Evolution of Social Networks: Past, Present, and Future

Mark Schaefer’s recent post on {grow} (which I subscribe to, by the way, and you should to) got me thinking. I wrote a comment and mid-comment, realized I probably had a blog post there. Mark said the same thing. So, here it is.

Mark talked about obstacles to the growth of the social web for various types of businesses. I believe a number of factors must come together in order for the social web to really explode for business–and most of those factors are dependent upon the social networks themselves.

The following video shows the evolutionary path I expect the networks to take–at least the successful ones. If you’re not a video-watcher, I’ve provided the content in writing below the video. (And, hey, it’s my first time doing a video, so please cut me a little slack.)

(YouTube URL: http://www.youtube.com/watch?v=fw1o81KEIE8)

There are three phases in the evolution of social networks:

• Phase I: Growing the Customer Base
• Phase II: Growing Business Use
• Phase III: Driving revenue

• Facebook, LinkedIn, and YouTube have built a solid customer base.
• Twitter is still building its customer base.
• All these social networks have initial business use, mostly unsolicited. They still need to grow that  business use.
• None of the social networks have reached phase III, yet.

The social networks right now are stuck in the second phase, because they haven’t grasped their necessary role in growing business use of their networks.

Phase I: Growing the Customer Base

A social network starts with a unique and useful service or tool. Facebook connects people and keeps them updated on what everyone is doing. YouTube lets you upload (amatuer) videos and watch the same. Twitter lets you micro-blog and monitor a continuous stream of real-time, concise updates from people. LinkedIn lets you network online with other people for business/career-related purposes.

Phase I, early stage. These networks start with a small group of people who find the tool fun or useful and are dedicated to using it. They are willing to overlook usability issues, service failures, and other short-comings because they find the tool so valuable. This is the early stage of phase I.

Phase I, late stage. If it’s successful, the social network grows its customer base by providing added value and addressing its shortcomings, such as increasing usability, scaling, and so on. Growing the customer base necessarily means honing the site’s purpose and adjusting the feature set. Over time, the site grows to acquire and accomodate a large number of users. Facebook and YouTube are certainly in the latter part of phase I.

Phase II: Growing Business Use 

Some users see the potential of the social network as a business tool. Others simply stumble into making it a business tool. For example, early users of Twitter may have garnered a large following, which then led them to realize they could leverage that following for business purposes.

Business use is important to the social network because it cannot realize significant revenues from end-users. Consumers are notoriously unwilling to pay for these types of services, or not willing to pay much. Hence, business users present the main opportunity for revenue.

Phase II, early stage. As the network’s customer base grows and as some business/marketing success stories emerge from very early adopters, more businesses begin to explore and use the social network. They work with the feature set offered by the system and any third-party developers.  These businesses are attracted to the social network by a combination of factors: it’s novel, it’s free, and it provides something else of particular value to them. For example, the social network’s demographic is composed of a high number of the business’ target customers. Or the type of engagement the network offers is well-suited to the particular business.

In the early stage, businesses come to the social network, seeking it out, because the platform offers some specific advantages for them. However, it offers those advantages to only a limited number and type of businesses, so growth is limited. To grow business use, the social network needs to become more mainstream, lower the barrier of entry and use for businesses, and offer more–and more widespread–advantages.

Phase II, late stage.To grow beyond the early stage, and gain significant numbers of business users, the social network makes itself attractive to business users. It builds features for business users and ensures that companies can get business value out of using the social network. Specifically, the social network must accomodate key business needs:

• Reach (volume of users, of different types)
• Targeting (ability to find the right customers)
• Engagement (ability to capture and retain the customer’s attention)
• ROI & measurements (reasonable and verifiable ROI)

Business use of the social network only grows significantly when the social network takes it upon itself to build a platform and tools for business use. It provides new ways for companies to market or otherwise take advantage of the social network, methods uniquely suited to the social network and that leverage its assets. 

Phase III: Drive Revenue Growth 

Once the end-user customer base and business use have grown to appropriate sizes, the social network can focus on driving revenue growth. The revenue comes primarily from companies using the social network, though incremental revenue may come from end-user fees. Online advertising in the traditional manner may be a source of revenue, but not the only or even the primary one.

In Phase III, the social network must balance the needs of the end-users with those of the businesses trying to reach them. One way it does this is by focusing on features that benefit both parties: features that are entertaining or valuable to the end-user, but also valuable to the businesses users.  The social network designs its end-user features such that they can be well-leveraged by business users.

For example, the social network may design new forms of entertainment, but it designs them such that they can also be used by businesses to promote themselves and engage users. If the network creates ways for users to connect with each other, it stores information about those connections and what they reveal about the users, and makes it possible for businesses to use that information for campaign targeting.

Providing necessary access to and information about consumers during this phase runs the risk of alienating the same consumers. For that reason, it will be important to build support for Trusted Sources. 

• Trusted Sources are people and companies that individuals trust.
• Trust means the user relies on, believes, and leverages content from the source.
• Users will have Trust Circles, with the innermost circle being their most trusted sources for a topic, the next circle a little less trusted, and so on.
• It is possible to look at the Trusted Sources of your own sources, look at those people’s sources, and so on, resulting in a Trust Network.

To leverage Trusted Sources, the social networks will have to ensure that:

• Business have access to consumers, but consumers always have visibility and control over that access.
• Consumers realize tangible benefits to having trust relationships with companies.
• Those benefits increase as companies move into closer Trust Circles.
• Businesses have ways to promote themselves as trust-worthy and valuable, in specific contexts.
• Users have ways of rating businesses on trust scales.
• It is easy and desirable for users to publicize and promote their trust relationships with companies, to foster viral growth of trust relationships.