faberNovel Consulting 2007 Public document 28.11.2007 ? Research paper Research paper 2007 Social Network websites: best practices from leading services 28. 11. 2007 ? Research paper This work is licensed under the Creative Commons Attribution- NonCommercial-ShareAlike 3.0 Unported license. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/ or send a letter to Creative Commons, 171 2nd Street, Suite 300, San Francisco, California, 94105, USA. 2 28. 11. 2007 ? Research paper About the study Amid the growing number of online ?social? feature offers, many companies, from major actors to start-ups, may ask themselves: How online social features can impact their customer relationship policy Which social features and practices bring value to their activities What the best candidate for an acquisitions is This study aims at answering part or the totality of these questions by: Providing a social networking website typology and understanding the specificities of these different categories Identifying social networking website best practices and trends and proposing specific analyses for each site Assessing the profitability for firms to be involved in online social networking activities, under which conditions and regarding what type of investments This document provides a general background for understanding social network websites and the study of online matchmaking websites and business network websites This study is only the first step. Distributed under creative commons license, it should be completed and improved through the contribution of external experts, firms and web users as major moves in the industry are expected to occur in the coming months 3 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 4 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 5 28. 11. 2007 ? Research paper Social networking websites are extensively used worldwide 6 Source : Ipsos 2007 28. 11. 2007 ? Research paper An introduction to social networking website analysis requires the presentation of a set of five principles 7 Social networking websites Network organization Virtual Identity Typology of social network Relevant metrics Basic economic effects 28. 11. 2007 ? Research paper Social network business generally generates economies of scale 8 Basic economic effects Economies of scale imply that the operating costs of the website are less than proportional to the number of users on the platform, e.g the more users the website has the less it has to spend per user This effect depends mainly on: The centralization and the independence of the website users: if the community functioning is strongly decentralized and relies on peer to peer relations, the CRM costs and monitoring costs will increase less than proportionally with the number of users. By contrast, if there is a strong need for monitoring and managing users? interactions (e.g: moderation), the costs will tend to be strictly proportional The existence of viral marketing: if viral marketing is strong in the segment of the market where the social networking website operates, the acquisition cost of new subscribers will be lower since users are going to ensure the advertising instead of the website Decentralisation of user relations Viral marketing Strong economies of scale Example of economies of scale 28. 11. 2007 ? Research paper Networks are characterised by « network externalities » and congestion point Networks display two effects: Network externalities: the interest in being a member of a network increases more than proportionally with the number of users Congestion point: an increase occurs up to the point where the network cannot support the number of users which depletes the service provided 9 Basic economic effects Demand Offer Size If price is too high Demand Offer Size If price is low Critical mass « Sponsor the access, charge the use » (Principle to manage a network) The challenge for managers of networks is to reach the « critical mass » where there are enough users to produce this network effect, which implies to: Ask a low price when the network begins to grow Make users pay for the use of the services provided by the network, not the access to it Price/ revenues Price/ revenues If the price is too high, the network does not reach its critical mass since the demand is too low If the price is low enough, the network reaches its critical mass and grows up to its congestion point Congestion point 28. 11. 2007 ? Research paper Information plays a fundamental role in managing social networks Evaluating the interest of a network before joining it is very diffcult 1) Knowing if the services will meet users? expectations is hard, even if they can estimate the value of the services promoted 2) 10 Basic economic effects 1) Internet services are what economists call « experiment goods »: goods that you cannot valuate until you have used it 2) This is known as « asymetric information ». Potential users know little about the network whereas managers know a lot Managers have different tools to tackle these issues. For instance in online matchmaking they can: Offer free registration that allows users to look at the profiles (or some of the profiles) of other registered users Broadly communicate about their balanced user base between men and women Q: How can you be sure that registered members in online matchmatchmaking websites are not all ugly ? A: Allow free registration and free profile base checking Managing social networking websites also requires alleviation of the mistrust of potential users : 28. 11. 2007 ? Research paper Social networks have a specific structure Many online social networks are « scale free networks » They are organized around some central nodes They grow through the principle of « preferencial attachment »: the more a node has connexions, the more chance it has to add new connections 11 Network organization Example of scale free network Example of random network 28. 11. 2007 ? Research paper Social website growth depends on the network?s structure Backing a viral adoption of the network, relying on its« scale free network » structure: every new user of a network is potentially a new « node » of the social network structure, websites have to induce them to bring all their « real » connections into the virtual community 12 Network organization Sources: Facebook, faberNovel analyses Supporting the animation of the network: since a « connexion-node » (e.g a user that has brought a lot of people to the site) may not be an animator Animation on the website is essential to keep the network growing Websites have to provide multiple and intuitive tools to interact with other users Two classic levers of growth for scale free networks 28. 