Online Communities

There once was a time that Myspace’s $600 million price tag was laughed at. That debate is dead. Now its not a question of a billion but how many billions. The number $15 billion was being tossed around over a year ago. Its no surprise now that Facebook now also likes that 11-digit number, Microsoft agrees.

Its the tail end of 2007 and Myspace’s traffic has peaked. But who cares? Social networking is here to stay.

Social networking sites are very powerful tools if you know how to use them. Web entrepreneurs have raked in countless millions of dollars simply by providing third party graphics and layouts. Others have used social sites to funnel growth into their own start up sites, with phenomenal success.

Its simple, social networking sites are a destination. Snuggling up to that source and you end up with a stream of visitors. How important is Google to your site? In the right markets, social networking sites can be just as powerful.

How To Do It

Unlike Google, social networking sites are not search engines. If you want to throttle their power, legally, you need to use permission marketing and viral marketing (think of it as link bait.)

Over two years ago I placed a simple Myspace button on one of my community sites — much like the RSS buttons on blogs. Visitors added our site’s profile to their friends list and it spread. Our site’s profile had plenty of graphics and links, every single one went to our site. It was a free, fast, and easy way to build a forum userbase ; It was also a passive, soft sell approach that didn’t piss anyone off.

Social networking promotion can be that simple. If your content engages your audience then a little work will take you a very long way.

Lets take this one step further. You don’t even have to try to get social networking traffic. If users are sharing your site’s links with their friends, a good percentage are going to do it through a social networking site. For a quickly growing core, social networking has replaced e-mail and instant messaging as the internet communication medium of choice.

Facebook is the next leader, catch this train now

Facebook provides a complex API you can use to build applications that interact with the site. Facebook’s owners are enthusiastic about bringing new features aboard. And yes, they are very open and accepting of commercial goals. This has opened the floodgates for aggressive Facebook API tactics. This same traffic, Facebook could sell for tens of millions of dollars. Your cost? Give people what they want.

I was a bit skeptical of Facebook at first. Their closed system means there is no graphics & layouts after market. Rumors of a non-converting audience made things look even worse. But Facebook isn’t just a bunch of bored college freshmen. The site has gone mainstream; Facebook’s astounding compounding growth rate is making Myspace look very small. And the traffic does convert.

Where you tempted to give Second Life a try? Forget it. Why build an island 10 nerds a day will see when the same effort will put you in front of 1 million? Whether you are a Fortune 500 company, Web 2.0 start up, brand marketer, or just a plain old web publisher, leave the skepticism behind: you need to be paying attention this.

Its funny what kind of things can happen when you own a community of zealot users. The owners of Digg found this out today, and as I right this, they site has been pulled offline.

So what happened? Someone posted a story containing the HD-DVD processing key, and someone at Digg banned the user. The result: a deluge of HD-DVD stories, most featuring the codes along with stories heavily critical of Kevin Rose.

Whenever you run an internet community you must be prepared to mange a crises. Each audience presents its own set of potential problems, some disasters are easier to contain than others. The results of a “fallout” can vary depending on the niche of your audience, spheres of influence, and the structure of your community. Key members are likely to make an exodus following an event like this but the community itself continues on.

As for Digg, this probably is very good for them. This story is everywhere already including the top of The Drudge Report. I wouldn’t be suprised to see it make TV.

Over the past month or so I’ve run in to stories of several people making an absolute killing from selling assets in online games and virtual worlds. Several affiliate marketers have even raised the question, “how can we make money off this?”

Lets first classify the two distinct “games” that are money makers for third parties. The first type is the MMORPG - Massively Multi-Player Online Role Playing Game. This includes popular games such as World of Warcraft, Everquest (1 & 2), Ultima Online, and a very long list of wanna-be’s. The second type of “game” is the virtual world which does not really involve any game play at all. The market leader here is Second Life. The entire game basically involves building new 3D objects and talking to people.

