by pj.rey

A recent article in the New York Times, “Experts Predict 2010 the Year for Social Media ROI” summarizes a report entitled “TrendsSpotting’s 2010 Social Media Influencers – Trend Predictions in 140 Characters.”  The post identifies six trends to look out for in social media over the coming year: “Mobile, Location, Transparency, Measurement, ROI, [and] Privacy.”  The Times article focuses, particularly, on return on investment.  The articles reports three strategies for garnering profit from user-generated content (i.e., prospecting, stewardship, and advocacy) but fails to provide much analysis.  Viewing the proliferation of user-generated content from a sociological perspective, I’d like to consider the prospects for these three strategies.

The concept of prosumption (i.e., the convergence of production and consumption) has become a frequent talking point on Sociology Lens.  Prosumption has vastly proliferated on the Web due to widespread, low-cost, and instantaneous access to the means of production and consumption.  Yet, even heavily-trafficked social networking sites (e.g., Facebook and MySpace), who depend on users to both produce and consume the content hosted on the site, have had a great deal of difficulty turning a profit.

The lack of profitability of such companies seems strange, given that the bulk of the content-producing labor is provided to these companies free-of-charge.  Facebook even (somewhat successfully) solicited volunteers to translate the site.  Nevertheless, companies have found limited success (beyond basic advertising) in leveraging the free content provided by users into a steady revenue stream.  Of course, the natural question is “why?’

The diversity of predicted solutions or strategies to achieve profitability are indicative of the multiplicitous nature of the problem.  Because online social networking technology is so new (timeline), the slow-moving bureaucracies of well-established companies have only recently begun to pour money into online marketing strategies.  Moreover, demand for technologies which exploit online social networks could only develop after the social networking technologies themselves were developed and successfully employed.  Data-mining and sentiment analysis technologies, for example, attempt to aggregate online behavior or content into a marketable form.  Of course, these technologies will always be antecedent to the technologies they exploit.  So, it is only in the present, when companies across various sectors of the economy have invested heavily in the Internet and when these investments have come to bear fruit (in the form of new technologies of exploitation) that online social networks produce value for corporate (and not just individual) use and thus gain value for themselves.  Finally, Facebook, perhaps the most visible online social network, is profiting from a demographic shift towards older, hence wealthier, users.

The Times article calls the first method of leveraging social networks for profit prospecting.  This really seems to be a complicated way of saying that social networking technology allows for more refined cost-benefit analysis.  Advertisers can see which pitches work for which people and tailor their strategies accordingly.  Of course, this is the strategy which supported Google’s ascent and which is already employed on every social networking site, so it’s hard see how much has changed, other than the simple point that social networking sites are constantly improving their aggregate data collection.

The second trend, stewardship, is more interesting.  Stewardship is, yet again, a complicated way of saying that social networking sites will be offering more opportunities for users to create closed or private networks.  This is already what sites like Wetpaint have done for Wikipedia or what Ning has done for Facebook.  Rumor has it that Twitter will start offering a premium service that allows users pay for a private network.  Thus, a university or business, for example, could create its own closed Twitter network.  This model of charging users extra to access additional features of a free service is sometimes referred to as a “freemium.”  The question here is whether institutions will be motivated (perhaps by privacy concerns) to pay for something their members already access for free.  Does closing the gates add sufficient value to justify the expense?  Maybe, but that’s assuming members will prefer to create content for the local group instead of the whole world.  If people are pursuing maximum attention for their work online, as has often been argued, this is a tough sell.  If anything, stewardship will likely have the most success with networks who are communicating about proprietary or confidential content.

The final predicted trend, advocacy, involves tracing the path through which a specific customer is led to a specific purchase.  Apart from conventional advertising, companies engaged in the tactic of advocacy sponsor fan groups, blogs, and reviewers, who subsequently influence customers.  The value of these “advocates” in terms of sales is expected to increase with the continued proliferation of social networks.  Advocacy makes sense in a prosumer economy because it allows individual prosumers to act as middle men, sharing in the profits of the giant companies they support.  Yet, like prospecting, advocacy has been part of online social networks from the beginning, so it’s hard to discern why advocacy holds greater significance in 2010, especially when a likely increase in advocates may simply dilute the market, diminishing the benefit to early adopters of this tactic.

For further analysis of prosumption, see several other Sociology Lens posts: “Consuming America: What Have We Done to Ourselves?,” “When Prosumption is Law, the Prosumer is King (for Now)” “prosumers of the world unite,” “Light capitalism, prize economics, and the prosumer,” “Out of Print: Prosumption and the Triumph of New Media,” “the prosumer and intimate profit.”

Square-eye “Experts Predict 2010 the Year for Social Media ROI ” by Dana Oshiro

Square-eye “The Intersecting Roles of Consumer and Producer: A Critical Perspective on Co-production, Co-creation and Prosumption,” By Ashlee Humphreys and Kent Grayson