11. 2007 ? Research paper Social networking platforms change the concept of identity Identity: ?sameness of essential or generic character in different instances? (Merriam-Webster). Identity in the real world is how one is described either by self- assertions or by the assertions of another Digital identity is a set of characteristics asserted ?by one digital subject about itself or by another digital subject, in a digital realm.? (Microsoft). This identity is comprised of multiple pieces of formal and informal data, real or fantasized 13 Virtual identity Digital identity has three particularities: Fragmentation: the identity is broken up between several networks and websites and these different pieces of identity might not be coherent Fantasy: digital identity can be easily fantasized Temporality: identity might not evolve over time ( a comment or an old profile is not automatically removed) Sources: Cavazza website, faberNovel analyses 28. 11. 2007 ? Research paper The applications managers have to develop depend on the type of network proposed 14 Real identity Fantasized identity Qualitative contacts Public exposition Virtual identity Example: according to its position, what kind of applications should be developed by my site ? ?Privacy/intimacy protection ??Relationship certificates? ?Network expansion tools ?Self-promotion ?Recommandations and profile certification ?Improvement of user?s public profile ?Enhancement of the image displayed to the rest of the community 28. 11. 2007 ? Research paper The way users manage their identity and the functionalities available on the site are closely linked MySpace Presentation of a desired identity Meeting of new friends based on center of interests « Monolog » space: additional applications are limited to personal space 15 Facebook Presentation of a real identity Extension of real friendships « Dialog » space: additional applications are developed to interact with other users MySpace vs. Facebook Virtual identity 28. 11. 2007 ? Research paper Social networks have all their specificities: four criteria can be identified 16 ? How far are interactions between users and profiles monitored and how ?open? is the platform ? (for instance can users develop their own applications ?) Degree of decentralisation of the network ? Is the network dedicated to a unique type of service (such as online matchmaking) or does it allow many more kinds of services ? Number of different types of interactions allowed ? Is the identity developed on the network close to the real identity of the user or is it a fantasized identity ? Type of identity ? What part of the Internet population might join the network ? Niche vs mainstream network Potential size of the network Typology of social networks 28. 11. 2007 ? Research paper Four types of networks can be identified 17 Online communities Business networks Online matchmaking Alumni networks Typology of social networks Facebook is currently moving from an « alumni network » to an« online community » Goal: socializing Goal: career and business opportunities Goal: soulmate Goal: getting back in touch 28. 11. 2007 ? Research paper Example of a representation of social networking websites 18 Degree of decentralization of the network Number of different types of interactions allowed Distance from real identity Potential size of the network Typology of social networks Facebook Meetic Match.com LinkedIn Myspace 28. 11. 2007 ? Research paper Differentiating the metrics is necessary Traditional metrics are limited Classic metrics are not always relevant for analyzing the success of a social networking website 19 Traditional metrics still applied: Number of unique users Number of pages viewed Average time spent Number of registered / active users Number of profiles created As well as geo-socio-demographic metrics : Gender Age Household revenue Geographical data But they are not relevant for every social networking website Sources: faberNovel analyses The emergence of social networks highlights the need for new metrics For business networks (Xing, LinkedIn): Irrelevant but used metrics (examples): Number of pages Time spent by users Relevant metrics (examples): Number of requests transmitted or accepted Number of useful active users For online matchmaking websites (Meetic, Match.com): Irrelevant but used metrics (examples): Number of profiles Number of pages viewed Relevant metrics (examples): Number of subscribers Number of active users Churn rate and its components Relevant metrics 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 20 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 21 28. 11. 2007 ? Research paper 22 CASE STUDY: Meetic 28. 11. 2007 ? Research paper Brief presentation of the company Meetic was founded by Marc Simoncini, the current CEO, in November 2001 Meetic has been profitable since 2003 and in five years, it has become the leader in online dating in Europe Meetic realized an IPO in October 2005, its market capitalization was 508,491 million euros November 16th 2007 Meetic is active in 16 countries after a large campaign of acquisitions in 2006 and 2007 In 2007 Meetic launched its new version Meetic 2.0 23 28. 11. 2007 ? Research paper Meetic is the leading company in online matchmaking in Europe 24 Language Website translated into 12 languages Number of profiles [M] 2006 28,5 Number of subscribers 2006 426 000 Audience share1) of online matchmaking websites in Europe (November 2006) 19,49 % (number one in Europe) Turnover 2) [M$] 2006 107 Operating income 2) [M$] 2006 18,65 Number of employees 200 ARFU 2) [$/subscriber] 2006 18,83 ARPU 2) [$/subscriber] 2006 20,93 1): Audience share is calculated as follows: (number of unique visitors to the site x time spent on the site) / (number of unique visitors under the category ?dating? x time spent on this subcategory) x 100 2) : Converted at 0,734 ? per $ Sources: Meetic, NielsenNet Rating faberNovel analyses 28. 11. 