So is this just a fluke or is there really a lot of money to be made brokering virtual property online? Today the largest online game, World of Warcraft, has 6.5 million players. Curiously, the most hyped online world, Second Life, comparitively has around 70,000 (according to MMOGChart.com — “official” stats contradict this.)

Currently online role playing games, such as World of Warcraft, provide the largest opportunities for internet entrepreneurs. The main market here is selling in game currency (gold or credits) and items (such as weapons, armour, etc.)

There are many pitfulls to farming and selling virtual items. eBay recently issued a blanket ban for virtual items (with some exceptions made.)

With uncharted and dangerous territory comes windfall profits. There are various stories being thrown around about online developers and gold farmers raking in millions of dollar over the years. Thats enough money to be serious about.

Much like blackhat search engine optimization, those in a position to benefit the most are programmers who can identify loopholes and exploits in the system. However, if you have the starting capital and drive to succeed, you can profit from this massive emerging market too.

As a publisher there is money in it for you too! Gold sellers are paying top dollar for traffic. Just do a search on Google for “world of warcraft gold” and you’ll see the competition both in PPC and organic listings.

Here is an idea — take a look at mmorpg.com’s listing of upcoming games, and start building the pages and backlinks for sites now. You don’t really know what games will boom or flop, so following one game may not pay off, you need to follow them all.

This story is a little off topic, but just too bizarre and funny to pass up, so I am going to make it and then add an educational twist to the end.

I’ve made posts before about the over-hyped and over-reported Second Life. Aaron Wall wrote a post recently that applies perfectly to what Second Life has done “Leveraging Statistics to Dupe the Mainstream Media for Public Relations.”

From ZDNet:

“The issue has surfaced after the avatar Anshe Chung (real name Ailin Graef) was attacked by animated flying penises during a virtual interview with CNET news, conducted in their Second Life bureau last month. A video of the attack surfaced on YouTube, and was then taken town after Anshe Chung Studios filed a DMCA complaint.”

Cheap & free publicity is a critical key to entrepreneurial success, online and off. I suggest every time you see an attention-grabbing story you pay close attention to the factors that got it there. In this case an odd event combined with a controversial DMCA complaint snagged two audiences — despite making one angry it managed to build backlinks and mindshare for a virtual business owner.

I finally installed a Wordpress plugin that allows my posts to be dugg, de.licio.us’ed, reddited, or Yahoo’d (or whatever you want to call it.) This plugin include 12 more social bookmarking sites which were included by default.

Despite all of the social bookmarking sites available, nearly all seem to have a heavy dork-appeal (with the notable exception of StumbleUpon.)

I have a few suggestions for you if you are planning on launching a social bookmarking site.

#1 - Appeal to geeks, but don’t target them. Use them for the links, and then high tail it out there. Figure out what its going to take to get the average Myspacer visiting your site daily.

#2 - Make a few social networking sites, each with a slightly different twist. Whats the extra cost once you have the code written?

#3 - New features are nice but don’t add them just to be cool. New features should either bring in new users or keep existing users addicted to your site.

There are different approaches to social bookmarking. The three most unique services I am aware of are Digg, Del.icio.us, and Stumble Upon. Forget semantics, they all serve the same general purpose: allow users to share web pages with each other.

Internet entrepreneurs have a perfect oppurtunity today to reach the mass market with new social bookmarking sites. What are you waiting for?

I feel like my posts have been weighing too much toward social networking and Web 2.0 lately, but I couldn’t pass this story up. The founder of Mixi, a Japanese social networking site saw his company Tokyo Stock Exchange today making him an instant billionaire.

Online communities have are very vulnerable to geographic segregation. While Myspace dominates the US market, Orkut owns Brazil, and Bebo the UK. eBay owns the US for online auctions, Yahoo owns Japan. Whats the point? Don’t think that just because one company dominates the US market you can’t compete elsewhere.

Kenji Kasahara has now made a lot more money than Tom Anderson or Intermix made from Myspace (assuming that share prices don’t drop like Vonage.) Shoemoney made a good point on his radio show this week. You don’t have to come up with a brilliant idea to make a lot in business. Find out what works for someone else and do it better or tailor it to an underserved market.

