1. ADTELLIGENCE GmbH
Mannheim, Germany
www.adtelligence.de
info@adtelligence.de
“Cashing in” on Connections – Monetizing Today‟s Social Networks
White Paper (2009)
Chapter 2 – The Global Market of Social Networks

2. Contents
2. The Global Market of Social Networks
2.1 Social networks – Part of Web 2.0
2.2 Importance of Social Networks on the Net
2.3 Largest Social Networks in the world
2.4 Largest Social Networks in Germany
2.5 Asia: A special scene in Social Networks
2.6 Specialized Social Networks
2.7 Summary
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3. The History: Social Networks go
from Niche to Mass Phenomenon
The term ‘social network’ was picked up by the media just a few years
ago.
The basic functions of any network, communication and interaction
between two or more people, are not new technologies. They’ve been
around since the beginning of the Internet.
Chats, email, forums, and some specialized communities also have a
long history, but were always very decentralized.
Centralized systems, such as the “news groups” (i.e. Usenet) existed
mainly in the IT sector and have played a special role in the open source
movement since the early 90s.
“Social networks” as central platforms where people could create user
profiles mostly existed among online gaming communities, dating
services, or information services and have been around since the turn of
the century
Since 2006, there has been a mass adoption of large Social Networks in
Europe, since the advent of platforms such as StudiVZ, Netlog, Bebo,
MySpace and Facebook
Front Cover of COMPUTER magazine,
September 1979
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4. The Drivers: Social Networks Go
from Niche to Mass Phenomenon
 The spread of broadband access at home and Wi-Fi Internet access in public areas has led to a mass
distribution of long-lasting and cost-effective Internet
Broadband Internet
Access  Lack of broadband connections in the 90s prevented the breakthrough of many innovative Web
technologies
 In recent years, mobile Internet access has finally caught on in the private sector. This, after
years of acceptance in the business sector, is finally giving way to the introduction of useful
mobile applications and hardware
 The mobile Internet is gradually replacing the asynchronous communication via e-mail through a
permanent, active interaction between the real and virtual world. The “life” within Social Networks is
Mobile Internet slowly being merged with what’s happening in reality (1:n communication instead of 1:1)
 Photo uploads to Facebook and Twitter and mobile “status-updates” are very ‘en vogue’ among
young people and continue to become standard communication tools
 Many Social Networks have opened their doors to external developers to increase the speed of
innovation and connectivity. Some networks have bound together and have chosen an ‘open source’
standard for these developers, allowing them to “write once, install many”
Open Source  Various open source Internet services and social networking sites have made it possible for
Interfaces end-users to keep one login scheme, which allows them to access multiple sites with one user
profile or login (e.g. Open ID). This has cleared a very big hurdle for new Social Networks that
seek new traffic and users .
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5. Social Networks
Transforming our Communication
Chat with your News from my
network of Network – What
new friends are all my friends
up to...right
Information now!?
Find new
Send friends with
Messages Entertainm
ent similar
instead of interests
sending
Email
Social
Interaction
Walls, blogs,
videos,
combined with
editorial Self-
content portrayal
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6. Social Networks
Connecting our “Virtual” Lives with
Reality
„What ever happened to John Doe and
Lieschen Müller after University?“ (Facebook, The Success of Social Networks
MeinVZ, stayfriends)
Social networks do differ from one another to some extent
„What event should I go to – and who’s going
to be there?“ (Netlog, MySpace) In particular, it is certain features, functions, and aesthetics that make
up the attractiveness of individual social network
„Who’s the good looking blonde girl in our
Basic social networking features have existed on most platforms for a
Latin class?“ (StudiVZ) long time now. More modern networks have had massive growth
breakthroughs because of good strategic planning of users and how
„What the heck is my neighbor up to?“ (Wer they used the network effect. (i.e target users in regional areas, or
kennt Wen) certain ages groups, special interest groups)
„What music, fashion, etc. is in right now? Am In addition, they have cleverly defined the local dominance in target
I cooler, or are you? (MySpace) groups. (For example, x% of a students’ friends belong to network XY,
through the natural network effect, he will be encouraged to join
„What do you do, who do you know, and are them)
you an important connection for me to have? Virtual communication and interaction is common among all Social
(Linkedin, XING) Networks: chat, messaging, and related functions
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7. Contents
2. The Global Market of Social Networks
2.1 Social networks – Part of Web 2.0
2.2 Importance of Social Networks on the Net
2.3 Largest Social Networks in the world
2.4 Largest Social Networks in Germany
2.5 Asia: A special scene in Social Networks
2.6 Specialized Social Networks
2.7 Summary
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8. Social Networks
What it all means on the Global Scale
Six of the top 15 Websites in the world are Top Global Websites (Traffic)
Social Networks1)
1 Google
The high rate of growth for Internet usage in 2 Yahoo!