2007 ? Research paper Meetic offers several subscription formulas 25 1) All the offers are converted at 0,734 ? per $ Sources : Meetic, faberNovel analyses Free offer Pass Meetic Pass Premium Pass Select Pass Select + Premium No subscription fee Enables members to access the limited profiles of the other members Three subscription offers: Monthly subscription: ?29,99/month ($40,86/month) Trimester subscription : ?19,95/month ($27,18/month) Semester subscription : ?16,95/month ($20,37/month) The pass enables them to contact members and use meetic phone Three subscription offers: Monthly subscription: ?44,89/month ($54,35/month) Trimester subscription : #34,85/month ($40,64/month) Semester subscription : ?29,85/month ($33,86/month) The pass has all Pass Meetic functionalities and all registered users can contact premium members Same fees as Pass Premium The pass has all Pass Meetic functionalities and subscribers can check profiles without triggering an alert and define authorized contacts Three subscription offers: Monthly subscription: ?54,79/month ($67,83/month) Trimester subscription: ?44,75/month ($53,16/month) Semester subscription: ?39,75/month ($47,34/month The functionalities are those of Pass select and Premium Subscription fees are highly progressive to induce members to subscribe for the longest period possible 28. 11. 2007 ? Research paper Meetic offers multiple additional services Improvement of meetic messenger based on MSN Messenger, with a visio chat with secured mode Photograph album ?Meetic test?: allows the subscribers to create their own questions Meetic search engine with multiple criteria selection ?Meetic live?: events for meetic subscribers (Live oenology, salsa, ?) ?Meetic phone?: allows a user to call a subscriber without disclosing his phone number with an ?available / unavailable? presence function 26 28. 11. 2007 ? Research paper Meetic provides its customers with multiple tools to manage their identities Contracts offered: « Pass Meetic »: contact by email, visio, meetic phone and see video and photograph album « Pass Premium »: Pass Meetic functionalities plus allows registered users to contact premium members « Pass Select »: Pass Meetic functionalities plus checking profiles without sending an alert and defining authorized contacts Identity management tools: Nickname commonly used Multiple identities possible, although uncommon and closely watched by Meetic employees Common information, physical and psychological description. Between 10 to 80 criteria available Five photos per profile Personal video advertisement 27 Information available to others: Full profile available to other subscribers and very limited profile available to registered users Profiles of ?Pass premium? subscribers can be accessed by all registered users No public profile (e.g. available through search engine) Profile availability Subscriber Registered Public Limited Profil Full Profil Sources : Meetic, faberNovel analyses 28. 11. 2007 ? Research paper Meetic business model depends on three central mecanisms 28 Business model Monetized its user base (turning users into subscribers) Recruiting new clients to replace those who find their soulmate and stop using Meetic service Providing an efficient service to its clients (finding his soulmate) while capping the churn rate of its subscribers. 28. 11. 2007 ? Research paper Meetic?s strong conversion rate is achieved through four levers Charging for every service, except now to contact premium members Payment systems adapted to each country?s culture or custom (for instance credit card for French clients, direct debit for German) A contract menu with four different subscriptions (?pass Meetic?, ?pass premium?, ?pass select?, ?pass premium + select?) to meet all the clients? needs A low churn rate due to an important CRM strategy (37% of Meetic employees are devoted to customer relationship management) 29 Sources : Meetic, faberNovel analyses 28. 11. 2007 ? Research paper Meetic business development strategy is based on three pillars Service extensions: Mobile version that represents 7% of the traffic Thematic website for young people (Superlov), people over 35 years old in search of a long-term relationship (Ulteem) and gay (Cleargay) External growth: In 2006 Meetic acquired Yeeyoo (China, 10 million registered users) for around 31 million dollars*, Lexa (the Netherlands, 30.000 subscribers) for 15,67 million dollars* and Perperfeito (Brazil, 8 million profiles created) for 29,42 million dollars* In 2007 Meetic acquired DatingDirect (4,5 million members) for £ 27,3M and Cleargay (undisclosed amount) 30 Partnerships: Meetic has developed around 120 internet distribution partnerships on internet portals such as Alice, AOL, Orange, Lycos, Yahoo!, Lastminute and around 20 mobile partnerships (notably Orange, Bouygues, SFR, Vodafone) Partnerships accounted for 37% of Meetic?s new profiles and for 25% of sales in 2006 Sources : Meetic, faberNovel analyses *: Converted at 0,734 ? per $ 28. 11. 2007 ? Research paper Some best practices can be drawn from Meetic functioning 31 BEST PRACTICES Meetic has a churn rate twice as low as its competitors because: employees devoted to CRM and moderation of the website are the two biggest contributors to headcount Moderators make human controls for each new profile created (notice and photos) and semi automatic controls based on key words for writing communications The counterpart is the absence of economies of scale in Meetic business model since it has to keep its number of employees proportional to its number of users Meetic does not give public profile to respect user privacy Providing a secure environment Free registration and free consultation of limited profiles allow potential users to try Meetic and check the number of interesting profiles Subscription for women was free before 2007 and at a lower price from 2007, ensuring women account for around 50% of client base Meetic constantly communicates this statistic which reassures women about the reliability of the service Absence of viral marketing: Meetic invests heavily in advertising campaigns Diversity of users? needs: Meetic draws a clear segmentation of the market with four websites (Superlove, Meetic, Ulteem, Cleargay) to guarantee their clients they will find exactly the profiles for which they are searching Diversity of local markets: Meetic proposes different versions of its website and acquires online matchmaking firms that are already well implemented in the countries within which the firm wants to develop Focusing on keeping a balanced user base between men and women Understanding the specificities of its market(s) 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 32 28. 11. 2007 ? Research paper 33 CASE STUDY: Match.com 28. 11. 