I just finished reading an article over at the Hollywood Reporter in which Ross Levinsohn, the president of Fox Interactive Media talked about what they are planning and doing with Myspace right now and over the next few years.

I have been paying close attention to News Corp NWS for over a year now. By far, this is the most revealing look at their internet media plans.

One of the biggest problems with Myspace is much of the traffic is very generalised, thus resulting in only modest ad earnings. To combat this News Corp is working hard at how they can sub-niche Myspace’s general untargeted traffic to high-profit “vertical miniportals.”

This article also reveals that Fox Interactive Media has a “stealth group” of engineers who look out for new ideas and companies to buy. Now those would be some priceless contacts to have.

Lee Dodd, the guy behind Forumtrends and several large message boards will be on Shoemoney’s radio show at webmaster radio today at 6pm EST. If you own a message board Lee is one of the guys you should be listening very closely to. I have been reading his blog for several months now and it has given me some great insight in to the finer points of running a successful forum.

Shoemoney will also be announcing a special guest for his show on the 27th. He’s given me a heads up on who this is. Lets just say it is going to be very interesting.

Too paranoid to participate in social networking sites for privacy concerns? I’m well aware that colleges watch Facebook and school watch Myspace, but apparently the US government does too.

“New Scientist has discovered that Pentagon’s National Security Agency, which specialises in eavesdropping and code-breaking, is funding research into the mass harvesting of the information that people post about themselves on social networks.”

Recently I realised how someone could create a program that would allow someone to take a photo of a person on the street, perhaps with a mobile phone. Then using face recogonition software that image could be run through a database of information harvested from Myspace matching it up with a profile. Technical issue might require the database to be narrowed down to a specific geographic region but that would be one of the few limitations.

Forget the NSA for a moment, this data is public and can just as easily be harvested by someone else. Think about that for yourself, I don’t need to describe this in detail.

I suspect this comes as little suprise to most of my readers. All of the internet developers I have talked to either think Myspace is so silly they ignore it or like the marketing opportunities and use and about it. So, here is the good stuff that you need to exploit this situation for a much greater reward than politicians passing silly laws.

To profit off of this you need to build one of two things –
#1 a secure social networking site where minimal information is public. Number of friends could be public, but who they are isn’t. It will be difficult to go beyond this.

#2 a third party tool that allows users to encrypt data and display it only to select friends or people given a password. Right now many Myspace users input their age as “14″ because right now this is the only way to make their details private.

Once you have done #1 or #2 start building up the PR. Forget an affiliate program where you pay $1 a sign-up or something, you don’t need that. Right now the press is all over Myspace. They eat up any news story now matter how poorly it is written. Put something good out there and this should be easy.

A big part of my web background is in virtual worlds. When I was first getting started in commercial website publishing I was involved in creating an interactive virtual world. Unfortunately the project fell apart. However, my strong interest in this side of the internet has remained.

I was very suprised to read on Slashdot about how far along Second Life has come. If you are not familiar with SL, it is a 3rd or 4th generation 3D virtual world which was launched in 2002. Other than popular online role-playing games, SL dominates the virtual world market right now.

The thing that has made Second Life so unique is that their foundation is user created content. Programmers and artists are able to build just about anything they can imagine in 3D & other people around the world can interact with it.

Up until now I was aware that people were making money doing land deals in Second Life. Today I found out just how far that market has come along. There is a site called SL Exchange which allows people to buy and sell custom items. Just by taking a few glances at some of the things for sale it is clear that huge amounts of time and effort has gone into third-parties developing SL.

The thing that really caught my eye was this — “Soon after Second Life crossed the 100K subscriber mark in January, there’s been a rush of big companies itching to develop and promote their brand in the world: first it was MTV, then Coke, and now with SL at 225,000+, they keep coming: this week, for example, Twentieth Century Fox had a virtual world premiere of X-Men III in Second Life.” May be Stephenson’s vision of the metaverse wasn’t so far off?