CHAPTER 2
The Global Market of Social Networks
Table of Contents- Social networks – Part of Web 2.0
- Importance of Social Networks on the Net
- Largest Social Networks in the world
- Largest Social Networks in Germany
- Asia: A special scene in Social Networks
- Specialized Social Networks
- Chapter Summary
The History: Social Networks go from Niche to Mass Phenomenon
The term ‘social network’ was picked up by the media just a few years ago.
The basic functions of any network, communication and interaction between two or more people, are not new technologies. They’ve been around since the beginning of the Internet.
Chats, email, forums, and some specialized communities also have a long history, but were always very decentralized.
Centralized systems, such as the “news groups” (i.e. Usenet) existed mainly in the IT sector and have played a special role in the open source movement since the early 90s.
“Social networks” as central platforms where people could create user profiles mostly existed among online gaming communities, dating services, or information services and have been around since the turn of the century
Since 2006, there has been a mass adoption of large Social Networks in Europe, since the advent of platforms such as StudiVZ, Netlog, Bebo, MySpace and Facebook
Front cover of COMPUTER magazin, 1979
The Drivers: Social Networks Go from Niche to Mass Phenomenon
Broadband Internet Access
- The spread of broadband access at home and Wi-Fi Internet access in public areas has led to a mass distribution of long-lasting and cost-effective Internet
- Lack of broadband connections in the 90s prevented the breakthrough of many innovative Web technologies
Mobile Internet
- In recent years, mobile Internet access has finally caught on in the private sector. This, after years of acceptance in the business sector, is finally giving way to the introduction of useful mobile applications and hardware
- The mobile Internet is gradually replacing the asynchronous communication via e-mail through a permanent, active interaction between the real and virtual world. The “life” within Social Networks is slowly being merged with what’s happening in reality (1:n communication instead of 1:1)
- Photo uploads to Facebook and Twitter and mobile “status-updates” are very ‘en vogue’ among young people and continue to become standard communication tools
Open Source Interfaces
- Many Social Networks have opened their doors to external developers to increase the speed of innovation and connectivity. Some networks have bound together and have chosen an ‘open source’ standard for these developers, allowing them to “write once, install many”
- Various open source Internet services and social networking sites have made it possible for end-users to keep one login scheme, which allows them to access multiple sites with one user profile or login (e.g. Open ID). This has cleared a very big hurdle for new Social Networks that seek new traffic and users
Transforming our Communication
Connecting our “Virtual” Lives with Reality
„What ever happened to John Doe and Lieschen Müller after University?“ (Facebook, MeinVZ, stayfriends)
„What event should I go to – and who’s going to be there?“ (Netlog, MySpace)
„Who’s the good looking blonde girl in our Latin class?“ (StudiVZ) „What the heck is my neighbor up to?“ (Wer kennt Wen)
„What music, fashion, etc. is in right now? Am I cooler, or are you? (MySpace)
„What do you do, who do you know, and are you an important connection for me to have? (Linkedin, XING)
The Success of Social Networks
Social networks do differ from one another to some extent
In particular, it is certain features, functions, and aesthetics that make up the attractiveness of individual social network
Basic social networking features have existed on most platforms for a long time now. More modern networks have had massive growth breakthroughs because of good strategic planning of users and how they used the network effect. (i.e target users in regional areas, or certain ages groups, special interest groups)
In addition, they have cleverly defined the local dominance in target groups. (For example, x% of a students’ friends belong to network XY, through the natural network effect, he will be encouraged to join them)
Virtual communication and interaction is common among all Social Networks: chat, messaging, and related functions
2.2 Importance of Social Networks on the Net
Social Networks - What it all means on the global Scale
Six of the top 15 Websites in the world are Social Networks*)
The high rate of growth for Internet usage in the past few months has been due to social network activity
The top-ranked sites are continuously disputed between Google, Yahoo, Facebook, and other major player
Other top sites outside of “pure search engines” have incorporated more and more elements of classical Social Networks (Blogger, Twitter, YouTube, etc.)
*) The distinction between "traditional" Social Networks like Facebook and the user-generated content side of Web 2.0 (eg. Blogger.com. Twitter) is extremely difficult. Therefore, we’ll keep the US-tradition (see, eg. TechCrunch) of the broad definition.