2007 ? Research paper Presentation of Match.com Launched on the Web on April 21, 1995, Match.com was a pioneer in online dating and is considered as having taken this service mainstream Match.com is an operating business of IAC/InterActiveCorp quoted on Nasdaq Match.com is today the world?s number one dating and relationship site 34 28. 11. 2007 ? Research paper Match.com is operating worldwide 35 Language 30 localized international dating sites in 18 languages Number of profiles [M] 2007 Over 20 million Number of subscribers [M] June 2007 1,313 Number of Unique Visitors in the US* (Dec. 2006) 3970000 (number three in the US) Turnover [M$] 2006 311,2 Operating income [M$] 2006 58,4 Number of employees 2006 275 ARFU [$/user] 2006 18,37 ARPU [$/user] 2006 20,42 Sources : Match.com, Comscore, faberNovel analyses * : Excludes traffic from sites powered by Match.com, such as Love@AOL (1.0 million unique visitors) and MSN Personals (635,000 unique visitors) 28. 11. 2007 ? Research paper Match.com has one simple offer for its main product but numerous additional services Match.com has a single two contract offer: Free offer enables members to access the profiles of the other members Premium offer (Monthly subscription: ? 29.95/month ($34,99/month), Trimester subscription : ?19,95/month ($19,99/month), Semester subscription : ?16,50/month ($16,99/month)) enables members to contact other members ,block profiles, check members who have looked at their profile 36 Match.com proposes numerous additional services: Matchmobile: a free service allows members to consult their alerts. A premium offer ($4,99 per month) allows members to use mobile phones for anonymous and secure wireless matching and online dating services (write and answer emails) MatchPlatinium: a custom tailored online matchmaking site Matchtravel.com: a travel agency for singletons MatchLive.com: a subscription-based service offering a variety of social events and parties for single adults Match.com Advisors: a network of trained dating, relationship and marriage experts accessible through the Match.com site Happen Magazine?: a dating advice and information magazine Profile Assistance: a service providing a network of writers skilled in creating and tailoring online profiles for members. Sources : Match.com, faberNovel analyses Premium offer + MindFindBind (for English, American and Canadian subscribers): subscribers can benefit from Dr. Phil?s advice (through the MindFindBind program) about how to determine good action plans, dating insights and related strategies and so forth. This service charges $9,99 28. 11. 2007 ? Research paper Match.com provides its customers with multiple tools to manage their identities Contracts offered: « Members »: search others profiles, download photos and send/receive « winks » « Subscribers »: contact by email, block profiles, check members who have looked at their profile Identity management tools: Nickname commonly used Mutliple identities possible, although uncommon Common information (Height, bodytype, astrological sign, daily diet, income, ?) Twenty five photos possible « Catcher » available but no video presentation Description of the ideal partner 37 Information available to others: Full profile available to other subscribers and registered users, which is a big difference in comparison with Meetic No public profile (e.g. not available through search engine) Profile availability Subscriber Registered Public Limited Profil Full Profil Sources : Match.com, faberNovel analyses 28. 11. 2007 ? Research paper Match.com has developed both generic and specific search tools Match.com search engine offers roughly the same functionalities as those provided by Meetic search 38 The firm has developed two alternative and original tools: The « matchWords »: every profile can list a number of key words. Then registered members can browse through these key words The « double compatibility » tool: for each profile visited by, members can see this mutliple criteria spreadsheet, gibing the compatibility details for the different criteria of the two profiles Sources : Match.com, faberNovel analyses 28. 11. 2007 ? Research paper Match.com succeeds in monetizing its user base thanks to four levers A strong differentiation of its local websites, which allows Match.com to perfectly match the specificities of the countries where it operates 39 Home Page Match.com (China) Home Page Match.com (India) Permanent help at every different step during the use of Match.com services (when users want to fill their profile, make a search, ?) The creation of Dr. Phil (which provides advice about how to get ready to have a good relationship, how to bind its couple, ?): Provide an original service Reassure potential users who might be reluctant to use online matchmaking Different strategies to « tease » the users and convince them to subscribe to Match.com?s offer: Match.com sends compatible profiles by email on a daily/weekly basis even to those who have not subscribed Match.com provides access to the full profile but charges if users want to contact by email or by « phone » (the MatchMobile) Match.com enables users to send « wink » for free. Thus if a user is winked at he will have a greater incentive to subscribe so that he can develop his contacts Sources : Match.com, faberNovel analyses 28. 11. 2007 ? Research paper International development through acquisitions of local well established actors Diversification of its revenues Match.com business development strategy In February 2007, Match.com acquires leading online dating and relationship companies in France and China: Netclub in France (number 3 dating and relationship site, 4 million members) eDodo in China (more than 180.000 subscribers) In 2005 Match.com signed an agreement with Deal Group Media to put advertising on its website for the first time In the summer of 2007 Match.com launched its mobile platform in the US, the UK and Canada. It would be expanded to 9 other countries at the end of 2007. This service is charged at $4,99 per month Recruitment of new paying members through a very efficient partnership policy Match.com powers MSN dating services on all continents (which accounts for more than 30 million visitors per month) and AOL for its Love@AOL service (1 million unique visitors in Dec. 2006), BET Interactive, Tiscali (France, Spain, Italy) and so forth In 2006 Match.com struck a partnership with Yahoo! to provide its dating services in England and Germany Advertising campaigns account for a large part of Match.com costs This firm often uses grand marketing campaigns: In 2005, Match.com spent more than £3 million in the UK In 2006 Match.com was third in terms of spending on online advertising for dating services in the US (16% of the total between January and November) Match.com strategy is clear: concentrate its marketing expenditures early in the year to drive subscriber growth Intensive marketing campaigns Match business development strategy is based on 4 axes 40 Match.com business development strategy 28. 