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How to Capitalize on SNS

How to Capitalize on SNS

KIM Byoungsoo

May 11, 2011


Welcome to our video program. I’m Byong-Soo Kim from the Management Strategy Research Department.

Zynga, Groupon, LinkedIn, Foursquare, and Huffington Post are all web businesses. What else do these companies share in common?

They are all experiencing soaring popularity and revenues. And they have come up with new business models based on social networking platforms like Facebook and Twitter.

Zynga is a social network game developer and provides simple interfaces and games that users of all ages can play. The web site is so popular that as many as 300 million users visit the site a month. Its revenue reached US$850 million last year, 95% of which came from sales of virtual items. This year, it was named the most innovative company, surpassing Apple’s App Store.

In the social commerce industry, Groupon sells products and services at discount prices. It has a presence in 500 cities in 44 countries around the world, and its membership exceeds 70 million. Groupon’s huge popularity prompted Forbes magazine to call Groupon “the fastest growing company ever” in 2010. On Groupon, you can connect to various SNS platforms like Facebook, Twitter and Google and share information on items with your friends.

LinkedIn is a business networking site that helps people form networks of experts and professionals. Many executives including those from Fortune 500 companies are members of the site, and the total membership is over 100 million representing 200 countries. Its pricing scheme ranges from US$19.95 to US$200 according to information a job seeker can upload and functionality that can be made available to the user.

Foursquare provides location-based social networking which enables users to find their friends’ locations and share information. A user’s check-in record and Tips information is shared with one’s Foursquare friends. By tapping the information, companies can analyze each customer’s life patterns and devise marketing strategies to enhance customer loyalty. Its membership surpassed 6.5 million in 2010 and has over 300 million check-in records.

The Huffington Post is a social news service that effectively blends bloggers’ voluntary participation and open SNS. It started as a blog that offered political news and has grown to be a global media company that boasts over 25 million monthly visits. Since it linked articles and comments to Facebook in August 2009, it has seen more than a 20% increase in the number of visits. Now, around 6,000 bloggers including celebs like Michael Moore and Madonna voluntarily contribute to the site.

What is behind the huge success of these companies?

First, they provide valuable incentives to customers.

Each day, Groupon features a single deal in a specific town or city to attract continuous visits. LinkedIn provides customized news service to a member’s profession.

Foursquare focuses on marketing that can satisfy its customers by joining hands with Starbucks and Gap. It has launched promotions like handing out barista badges and coupons for those who check into Foursquare the most times at a Starbucks store. Foursquare also held an event that provided a 25% discount for customers who checked into Foursquare at Gap stores.

While catering to their customers, they also focus on creating value for partners. For example, Foursquare offers a “business dashboard” which describes users’ activities to partners so they can tap into them for marketing purposes. The dashboard shows stats including total number of check-ins at each location, users’ gender, age, and posts on Facebook and Twitter.

There is one more thing that is just as important as incentives-fun.

No matter how good a service is, customers easily lose interest if the service is not fun. In an interview with Wired magazine, one user said that she realized she was addicted to Zynga’s Farmville when she found herself adjusting her schedule to play it. This illustrates just how much fun the game is. Zynga has diversified various factors according to levels, so a gamer doesn’t get bored.

The Huffington Post awards users badges and grades based on their activity on the site in order to stimulate information sharing among users. “Networker” is a badge that a user earns when they have many friends or followers on the Facebok or Twitter account they log onto the website with. “Superuser” refers to a user who shares stories a lot, a “moderator” badge is awarded when a user flags inappropriate comments.

Another ingredient for success is this.

Companies that have achieved success by tapping SNS platforms have encouraged users to form close ties with friends via their service. Zynga’s games are designed to promote cooperation among people who know each other. In partnerships with IBM and MS, LinkedIn supports people who work in the same field to interact with each other.

The Huffington Post introduced community mechanisms based on comments and replies so bloggers and netizens can develop emotional intimacy. For instance, you can follow a blogger if you like his or her articles, and profiles of netizens who post comments are shared.

Today we have looked at how some companies have established themselves by utilizing SNS.

The importance of improving services and creating new value by tapping SNS platforms is ever growing. In March 2011, Warner Brothers signed a strategic partnership with Facebook to expand its business scope in the content distribution market. Such changes are not only limited to IT companies. Companies in any field need to think about how to adopt SNS in order to improve products and service.

Thank you for watching. I’m Byong-Soo Kim.

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