the past few months has been due to social 3 Facebook
network activity 4 YouTube
5 Windows Live
The top-ranked sites are continuously changing 6 MSN
between Google, Yahoo, Facebook, and other 7 Blogger.com
major players 8 Wikipedia
9 Baidu
Other top sites outside of “pure search 10 Yahoo Japan
engines” have incorporated more and more 11 MySpace
elements of classical Social Networks (Blogger, 12 Google India
Twitter, YouTube, etc.) 13 Google Deutschland
1) The distinction between "traditional" Social Networks like Facebook and the user-generated 14 Twitter
content side of Web 2.0 (eg. Blogger.com. Twitter) is extremely difficult. Therefore, we’ll keep
the US-tradition (see, eg. TechCrunch) of the broad definition.
15 QQ
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9. Social Networks
In Germany, there is even more to the
Story
Top Websites in Germany
Ranked in order of page impressions, more (Traffic)
than half of the top 15 sites in Germany are 1 schülerVZ
Social Networks! 2 wer-kennt-wen.de
In Germany, neither Google nor Facebook 3 studiVZ
has been audited / approved by the IVW 4 T-Online
(Informationsgemeinschaft zur Feststellung 5 meinVZ
der Verbreitung von Werbeträgern e.V.). 6 lokalisten
Still, the dominace of social network in 7 bild.de
Germany is even more than that of the 8 mobile.de
international realm 9 Yahoo!
10 Kwick!
Even in Germany, Social Networks grow with 11 Travian
the same dynamic and faster than their 12 Schueler.cc
competitors – similarly to the rest of the 13 MSN
world 14 MySpace
15 Spin.de
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10. Contents
2. The Global Market of Social Networks
2.1 Social networks – Part of Web 2.0
2.2 Importance of Social Networks on the Net
2.3 Largest Social Networks in the world
2.4 Largest Social Networks in Germany
2.5 Asia: A special scene in Social Networks
2.6 Specialized Social Networks
2.7 Summary
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11. U.S. & Chinese Sites dominate the
Market for Social Networks
Trying to get hold of reliable statistics on the world's Social Networks, Global Ranking
largest Social Networks is a task in itself. There is a (ranked by unique visitors)
huge lack of statistical comparisons and publications
available, making it practically impossible to compare
1 Blogger
2 Facebook
In addition, the difficulty is that the establishment of 3 QQ
Social Networks has become much more complex 4 MySpace
since many websites incorporate community features 5 Wordpress
6 Windows Live Spaces
The most relevant statistics can be found within blogs 7 Yahoo! Geocities
(Blogger, WordPress), and sites like Flickr, Yahoo!, and 8 Flickr
Geocities, which also include user-generated content. Hi-5
9
Statistical experts such as TechCrunch and Comscore
10 Orkut
have found analogous results.
11 Six Apart
Strikingly, the global market is dominated by U.S. and 12 Baidu Space
Chinese pages (QQ, 56.com, Baidu Space) 13 Friendster
14 56.com
15 Webs.com
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12. Facebook & MySpace
Maybe the best in the World,
but not locally
Country SN #1 SN #2 SN #3
Source: http://www.vincos.it/world-map-of-social-networks/
Australia Facebook MySpace Twitter
Canada Facebook MySpace Flickr
China QQ.com Xiaonei 51
France Facebook Skyrock MySpace
Germany Facebook StudiVZ MySpace
Italy Facebook Netlog Badoo
Russia V Kontakte Odnoklassiniki LiveJournal
Spain Facebook Tuenti Fotolog
England Facebook Bebo MySpace
USA Facebook MySpace Twitter
India Orkut
South America Orkut
 Despite the widespread use of Facebook and MySpace, they do not dominate every local market. Although, they both
have the number 1 position for most countries in the western English-speaking world
 Data for this chart was simply collected from Alexa.com und Google Trends, therefore this survey does not attempt to
fully prove the accuracy of today’s known rankings
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13. Facebook
Number 1 among English speaking
Countries
Source: http://www.oxyweb.co.uk/blog/socialnetworkmapoftheworld.php
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14. Registered User Accounts worldwide Tencent // QQ
>870 Mio.
Source: iBusiness
Facebook
> 300 Mio.
MySpace
> 200 Mio.
Twitter
>80 Mio.
VZ Gruppe
Xing WKW
ca. 15 Mio. Lokalisten
> 8 Mio. 6,3 Mio.
1,9 Mio.