11. 2007 ? Research paper Some best practices can be drawn from Match.com functioning 41 BEST PRACTICES Providing a secure and simple environment Adopting an efficient ?teasing strategy? Understanding the specificities of its market(s) Absence of viral marketing: Match.com strongly invests in advertising campaigns Diversity of local markets: Match.com proposes different versions of its websites Match.com acquires online matchmaking firms that are already well implemented in the countries within which the firm wants to develop its activities Monitoring the profiles of its users: texts, photos and ?ambiguous? profiles. Moderators provide human controls (not only automatic ones) This guarantee results in: User base is 50% women 60% of new subscribers are women, even if they have had to pay since 2006 The counterpart is the absence of economies of scale in Match.com business model: employees are to be kept proportional to the number of users Match.com also provides services to ease the use of Match.com website and to give confidence to non usual users (especially with Dr. Phil?s advice) Match.com allows full access to its users? profiles: potential subscribers can be sure of the service Match.com provides Every user can receive a ?wink? but must subscribe if they want to communicate Different simple and explicit ?compatibility tools? (the double compatibility spreadsheet or the matchWords) underline the usefulness of the service Match.com sends compatible profiles regularly If all the most compatible profiles have already been sent, the firm sends the same again in a different order This gives the illusion that new interesting profiles register all the time 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 42 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 43 28. 11. 2007 ? Research paper 44 CASE STUDY: Xing 28. 11. 2007 ? Research paper Brief presentation of the company XING AG was founded in August 2003 as a German limited liability company by Lars Hinrichs. It was first called Open Business Club AG The platform was officially launched on November 1st, 2003 In 2005, Open Business Club launched a multilingual platform in 16 languages and became one of the leaders of online professional networks In December 2006, Open Business Club AG was the first Web 2.0 company to go public, floating in the Prime Standard segment of the Frankfurt Stock Exchange. It changed its name and became Xing for the IPO Its market capitalization on November 23th 2007 was 290 million dollars 45 28. 11. 2007 ? Research paper Xing is one of the leading company in business networks in Europe 46 Language Website translated in 16 languages Number of profiles [M] September 2007 4 (1) Number of subscribers March 2007 258 000 Number of unique visitors (December 2006, worldwide) 1,186,000 (number two) (2) Turnover [M$] 2006 3) 8,4 Operating income [M$] 2006 3) - 1,26 Number of employees 2006 3) 73 ARFU [$/user] 2006 3) 52,88 ARPU [$/user] 2006 3) 48,65 1) Including members from Neurona (over 1 million) and eConozco (360,000) 2) Includung unique visitors from Neurona (240,000) 3) Converted at 0,734 ? per $ Sources: Xing, NielsenNet Rating faberNovel analyses 28. 11. 2007 ? Research paper Xing has been experiencing strong growth 47 CAGR: 304% CAGR: 182% Sources: Xing, faberNovel analyses * : converted at 0,734 ? per $ 28. 11. 2007 ? Research paper Xing has a simple contract offer Xing has a single two contract offer: Free offer enables members to access limited profiles of the other members, invite other users to join their network (which allows them to send a message), make basic searches, receive private messages, join groups, organize one meeting per month, research job offers Premium offer (?5,95 ($8,12*) per month) enables members to receive and send private messages, make advanced searches, post job offers, organize unlimited meeting and conferences, check members who have looked at their profiles and have access to the « premium world » (discounts ofr airline tickets, hotels, etc.) 48 Subscription offer gives premium members access to all the functionalities provided by Xing, which makes Xing offer one of the simplest and most readable offer of social networking websites Sources: Xing, faberNovel analyses * : converted at 0,734 ? per $ 28. 11. 2007 ? Research paper Xing offers several additional services Xing mobile allows members to view messages or manage and search for contacts on their mobile phones, Blackberry or PDA 49 Xing paying members can benefit from the exclusive offers available in the PremiumWorld (Avis, Radisson,?) Xing allows members to communicate about events they organize Xing members can join different types of groups: Alumni networks (ENAss alumni club, Coastal Carolina University) Professional (English job offer and demand, Worldwide legal practitioners) Thematic (Green electricity, patrimony and taxation) The Marketplace allows members to access job offers and premium members to post three job offers at the same time Sources: Xing, faberNovel analyses 28. 11. 2007 ? Research paper Xing provides its customers with multiple tools to manage their identities Contracts offered: « Free members »: access to limited or full profiles of other members, search other profiles, receive private messages « Premium members »: access to full or limited profiles of other members, send and receive private messages, check members who have looked at their profile Identity management tools: Real name used Mutliple identities possible, although extremely uncommon Common information (Surname, name, skype, company, previous company, study,?) and photo Interests and group/association participations 50 Information available to others: The users can choose to make public their profile (available on search engines) or not Only premium members can decide whether their full profiles are available to other members or only to their contacts (except for the contact list, all the users can choose to make it available or not to others) Profile availability Subscriber Registered Public Limited Profile Full Profile or or or Sources: Xing, faberNovel analyses 28. 