Top Global Websites (Traffic)
- Yahoo!
- Youtube
- Windows Live
- MSN
- Blogger.com
- Wikipedia
- Baidu
- Yahoo Japan
- MySpace
- Google India
- Google Deutschland
Social Networks - What it all means on the global Scale
Six of the top 15 Websites in the world are Social Networks*)
The high rate of growth for Internet usage in the past few months has been due to social network activity
The top-ranked sites are continuously disputed between Google, Yahoo, Facebook, and other major player
Other top sites outside of “pure search engines” have incorporated more and more elements of classical Social Networks (Blogger, Twitter, YouTube, etc.)
*) The distinction between "traditional" Social Networks like Facebook and the user-generated content side of Web 2.0 (eg. Blogger.com. Twitter) is extremely difficult. Therefore, we’ll keep the US-tradition (see, eg. TechCrunch) of the broad definition.
Top Global Websites (Traffic)
- Yahoo!
- Youtube
- Windows Live
- MSN
- Blogger.com
- Wikipedia
- Baidu
- Yahoo Japan
- MySpace
- Google India
- Google Deutschland
- QQ
Social Networks - In Germany, there are even more in the Story
Ranked in order of page impressions, more than half of the top 15 sites in Germany are Social Networks!
In Germany, neither Google nor Facebook has been audited / approved by the IVW (Informationsgemeinschaft zur Feststellung der Verbreitung von Werbeträgern e.V.). Still, the dominace of social network in Germany is even more than that of the international realm
Even in Germany, Social Networks grow with the same dynamic and faster than their competitors – similarly to the rest of the world
Top Websites in Germany (Traffic)
- schuelerVZ
- wer-kennt-wen.de
- studiVZ
- T-Online
- meinVZ
- lokalisten
- bild.de
- mobile.de
- Yahoo!
- Kwick!
- Travian
- schueler.cc
- MSN
- MySpace
- Spin.de
2.3 Largest Social Network in the World
U.S. & Chinese Sites dominate the Market for Social Networks
Trying to get hold of reliable statistics on the world's largest Social Networks is a task in itself. There is a huge lack of statistical comparisons and publications available, making it practically impossible to compare
In addition, the difficulty is that the establishment of Social Networks has become much more complex since many websites incorporate community features
Most relevant statistics can be found within blogs (Blogger, WordPress), and sites like Flickr, and Yahoo!, Geocities, which also include user-generated content. Statistical experts such as TechCrunch and Comscore have found analogous results
Strikingly, the global market is dominated by U.S. and Chinese pages (QQ, 56.com, Baidu Space)
Social Networks, Global Ranking (ranked by unique visitors)
- Blogger
- MySpace
- Wordpress
- Windows Live Spaces
- Yahoo! Geocities
- Flickr
- Hi-5
- Orkut
- Six Apart
- Baidu Space
- Friendstar
- 56.com
- Webs.com
Facebook and MySpace - Maybe the best in the World, but not locally
| Country | SN#1 | SN#2 | SN#3 |
|---|---|---|---|
| Australia | MySpace | ||
| Canada | MySpace | Flickr | |
| China | QQ.com | Xiaonei | 51 |
| France | Skyrock | MySpace | |
| Germany | StudiVZ | MySpace | |
| Italy | Netlog | Badoo | |
| Russia | V Kontakte | Odnoklassiniki | LiveJournal |
| Spain | Tuenti | Fotolog | |
| England | Bebo | MySpace | |
| USA | MySpace | ||
| India | Orkut | ||
| South America | Orkut |
Despite the widespread use of Facebook and MySpace, they do not dominate every local market. Although, they both have the number 1 position for most countries in the western English-speaking world
Data for this chart was simply collected from Alexa.com und Google Trends, therefore this survey does not attempt to fully prove the accuracy of today’s known rankings
Facebook - Number 1 among English speaking Countries
Registered User Accounts worldwide
- Tencent / QQ > 870 Mio.
- Facebook > 300 Mio
- MySpace > 200 Mio.
- Twitter > 80 Mio.
- VZ Gruppe about 15 Mio.
- Xing > 8 Mio.
- WKW 6,3 Mio.