15. Contents
2. The Global Market of Social Networks
2.1 Social networks – Part of Web 2.0
2.2 Importance of Social Networks on the Net
2.3 Largest Social Networks in the world
2.4 Largest Social Networks in Germany
2.5 Asia: A special scene in Social Networks
2.6 Specialized Social Networks
2.7 Summary
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16. Facebook and Student Directory
Networks dominate in Germany
In Germany, “student directories” (VZs)
are mainly targeted to the students of
German elementary schools, high
schools, and universities. They continue
to lead in the social networking space
throughout the country and look like a
Facebook copy cat but in red
Facebook ranks at the top position as a
stand-alone network in Germany, but its
growth is accredited to its international
momentum and its popularity as the
major U.S. networking site
With overall retention rates dropping off
in Germany, Facebook is still ahead, but
has decreasing retention trends
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17. Emerging Top Social
Networks in Germany
Factsheet
Founded October February20 February 2006 August 2002 2005 2003 2001
2005 08 2007
Registered 5.600.000 2.600.000 5.200.000 6.300.000 7.400.000 3.100.000 7.500.000 ~ 1,000,000
Users
Average Age 20-29 20-29 years 12-20 years 20-49 years 20-49 years 14-29 years 26 – 40 20-49 years
years years
Unique Users 5,29 Mio. 3,27 Mio. 4,38 Mio. 5,71 Mio. 2,76 Mio. 1,47 Mio. 5,5 Mio. 0,97 Mio.
Visitors 44% 45% Users 51% Users 2,8 Mio. Users 0,5 Mio. Users 20 Mio. >25 Mio.
Users visit daily visit daily visit daily visit daily monthly monthly
visit daily approx 32 approx 32 approx 32 Min.
Min. Min..
Page 3,95 billion 1,74 billion 5,67 billion 4,29 billion >120 Million 1,667 billion 300 million ca. 1 billion
Impressions
per Month
Reach 20-24 20-24 years: 20-24 years: 20-24 years: 30% 20-24 years:
years: 30% = 30% = 0,985 = 0,985 UU in 30% = 0,985
34% = 0,985 UU in UU in mio. mio. UU in mio.
1,783UU mio.
in mio.
Source: IVW, AGOF , Blogs & operator pages, own analysis
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18. Strong Aesthetic Differences of
German Social Networks
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19. Contents
2. The Global Market of Social Networks
2.1 Social networks – Part of Web 2.0
2.2 Importance of Social Networks on the Net
2.3 Largest Social Networks in the world
2.4 Largest Social Networks in Germany
2.5 Asia: A special scene in Social Networks
2.6 Specialized Social Networks
2.7 Summary
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20. Independent Social Networks in Asia on
the Rise due to vast Cultural Differences
 Many Asian cultures  Anglo-Saxon players
use Social Networks like Facebook have China
as their “virtual failed to fully meet
escape” to break out the needs of users in
from their often Asia due to language
conformist lives and character barriers
 Social Networks from  Success of the large
Asia usually offer Social Networks in Japan
much more space on Asia can be similarly
users’ profile pages compared to that of
for display, dominance players
decoration, and self like Facebook in the
promotion USA
South Korea
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21. Some Screenshots
Source: plus8star
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22. QQ – China„s money machine
reaching 1 billion revenues in 2009
Source: plus8star, Tencent annual report
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23. Asia as Example? Yes,
but think about cultural differences
Monetization in Asia QQ (Tencent) as Model of Success
 Creating individual profile pages is one of the main  Tencent began as an instant messenger service and
features of Asian Social Networks. today, although it is not a typical Social Network, it
offers several products like gaming, portal, virtual
 This creates a big opportunity to not only sell real currency and many more. All offers are combined
goods, but virtual goods (see also in chapter 3) like with typical social network features like user
skins, avatars etc for the users cartoon alter ego. generated content, multimedia and communication
This is comparable to a mixture of the Sims and features
Second Life or Habbo hotel
 QQ is Chinas biggest community, but also the world
 Virtual commerce is often combined with the leader in number of users and revenue
generally known revenue models like
advertisement  The business model started with free instant
messaging services and up sells premium features,
 The Asian leaders often have a monopoly in their games and virtual goods. 90% of the revenues are
country. E.g. Cyworld has about 90% market share created through premium services. Advertising is
in south Korea and Mixi locks the market of people only 10% of the revenues
in their twentys in Japan
 Success factors are the big network effects & the
massive feature offering
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24. Tencent Financials (in Mio. €)
1200
1000
800
600
400
200
0
2004 2005 2006 2007 2008 2009
Profit for the year Gross Profit Revenue
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25. Asian Social Networks top the
Source: http://resources.emartin.net/blog/pic/China-SNS.jpg
Charts among World Players
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26. Contents
2. The Global Market of Social Networks
2.1 Social networks – Part of Web 2.0
2.2 Importance of Social Networks on the Net
2.3 Largest Social Networks in the world
2.4 Largest Social Networks in Germany
2.5 Asia: A special scene in Social Networks
2.6 Specialized Social Networks
2.7 Summary
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27. Understanding the Content
“Boundaries” of Social Networks
 Social networks possess very extreme dynamics, both in terms of
user numbers and their orientation
Dynamic  Networks’ user alignment is usually due to the fact that Social Networks
Development of a start in specific geographic locations. KWICK , for example, started as a
Network regional social network in the Stuttgart (Germany) area and now has become
a pan-regional social network, the same holds for Localisten.de and Wer-
kennt-wen.de. (This is also true for vendors from other countries)
 On the other hand, large Social Networks like Facebook or MySpace offer
Specialized even the smallest communities a home merely through their large numbers
Communities and
Interest Groups  These smaller interest groups that focus on specific topics make it possible
for users to exchange ideas with other like-minded users
 In addition, “normal” websites that focus specifically on content, such as
European Soccer (like kicker.de) are slowly evolving in the direction of social
networking sites - incorporating features that better connect their community
“Content Focused” (forums, profile pages, personal messaging, etc.)