11. 2007 ? Research paper Xing business model relies on three mechanisms 51 Monetizing its user base Attracting new members Leveraging economies of scale 28. 11. 2007 ? Research paper The increase in Xing monetization rate is achieved thanks to five levers 52 Monetization of user base Adaptation to local specificities Specific offers for premium members A high quality of services Discrete but efficient advertising A readable offer 28. 11. 2007 ? Research paper Xing offer is readable and well adapted The adaptation of Xing website to local specificities: The website is available in 16 languages Premium subscription tariffs evolve depending on the country to reflect the differences in purchasing power 53 A clear and extremely readable offer (the subscription covers all the functionnalities proposed by the website) which encourages users to subscribe: They are not afraid of being « over charged » They can use premium functionalities any time they want and see a clear difference between these ones and the simple functionalities It encourages Xing users to use the website extensively Xing in Chinese Sources: Xing, faberNovel analyses 28. 11. 2007 ? Research paper Xing smartly advertises its offer 54 Xing provides permanent, changing and discrete advertising for the different services offered by its premium contract on the user home page This window changes any time the user refreshes its webpage Xing regularly offers subscription to the premium contract 28. 11. 2007 ? Research paper Xing offers a high quality service 55 Xing has been experiencing a very low churn rate thanks to a high quality of services: the ?member relation team? accounts for two thirds of Xing employees Premium members benefit from multiple special advantages with appropriate services (Financial Times, Radisson Hotels, ?): It contributes to creating a specific environment around them It pampers them and proves how special and important they are for Xing Sources: Xing, faberNovel analyses 28. 11. 2007 ? Research paper Xing has a very efficient strategy for recruiting new users Xing succeeds in experiencing strong growth of its premium members while spending few in marketing 56 It greatly encourages its existing members to recruit new users: The website offers a very powerful tool to easily import its address book Members win one month subscription for free for each person they invite and who subscribes to the premium contract Xing proposes « premium groups » for institutions and companies: They ease the identification and the coordination of the members of these institutions ; each member has the logo of the institution he belongs to on his home page Institutions will benefit for free from these groups if they agree to promote Xing among their members (otherwise they have to pay to create their group) They can obtain a commission if they recruit a certan number of members Members can benefit from a discount if enough members subscribe at the same time In September 2006, Xing counted that 26 Premium groups (Accenture, the University of Hamburg) accounted for 72,000 members Marketing expenses*/paying members recruited during the period [$/paying members] (2004-2006 Sources: Xing, faberNovel analyses * : converted at 0,734 ? per $ 28. 11. 2007 ? Research paper Xing viral marketing strategy enables the firm to benefit from economies of scale While Xing spends little in marketing for each new premium member, it enjoys an increasing average revenue per paying member 57 Avereage revenues*/Average marketing expenses [$/paying members] (2004-2006) It strongly contributes to the important economies of scale in Xing business model Share of operating costs [000?] (2004-2006) 248% 120% 105% Sources: Xing, faberNovel analyses * : converted at 0,734 ? per $ 28. 11. 2007 ? Research paper International development through acquisitions of local well implanted actors Diversification of its offer Match.com business development strategy Xing wants to increase its number of paying members by offering more services Additional services are numerous: Development of PDA versions Additional criteria to manage user profiles and to add links to other profiles on Flickr, Twitter, eBay or Digg Xing has joined Open Social Plateform Xing business development strategy is based on four pillars 58 In 2005, acquisition of the Swiss company First Tuesday AG In 2007, Xing acquires leading business network companies in Spain and Latin America: eConozco: 150,000 members in March Neurona: 835,000 members in June Recruitment of new paying members through a very efficient partnership policy Non-employee Premium Members who serve as country representatives in different countries. They are well-connected individuals who voluntarily use their local and regional contacts to add new members Huge institutions such as Universities or multinational firms which promote the Xing website Numerous tools encourage existing members to easily add their contacts Incitation to add new members through the offering of the subscription fees during a few months (depending on the number of new users bring on Xing) Promotion of viral marketing Xing business development strategy 28. 11. 2007 ? Research paper Best practices can be drawn from the Xing case 59 BEST PRACTICES The premium groups encourage Xing members to invite connections who work in the same organization but who are not using Xing services yet Xing makes alliances to incite big institutions to promote their services to their employes Xing endeavours to ally with persons who are able to be efficient relays for their product. Their multiple connections and central positions enable them to ?prime the pump? of viral marketing Xing has developed tools to ease the importations of all user contacts Xing incites their members to be promoters of the website by offering subscription fee for those who attract new members Promoting viral marketing Xing website is translated into 16 languages Price policy reflects the diversity of purchasing power among countries The firm acquired business networks that were already well implemented in the countries within which the firm wanted to develop Creating a pleasant environment Understanding the specificities of the markets it operates Xing?s offer is extremely readable and subscribers do not have to pay attention to how much they use Xing The subscription covers all the services provided Xing members are more prone to subscribe and to intensively use the services Xing subscribers can feel they are ?special? for the company: Premium advantages pamper them Xing ensures a high quality service in allocating more than the majority of its employes to member relations 28. 