Platt Perspective on Business and Technology

Monetizing social networks and the valuation of social media connectivity – 3: connecting valuation approaches

Posted in macroeconomics, social networking and business by Timothy Platt on January 28, 2012

This is my third installment in a short series on the valuation of social networking and social media connections and on the collective valuation of social networks that arise from them (see Part 1: a diversity of participant-side visions and Part 2: a diversity of provider-side visions.)

I have been discussing valuation and how social media connections are evaluated and rated for their value, and from both the social media consumer/user side and from the service provider side. And in both cases I have at least touched upon a range of measures and approaches that can be fit into two basic paradigms:

• Measures of connectedness per se, and
• Measures of monetary return from those connections.

Think of them as:

• Searches for value intrinsic to social networking and social media per se, and
• Value that can be developed from those connections but that is extrinsic to them and grounded in a larger marketplace.

(Note: I am going to separately consider online stores as they tap into and seek to find quantifiable value in social media, in a separate series installment. Here, I stress, I am only looking at the way that social media service providers such as Facebook, LinkedIn, Yahoo and Google (for their services in this arena) seek to leverage their social networks into establishing their overall monetary value.)

And I add as a qualifying note, that up to here, this posting is quite abstract so I will move to take it back to a more real-world context with an example – drawing from my own social networking and social media experience. I have a LinkedIn account that I do use. But I also have a Facebook account that I primarily set up because I was working with client businesses that were using it in one way or other – generally through their own Facebook pages. I still have it but I do not use it and I have been considering just dropping it. People still post to my wall, and I should clean a lot of that out but bottom line, mine is a moribund Facebook account – and all evidence I see indicates a very significant percentage of Facebook accounts fit the same pattern. And in fact a significant percentage of the overall Facebook community must consist of people who no longer even remember their logins to the site, or care. So let’s consider the actual monetary value to Facebook, or to any business that buys Facebook member data, or space on their profile page – directly seeking to monetize memberships. What are those member profile pages and their Facebook connections data actually worth, as predictors of future business transactions by those members, or as bases for initiating specific online transactions through placed ad links?

My point is that at best, scale of social network showing from overall site membership overstates monetizable value, and that is because all memberships and all connections to and between members are not worth the same. On one level, this simply reflects differences in social networking strategy (as I have discussed in Social Network Taxonomy and Social Networking Strategy, and in other postings available at Social Networking and Business.) But more than that, single individuals can in effect follow different strategies when connecting through different site venues, and they can and do show very different levels of active involvement for the sites that they are at least nominally members of, even if they follow the same basic strategy in principle on all of them – and even if they accumulate a significant number of direct connections-showing on all of them.

Activity going up on a Facebook wall might consist largely of what amounts to spam – content posted by a subset of active users, more or less indiscriminately on every wall they are connected to. And less actively maintained walls will accumulate this type of content and show activity that is in fact of this type. What is that worth?

• The basic monetization/extrinsic valuation assumption is that some directly, reliably knowable if not entirely known percentage of page hits, eyeball and sticky eyeball counts, etc predictably indicate entry into transaction processes that would lead to filled online shopping carts and online business completed.
• Or online activity would be viewed as a window into measuring and increasing awareness of opportunity for consumers in bricks and mortar businesses, and lead to increased foot traffic and business there, and once again in a directly predictable manner.
• But that is not true, and certainly when site memberships and profile page activity are not analyzed and partitioned according to sophisticated, nuanced models.

With that, I have outlined something of the basic challenge faced. I am going to continue this discussion with my next series installment, where I will look into influence score measures, and sites like http://www.klout.com and http://www.peerindex.com.

You can find this and related postings at Macroeconomics and Business. You can also find this and related postings at Social Networking and Business.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: