is an ideal online meeting place for vendors and consumers, but marketers must understand the particular dynamics of consumers in these contexts. “To be successful,” says Gupta, “as a marketer, you need to shift your mindset from social media to social strategy…A good social strategy essentially uses the same principles that made online social networks attractive in the first place—by solving social failures in the offline world. Firms should begin to do the same and help people fulfill their social needs online.”

To continue the earlier analogy, Gupta suggests the following: “You should come to the table and say, ‘Here is a product that I have designed for you that is going to make you all better friends.’ To execute on this, firms will need to start making changes to the products themselves to make them more social, and leverage group dynamics, using technologies such as Facebook Connect.”

Revolution in Online Marketing?

What does this mean for marketers and firms? “Search, as we know it, is dead,” says Glenn Derene, the senior Tech Editor of Popular Mechanics magazine, who has written extensively on the subject. “With the rise of social networking sites such as Facebook, MySpace, Twitter, Second Life, LinkedIn…the next generation of Web users may find what they want by using their social network rather than a search algorithm. After all, the people in your online social network should know you better than a mathematical algorithm, right?”

“Consider how much information you voluntarily provide on your Facebook profile,” Derene continues. “Now imagine if you could combine that with your Netflix renting and Amazon buying habits. Then throw in the suggestions of your friends and the pages you visit the most often… just imagine how accurate a search could be if every time you had a question, the mass of data about you that exists on the Internet could inform the results.”

The potential profitability of these networks is promising. Survey research conducted by Webbed Marketing Company revealed that 47% of all respondents said they would go to a social networking site to download coupons or search for gift ideas if those services were available. In addition, 45% said they would visit a social networking site to find out about upcoming sales in stores or discounts on products; 22% said they would read or write a product review on a blog.

Furthermore, Gupta’s research has shown that because of the inherent dynamics of social networks, a viral marketing campaign is much more likely to be successful than a typical banner ad campaign. Imagine you are Sony, he says, and that you are trying to promote your new digital camera. You can either advertise on Facebook and accept a very low click-through rate, or give away free cameras to several Facebook members (potentially at a lower cost than advertising) and generate a viral campaign. “Our research shows that this viral campaign is possible. We further show what type of users are more likely to be influenced by such a campaign,” Gupta contends.

Sheryl Sandberg, a Harvard Business School grad and the new COO (Chief Operating Officer) of Facebook, recently discussed the success of viral campaigns. On Valentine’s Day, Honda offered 750,000 Facebook members the opportunity to purchase a heart-shaped virtual gift complete with the Honda logo that could then be passed on to other network members. “It is exactly this type of viral campaign that has the potential to be an enormous source of revenue,” says Sandberg. “Unlike banner ads, these viral campaigns truly leverage the network aspect of these social networking sites.”

While online social networking trends suggest the promise of an overall shift in online marketing strategy, Gupta says there hasn’t been much change yet. “I still see businesses saying ‘Let’s talk to people on Twitter or let’s have a Facebook page, or let’s advertise.’ These are good first steps,” says Gupta, “but they are nowhere close to a social strategy.”

Gupta is currently working on understanding the relative role of offline and online advertising to determine how firms should optimally allocate their resources across different media. As research continues, marketers will continue to discover the best ways to truly harness the social dynamics of online networks and create effective marketing campaigns around new social strategies.

 

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