11. 2007 ? Research paper Summary Some broad principles for understanding social networking websites Case study: online matchmaking websites Meetic Match.com Case study: business network websites Xing LinkedIn 60 28. 11. 2007 ? Research paper 61 CASE STUDY: LinkedIn 28. 11. 2007 ? Research paper Brief presentation of the company LinkedIn was founded in May 2003 by Reid Hoffman, former CEO and now Chairman and President LinkedIn has become profitable since March 2006, and has $30 million in backing from venture firms such as Sequoia Capital ($4,7 million in November 2003), Greylock ($10 million in October 2004), Bessemer Venture Partners and European Founders ($12,8 million in January 2007), valuing the company at $250 million LinkedIn is the largest online professional network worldwide, with more than 16 million users The website is only available in English, but has raised funds in prevision of an international expansion in the near future 62 28. 11. 2007 ? Research paper LinkedIn is the world?s leading company in business network 63 Language Website only available in English Number of profiles [M] November 2007 16 Number of Unique Visitors [M] (Dec.2006) 1,5 Turnover [M$] 2006 6,5 (1) Operating income [M$] 2006 1 Number of employees 2006 70 ARFU [$/user] 2006 0,62 (1) ARPU [$/user] 2006 20,63 (1) Sources: NielsenNet Ratings, Thomson Financial, LinkedIn 1) : Estimates 28. 11. 2007 ? Research paper LinkedIn boasts an impressive growth More than 16 million users as of November 2007 Around 9 million members at the start of the year All members are professionnals, meaning the site?s target audience is restricted LinkedIn was the fastest growing social networking website in the US in 2007: up 189% between October 2006 and October 2007 64 Top 10 Social Networking Websites for October 2007 (US, Home and Work) Social Networking Site Unique Audience (000) Oct-06 Oct-07 % Change Myspace 49,516 58,843 19% Facebook 8,682 19,519 125% Classmates Online 13,564 13,278 -2% Windows Live Spaces 7,795 10,261 32% AOL Hometown (TWX) 9,298 7,923 -15% LinkedIn 1,705 4,919 189% AOL People Connection 5,849 4,084 -30% Reunion.com 4,723 4,082 -14% Club Penguin 1,512 3,880 157% Buzznet.com 1,104 2,397 117% Sources: LinkedIn, Nielsen Online 28. 11. 2007 ? Research paper Profile availability Subscriber Registered Public Limited Profile Full Profile up to LinkedIn gives users a high level of control over their digital identity and their personal information LinkedIn users that know someone to the third degree can see his/her profile in full Information displayed in a profile includes: Full name and picture Current and past positions Education Connections Recommendations E-mail adress (only for direct connections) Other users will only see a limited profile This profile can be customized to display only what one wishes to make publicly available This profile can be found using search engines (a feature that can be turned off) The ?Invitation Block? feature lets users block invitations from people they do not know well 65 Sources: LinkedIn 28. 11. 2007 ? Research paper LinkedIn?s business model is based on three mechanisms 66 Offering a valuable service Attracting intensive users Providing free services Attract users willing to pay for specialized features that let them extend their connections Gain adhesion from LinkedIn users by providing additional services Offer services that tap into the user base?s knowledge and connections 28. 11. 2007 ? Research paper LinkedIn provides users with multiple free services Free offer: allows users to manage their network, send request introductions (but not inmails), see the profiles of their network members and check out job offers LinkedIn Service Recommandations: LinkedIn users can search service providers of all types (Financial & Legal Services, Health & Medical, Consulting, ?), who are ranked by number of recommandations (even if they are not LinkedIn members) and look up service providers recommanded specifically by their network. Each user can ask members of his/her network to recommand them. 67 LinkedIn Groups: any user can create a group, which makes relations between members of a same organization easier to manage. More than 1000 such groups currently exist on LinkedIn. Sources: LinkedIn 28. 11. 2007 ? Research paper LinkedIn provides an array of free tools to better integrate the information available in the users? everyday life and uses 68 Helps the user build his/her network Manages contacts and communications in Outlook Integrates LinkedIn services ? See which people you e-mail often, and invite them to your LinkedIn network ? Fast one-click invites ?Upload your Outlook contacts in LinkedIn ? Create an Outlook contact from text with the Grab feature ? Update Outlook contacts with LinkedIn information ? Manage contacts and communications with the LinkedIn Dashboard ? Direct access to LinkedIn features ? Search LinkedIn by keyword, name, title or company ? button displays profile information for every e-mail received Linkedn Outlook Toolbar Provides extensive search features Integrates LinkedIn services Features the LinkedIn JobsInsider ? Search LinkedIn by keyword, name, title or company ? Highlight any text and right click to search LinkedIn ? Save search results as bookmarks for future references ? Direct access to LinkedIn features ? Save profiles of interest as bookmarks for future references ? button displays profile information for every webmail received ? See what people in your connections can help you with job offers displayed on job sites (Craigslist, Monster, etc.) ? Request an introduction, additional information or help to get hired from these people Linkedn Browser Toolbar* *For FireFox / Internet Explorer Sources: LinkedIn, faberNovel analyses 28. 11. 2007 ? Research paper LinkedIn offers intensive users three paying services 69 One subscription offer: $60 per year Personnal offer Business offer Job service Three subscription offers: Business: $19,95 per month Business Plus: $50 per month Pro: $200 per month These passes offer: Business:15 request introductions at a time, 3 inmail sending per month and 100 LinkedIn Network search results Business Plus: 25 request introductions at a time, 10 inmail sending per month and 150 LinkedIn Network search results Pro: 40 request introductions at a time, 50 inmail sending per month and 200 LinkedIn Network search results All give access to the OpenLink Network Two offers: Post one job offer: $145 Post 5 or 10 job offers: $125 per offer The pass allows one to: Be contacted by any LinkedIn member without revealing his email or phone number (the ?OpenLink Messages?) Receive premium support from LinkedIn?s Customer Service team Get five more Introductions at a time Announce that you want to make new contacts Find and be found by other members of the OpenLink Network Sources: LinkedIn, faberNovel analyses 28. 