Web Sites
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28. Specialized Social Networks
Target Audiences and
Special Features and Functions
 Almost all Social Networks started in some form as a specialized network.
Here are the main criteria of specialization:
Target Groups  Occupational: students (StudiVZ), business groups, (LinkedIn, Xing.) graphic
designer (grafiker.de)
 Age: e.g. MeinVZ, platinum grid, etc.
 Geography: National, regional or even local networks - such as KWICK!,
Nachbarn.de, etc.
 Special interest: Music (e.g. simfy.de or last.fm), Auto (e.g. autoki), Old timer
(e.g. Carsablanca), Mothers (e.g. NetMoms), etc.
 Other Social Networks have “special features” at the core of their
community, attracting users who have specific needs
Features
 Noovo.com - Information Worker / Business Users - Users of Social
Networks with similar interests that filter the information "collaborative
filtering" and "crowd sourcing"
 Ning.com - Marc Andressen's approach combines thousands of niche
networks on one single platform, rather than creating one “general” social
network
 Aki-aki - Location-based Social Networks
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29. Examples of Social Networks with
Special Features and Interests
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30. Specialization alone does not
guarantee Successful Monetization
 Large and “successful” Social Networks find it a continual challenge to monetize even a
fraction of their enormous user bases. As already stated in this paper, the lack of
monetization lies in the inability to efficiently advertize and target large undefined audiences
within their networks, which leads to low CPMs and the difficulties of proving an added-value
or a unique selling point over competitive websites due to the homogenous nature of Social
Networks
 “Specializing” a Social Network is still no guarantee for success:
 Specialized groups and Social Networks like StudiVZ face the same challenges as their large, general
counterparts. Not all students are the same; they want customized news & ads
 “Long-tail” Social Networks are indeed an interesting, definable user base to advertisers, but they
lack convincing “user traffic” numbers that are needed to attract advertisers to run a solid, lucrative
marketing campaign
 Therefore some specialized Social Networks use alternative methods, such as subscription-based or
“Freemium” models, and are successful
The following chapters will go into detail about how Social Networks of different structures create
revenue today and in the future
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31. Contents
2. The Global Market of Social Networks
2.1 Social networks – Part of Web 2.0
2.2 Importance of Social Networks on the Net
2.3 Largest Social Networks in the world
2.4 Largest Social Networks in Germany
2.5 Asia: A special scene in Social Networks
2.6 Specialized Social Networks
2.7 Summary
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32. Social Networks in Global Competition:
Specialization, new Features Keys to
Success
 Today, rapid penetration and a large number of Social Networks have already
Global “Knock-Out” saturated the market in many countries
Competition
 The result is “cut-throat” competition between established players and
newer entrants which occurs globally.
 The last few months have shown that users find newer, more innovative
features enough of an incentive to switch platforms, despite the higher costs
involved
Features Critical to
Success  Global players (particularly Facebook) heavily invest in the technical
development of their platform with the hope that global market dominance
is the key to rapid return on investment. Consequently, they have the ability
to scale their development more quickly than others with development
teams spread over several countries
 Certain social network specializations (like special-interest groups or regional
markets) can lead to successful business models
Attractive
Specialization  The question is, how far can they preserve the attractiveness of niche
platforms for target audiences and to what extent will regional networks be
able to withstand the pressure of global innovation?
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33. Global vs. Local
General vs. Specialized
Global/International
Which will emerge as the dominant Social
Networking Strategy?
 Today's Social Networks can be generally Facebook,
LinkedIn
categorized as "global vs. local" and "general vs. MySpace
specialized," despite some gross inaccuracies
 Although local specialized Social Networks (such
as XING and LinkedIn) show a positive cash flow Specialized General
today, reviews from Facebook and MySpace,
which follow the global, general pattern continue
to raise the eyebrows of investors XING,
carsablanca, MeinVZ, QQ
 Only the future will tell if there is a dominant
model of success in this game.
StudiVZ
Local/Regional
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