Social networks: the analysis of traffic patterns and social networks in the pursuit of elusive profits and monetization

[Wireless Week] As social networks continue to grow, carriers, content providers and handset manufacturers are all looking for ways to create an ease-of-use scenario that will generate revenue.

Everyone wants to know where the money is in social networking. Carriers and handset manufacturers are working to create handsets that quickly connect users to their chosen communities. The sites themselves are experimenting with everything from virtual gifting to nominal subscription fees. So what’s the hold up? Why did Facebook, which currently boasts 175 million users, only gross a rumored $150 million for 2007?

Two important factors appear to be holding up the social networking gold rush. First, no one understands the dynamics of these incredibly complicated networks. Second, all the players are getting closer but still struggling with an ease-of-use scenario for which consumers will be wiling to pay.

ANALYTICS

The current enormity of social networks could no more have been anticipated than the complexities inherent in generating revenue from them. These virtual coffee shops, and the possible behavioral insights that can be gleaned from them, are a potential gold mine.

That’s why analytics firms are beginning to concentrate on the dynamics behind these communities as a way of helping carriers understand the unique and valuable body of information to which they are privy.

The idea of social networking analytics stems from an academic movement back in the 1960s that attempted to combine mathematics and social theory in an effort to identify patterns and social ties among Hollywood actors. With regard to communities like Facebook and MySpace, the intent is to find ways to market to these communities in a manner that is incredibly accurate and identifies users’ specific interests.

Brush: Real value may not be on the social networking site.

Kathleen Brush, vice president of marketing at Openwave, explains how her company collects user data in an effort to understand these communities. “We’re installed as a gateway in the operator’s network,” she says. “So we see and record all Internet requests by subscribers. We can see every URL that I have accessed on my mobile device.”

From there, the company can group like-URL behaviors and build subscriber profiles that show the types of activities a user engages in while at a social networking site. Brush says that ultimately, the opportunity for marketing might not be on the social networking site itself. “So here’s this LinkedIn subscriber and they have a BlackBerry,” she explains. “We also know that they went to The Economist and gravitated towards cultural Web sites, so we have that level of detail. So we can go to any number of properties and place ads at those endpoints where they’ll be most effective.”

This kind of information is obviously valuable and unique to social networking, but the debate over using that data is fraught with privacy concerns. “There is some legislation that is in discussion that will change what can be done and what cannot be done. The debate about privacy is being renewed because of the social networking phenomenon,” says Saverio Romeo, analyst for Frost & Sullivan.

However, by truly understanding the way people engage with their communities, Romeo says the data could be used to reduce churn and develop incredibly effective marketing strategies. That may be true, but carriers don’t want to stop there.

Social Nets: Where’s the Revenue?