Monday, May 25, 2009

Calculating the value of online relationships

Understanding online relationships..

Stephen Baker in BusinessWeek, "Learning, and Profiting, from Online Friendships."
http://www.businessweek.com/magazine/content/09_22/b4133032573293.htm

The article discusses the efforts at the moment that marketers and researchers are undertaking to aggregate the massive amounts of data created by the vast social networking opportunities that exist. Duncan J. Watts, a Columbia University sociologist and the head of a research unit at Yahoo!, says that "this flood of data for social scientists could be as transformative as Galileo's telescope was for the physical sciences. It gives us a new understanding of our world and ourselves."

The amount of data regarding online relationships that is available provides an opportunity for advertisers to develop a better understanding of their targeted consumers and those consumers' motivations. And as information is certainly not scarce now, attention most definitely is, and knowledge regarding relationships and motivation just gets more and more valuable as the competition for attention intensifies.

But online relationship networks have changed the understanding of interaction. The article discusses how friends are more likely to be interested in the same sort of products, attracted by the same type of ads. But what constitutes a friend now? Although I have about 250 Facebook friends, would I be interested in wearing the same type of clothes as all of them, or do I like the same movies, books, television shows, etc.? Sociologists, economists and market researchers are using all of the data generated by social network activity to try and understand of my 250 'Friends', whose opinions and tastes are most like my own?

Friendship Data

Cameron A. Marlow, a research scientist at Facebook, is working on a study to determine how close we are to our online friends. He and his team look at how often people communicate with Facebook friends, click on their links, news and photos, as well as how the communication flows (is it reciprocal?). They have determined the following about an average Facebook user (average user is considered by them to be one with 500 friends):
  • S/he actively follows news on only 40 of them
  • S/he communicates with 20
  • S/he keeps in close touch with about 10
  • And those with smaller networks (less than 500 friends) follow even fewer
As we've discussed in class, the jury is still out on Facebook ads. Although the traffic is there, obviously (as evidenced through the study findings above) people aren't paying a ton of attention to most of their friends. But if scientists like Marlow can discover how these relationships work, then the ability to target those small, intimate networks amongst the vast pool of friends could be very valuable to advertisers.

The article also discusses the internal value of social networks for corporations in increasing the flow of ideas and harnessing the collective intellegence of its employees on a large scale. IBM Research has one such experimental internal online social network, Beehive. The network (at 60,000 currently) connects employees with similar interests and expertise and suggests them as friends. In addition to more social interactions (posting photos), the friends also use Beehive to discuss patents and critique software code.

It will be interesting to see how these studies impact advertising and internal corporate communications, particularly once the data is used to attempt to better understand these relationships in an actionable way so that the hypothesis are tested and produce some real, quantifiable results.

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