- Lokalisten 1,9 Mio.
2.4 Largest Social Networks in Germany
Facebook and Student Directory Networks dominate in Germany
In Germany, “student directories” (VZs) are mainly targeted to the students of German elementary schools, high schools, and universities continue to lead in the social networking space throughout the country and look like a Facebook copy cat but in red
Facebook ranks at the top position as a stand-alone network in Germany, but it’s growth is accredited to its international momentum and it’s popularity as the major U.S. networking site
With overall retention rates dropping off in Germany, Facebook is still ahead, but also has decreasing in retention trends
Emerging Top Social Networks in Germany
| Factsheet | studiVZ | meinVZ | schülerVZ | wer-kennt-wen | StayFriends | Lokalisten | KWICK | |
|---|---|---|---|---|---|---|---|---|
| Founded | October 2005 | February 2008 | February 2007 | 2006 | August 2002 | 2005 | 2003 | 2001 |
| Registered Users | 5.600.000 | 2.600.000 | 5.200.000 | 6.300.000 | 7.400.000 | 3.100.000 | 7.500.000 | about 1.000.000 |
| Average Age | 20-29 years | 20-29 years | 12-20 years | 20-49 years | 20-49 years | 14-29 years | 26-40 years | 20-49 years |
| Unique Users | 5,29 Mio. | 3,27 Mio. | 4,38 Mio. | 5,71 Mio. | 2,76 Mio. | 1,47 Mio. | 5,5 Mio. | 0,97 Mio. |
| Visitors | 44% Users visit daily | 45% Users visit daily approx. 32 min. | 51% Users visit daily approx. 32 min. | 2,8 Mio Users visit daily approx. 32 min. | 0,5 Mio Users visit daily | 20 Mio. monthly | > 25 Mio. monthly | |
| Page Impressions per month | 3,95 Billion | 1,74 Billion | 5,67 Billion | 4,29 Billion | >120 Million | 1,667 Billion | 300 Million | about 1 Million |
| Reach | 20-24 years: 34% = 1,783 UU in Mio. | 20-24 years: 30% = 0,985 UU in Mio. | 20-24 years: 30% = 0,985 UU in Mio. | 20-24 years: 30% = 0,985 UU in Mio. | 20-24 years: 30% = 0,985 UU in Mio. |
Strong Aesthetic Differences of German Social Networks
2.5 Asia: A specific scene in Social Networks
Independent Social Networks in Asia on the Rise due to vast Cultural Differences
- Many Asian cultures use Social Networks as their “virtual escape” to break out from their often conformist lives
- Many Social Networks from Asia usually offer much more space on users’ profile pages for display, decoration, and self promotion
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- Anglo-Saxon players like Facebook have failed to fully meet the needs of users in Asia due to language and character barriers
- Success of the large Social Networks in Asia can be similarly compared to that of dominance players like Facebook in the USA
Some Screenshots
QQ - China's money machine reaching 1 billion revenues in 2009
Asia as Example? Yes, but think about cultural differences
Monetization in Asia
- To create a individual profile pages is one of the main features of Asian Social Networks
- This enables the big opportunity to not only sell real goods, but especially virtual goods (see also in chapter 3) like skins, avatars etc for the users cartoon alter ego. This is comparable to a mixture of the Sims and Second Life or Habbo hotel
- The combination of virtual commerce is often combined with the generally known revenue models like advertisement
- The Asian leaders often have a monopoly in their country. E.g. Cyworld has about 90% market share in south Korea and Mixi locks the market of twens in Japan
QQ (Tencent) as Model of Success
- Tencent offers not a typical Social Networks but started with a instant messenger and extend this to several products like gaming, portal, virtual currency and many more. All offerings are combined with typical social network features like user generated content, multimedia and communication features
- QQ is Chinas biggest community, but also the world leader in number of users and revenue
- The business model started with free instant messaging services and upsells premium features, games and virtual goods. 90% of the revenues are created through premium services. Advertising is only 10% of the revenues
- Success factor are the big network effects & the massive feature offering
Asian Social Networks top the Ranks among World Players
2.6 Specialized Social Networks
Understanding the Content “Boundaries” of Social Networks
Dynamic Development of a Network
- Social networks possess very extreme dynamics, both in terms of user numbers, as well as in their orientation
- Networks’ user alignment is usually due to the fact that Social Networks start in specific geographic locations. KWICK , for example, started as a regional social network in the Stuttgart (Germany) area and now has become a pan-regional social network, the same holds for Localisten.de and Wer-kennt-wen.de. (This is also correct for vendors from other countries)
Specialized Communities and Interest Groups
- On the other hand, large Social Networks like Facebook or MySpace offer even the smallest communities a home merely through their large numbers
- These smaller interest groups that focus on specific topics give way for users to exchange ideas with other like-minded users
"Content Focused" Websites
- In addition, “normal” websites that focus specifically on content, such as European Soccer (like kicker.de) are slowly evolving in the direction of social networking sites - incorporating features that better connect their community (forums, profile pages, personal messaging, etc.)