11. 2007 ? Research paper Corporate recruiters have access to improved services Main interest for recruiters : gaining access to all LinkedIn users, even those that are not actively seeking jobs Recruiters can get in touch with interesting candidates using LinkedIn Introductions and Inmails 30 times more likely to get a response than cold calls or emails, excellent response rate Available to: Recruiters who have upgraded to business accounts Corporate accounts : Between $10,000 and $250,000 annually for subscriptions Provide an array of tools and services designed specifically for corporate recruiting professionals to source, manage and hire talent, such as: The LinkedIn Project: A browser-based project management tool that lets recruiters add private comments to profiles and organize them during the search process Targeted Recruiting Advertising: An on-site advertising tool to reach a specific type of candidates, according to their skills, location or experience 70 Sources: LinkedIn 28. 11. 2007 ? Research paper LinkedIn Jobs lets users leverage their network to find job opportunities 71 Benefits: The poster: Makes sure he/she hires quality applicants (by reviewing their references) Uses his/her connections to spread the word on his post The applicant : Gets information on the poster Can be introduced by a common relation Sources: LinkedIn 28. 11. 2007 ? Research paper The LinkedIn Answers feature lets users tap into the vast pool of knowledge that LinkedIn members represent 72 Forbidden content: Advertisement Inappropriate questions Duplicate of questions already asked Different levels of propagation (chosen by the users): Only visible to the poster?s direct connections Visible to all LinkedIn users Usefulness and reward For the poster: getting specific information from relevant sources in different fields that would otherwise be inaccessible For answering users: showing one?s expertise in a specific field to all interested in the subject Launched in January 2007 LinkedIn Answers gives users the opportunity to ask questions and get answers from qualified professionnals Sources: LinkedIn 28. 11. 2007 ? Research paper LinkedIn development strategy is based on three pillars Gain an international influence: One of the last funding round?s main objectives (Jan. 2007) To be achieved by developing several major partnerships with international entities Develop the social aspects of the website (Addition of several features used in other popular social networking websites): User profile pictures ?Network Updates? equivalent to the Facebook newsfeed Improved messenging functions 73 Integrate the Open Social platform: One of the social networking websites that agreed to join Google?s Open Social initiative Creation of a global API platform that could be used across all partner social networks LinkedIn possible evolution with Open Social (beta test) 28. 11. 2007 ? Research paper Best practices can be drawn from the LinkedIn case 74 BEST PRACTICES LinkedIn insists on the professional interest of developing one?s network : finding interesting potential hires and checking their background using one?s connections LinkedIn offers paying subscribers access to their database, letting them find the ideal candidate and get in touch with him Compared to traditional job postings, the recruiter can also target passive members, which are not actively looking for a job Positionning the website as an efficient recruitment tool and career accelator LinkedIn offers tools that let users develop their network LinkedIn tools can also help looking for a job online LinkedIn?s main functionalities can thus be accessed from tools always used by professionals, without having to be on the website Maximising its user base?s potential Integrating the website on other platforms to increase its influence LinkedIn presents its user base as a formidable resource that subscribers can tap into Accessing the knowledge and expertise of million of professionals coming from various spheres and industries Using existing connections to quickly develop new relations and extend their network 28. 11. 2007 ? Research paper Allow us now to introduce ourselves? 75 28. 11. 2007 ? Research paper 76 faberNovel?s activities are split into 3 units Stimulate innovative genes Carry out quickly Remain entrepreneur Consulting XP Venturi Strategy and organization for growth and innovation Experimentation and project management Internal project development and investment Assisting large groups on methodology, analysis and decision making Innovation consulting Innovation strategy Organization and innovation Change management Knowledge management R&D portfolio management Strategic experimentation Reduction of innovation risks Fast acquisition of key know- how and skills Conception and development of innovative products and services Functional specification Outsourced project management Conception and business validation Evaluation and identification of partners Piloting and feedback Venture capital, ?excubation? Investment and development of internal projects Company creation assistance Capital shares offering additional action leverage 28. 11. 2007 ? Research paper 77 faberNovel oversees projects from their positioning to their realization 28. 11. 2007 ? Research paper 78 faberNovel Consulting heads all of faberNovel?s consulting activities Strategy Growth strategy Innovation platform Project portfolio management Innovation management faberNovel consulting?s mission: stimulate firms? innovative genes Prospective intelligence Technologies Markets Uses Implementation Competitive benchmark Functional specifications Partnerships/Monetization Organization Participative innovation(Idea Management System) Collaborative innovation (Customer Relationship Innovation ®) Intrapreneurship development Change management Sharing best practices Communities animation Knowledge design Technology transfer 28. 11. 2007 ? 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