Watch this MySpace

Social networking websites are important vehicles for communicating with prospects

By Sandra Hanchard

The adoption of social networks by Internet users has maintained strong growth in the past three years, worldwide and in Asia Pacific markets. Marketers have accordingly tested new forms of engagement through this channel as they learn the nuances of consumer behaviour and etiquette.

While there is a critical need to determine the marketing initiatives that are most effective in raising brand awareness, a changing online environment has posed new challenges for marketers. Recently we have witnessed diversified segmentation of social networks as users create profiles on multiple networks; and a trend towards an ‘open Internet’ that will permit multiple network loyalties. At the same time, many firms are vying to own online identities by offering portability of profiles and networks.

The growing commercial opportunity in this area for financial services marketers is highlighted by the online traffic that social networks distribute to corporate websites. According to Hitwise, referral traffic from social networks to banks and financial institutions websites by Australian Internet users increased by 61.9 per cent in the past 12 months, comparing February 2007 to January 2008. As financial services marketers strive to keep abreast of consumer trends in the social networking space, they will need to test and measure forms of engagement that work best for their industry.

Leading social networks
Social networking websites are online communities of people who share interests and activities, and who are interested in maintaining and forming new connections. Social networking is a mainstream activity with the leading social networks in Hitwise Asia Pacific markets typically ranking amongst the top 10 websites visited by Internet users.

In a Hitwise custom category of 40 leading social networking websites, MySpace was the leading player in Australia accounting for 44.16 per cent share of visits in January 2008. Geographical differences were highlighted by the fact that Bebo dominated in New Zealand with 41.77 per cent share, Friendster in Singapore with 41.99 per cent and Facebook in Hong Kong with 37.72 per cent share. Market dominance is by no means assured however as new networks can rise quickly to grab the attention of fickle users.

The high engagement of users with social networks is demonstrated by a relatively long average session duration. For example, the average session times for the three leading players in Australia were MySpace 27 minutes, Facebook 21 minutes and Bebo 26 minutes. This is almost double the engagement levels compared to an all categories average of 12 minutes in January 2008.

Impact on communication channels
The growth of social networks has had a fundamental impact on how users interact with online channels, particularly the search engines and email services industries. Firstly, Internet users are increasingly choosing to communicate with friends through social networks in addition to web-based email services; secondly, users are increasingly receiving information pushed to them from their connections on social networks, which may be pre-empting the need to seek information on search engines.

Social networks experienced growth in the past 12 months in all Asia Pacific markets, particularly in Australia and New Zealand, increasing 61.99 per cent and 88.54 per cent respectively comparing February 2007 and January 2008. 

Segmentation
As social networks have become a part of mainstream Internet usage, networks have evolved to attract niche online audiences. While generalist websites such as MySpace, Facebook and Bebo enjoy visits by different user segments, specialist networks have emerged to provide unique services or to cater to specific demographic groups. LinkedIn for example is a professional employment networking website, while Club Penguin is a virtual world for young children.

As these websites carve out their online territories, marketers have the ability to target specific audiences when making decisions about allocating online spend. For example, Bebo attracts a strong representation from household users in multi-cultural and young family groups; while Facebook is likely to attract well-educated and affluent households.

Marketing on social networks
Branding initiatives become a significant challenge on social networks, where marketers face a potential backlash from users if they are seen to be ‘too commercial’ or fail to observe the culture of a network. The growth in referrals from social networks to third-party websites is both a result of organic traffic and smart marketing campaigns. Whether marketers opt for display advertising, widgets, sponsored skins, user groups or other forms of engagement, it remains critical to measure the success of campaigns by analysing website referral traffic or growth in brand searches.

There are several examples of gadgets on Facebook that create compelling online activities for users while providing positive branding opportunities for marketers. For example, The Free Rice application allows users to add their support to the United Nations World Food Program, meanwhile testing their vocabulary prowess. Another example is the Broadband Speed Challenge, devised by ZDNet Australia that allows users to determine the speed of their Internet connection.

As Facebook attracts an audience of professional, tech-savvy users, the gadget is likely to be an appealing online activity. The lesson for marketers from these applications is that they should aim to create compelling online experiences that engage users’ interests. In the financial services sector, this might mean developing widgets that provide a useful financial application.

The social graph in 2008 and beyond
The social graph is a notion which refers to the data that expresses an individual: their consumer preferences and behaviours, and their various social networks, including friends, family, professional associates and online contacts.

The social graph will be an important point of debate in 2008 as it poses two key problems: for users there is the challenge of managing multiple networks – including logins and transferring personal data. For social network owners, there is the commercial decision of how they should participate in an ‘open Internet’, defined by platforms that permit data sharing between networks.

While these may be technology or end-user considerations, marketers will need to watch this issue closely as it could impact how they choose to work with social networks. This could involve developing widgets that are compatible for multiple social networks, or applications that draw in data from the full spectrum of a user’s social graph. Other potential avenues for marketers include targeting websites that facilitate management of user data sources, such as Plaxo.

The rapid change in web technology and adoption of social networks by consumers provides several challenges for financial services marketers. Determining the most effective channels as well as advertising models that reflect the values of your target audience, will be key steps in engaging and acquiring new customers.

Sandra Hanchard is a research analyst with Hitwise Asia Pacific

To download a copy of the Asia Pacific Social Networking Report 2008 visit:
http://www.hitwise.com.au/registration-page/ap-social-networking-report.php