Specialized Social Networks - Target Audiences and Special Features and Functions
Target Groups
Almost all Social Networks started in some form as a specialized network. Here are the main criteria of specialization:
- Occupational: students (StudiVZ), business groups, (LinkedIn, Xing.) graphic designer (grafiker.de)
- Age: e.g. MeinVZ, platinum grid, etc.
- Geography: National, regional or even local networks - such as KWICK!, Nachbarn.de, etc.
- Special interest: Music (e.g. simfy.de or last.fm), Auto (e.g. autoki), Old timer (e.g. Carsablanca), Mothers (e.g. NetMoms), etc.
Features
Other Social Networks have “special features” at the core of their community, attracting users for who have specific needs:
- Noovo.com - Information Worker / Business Users - Users of Social Networks with similar interests that filter the information "collaborative filtering" and "crowd sourcing"
- Ning.com - Marc Andressen's approach combines thousands of niche networks on one single platform, rather than creating one “general” social network
- Aki-aki - Location-based Social Networks
Examples of Social Networks with Special Features and Interests
Specialization alone does not guarantee Successful Monetization
- Large and “successful” Social Networks find it a continual challenge to monetize just even a fraction of their enormous user bases. As already stated in this paper, the lack of monetization lies in the inability to efficiently advertize and target large undefined audiences within their networks, which lead to low CPMs, and the difficulties of proving an added-value or a unique selling point over competitive websites, due to the homogenous nature of Social Networks
- “Specializing” a Social Networks is still no guarantee for success:
- Specialized groups and Social Networks like StudiVZ face the same challenges as their large, general counterparts. Also not all students are the same and want customized news & ads
- “Long-tail” Social Networks are indeed an interesting, definable user base to advertisers, but lack convincing “user traffic” numbers that are needed to attract advertisers to run a solid, lucrative marketing campaign
- Therefore some specialized Social Networks use alternative methods, such as subscription-based or “Freemium” models, and are thus successful
The following chapters will go into detail how Social Networks of different structures create revenue today and in the future
2.7 Summary
Social Networks in Global Competition: Specialization, new Features Keys to Success
Global "Knock-Out" Competition
- Rapid penetration and a large number of Social Networks have already today saturated that market in many countries
- The result is a “cut-throat” competition between established players and newer entrants which occurs on a global basis
Features Critical to Success
- The last few months have shown that users find newer, innovative features enough of an incentive to switch platforms, despite the higher costs involved
- Global players (particularly Facebook) heavily invest in the technical development of their platform in the hope that global market dominance is the key to rapid return on investment . Consequently, they have the ability to scale their development quicker than others with dev teams spread over several countries
Attractive Specialization
- Certain social network specializations (like special-interest groups or regional markets) can lead to successful business models
- The question is how far can they preserve the attractiveness of niche platforms for target audiences and to what extent will regional networks be able to withstand the pressure of global innovation?
Global vs. Local - General vs. Specialized
Which will emerge as the dominant Social Networking Strategy?
- Today's Social Networks can be generally distinguished, despite some gross inaccuracies, as "global vs. local" and "general vs. specialized"
- Although local specialized Social Networks (such as XING and LinkedIn) show a positive cash flow today, reviews from Facebook and MySpace, which follow the global, general pattern continue to raise the eyebrows of investors
- Only the future will tell us whether there lies a dominant model of success in this game
