Creating Stakeholder Value in Social Media

by | Sep 15, 2010 | Business Strategy

Creating networks of like-minded (and also not-so-like-minded) participants has facilitated the emergence of new companies and entirely new industries. Social networks such as Facebook, professional sites such as LinkedIn, and gaming companies (Zynga, Ngmoco, etc.) have experienced hyper-growth in users, revenues, and enterprise value in just a matter of years.

The simple act of connecting people, & keeping them connected has created value: LinkedIn recently completed a share offering valuing the entire company at $2 billion. Facebook has 500 million users and ad revenues estimated at $1.2 billion. Multiple transactions have taken place in the social media gaming space, an entire industry whose existence is pinned upon Facebook and other social networks.

So this month, when Facebook, the Wal-Mart of social media, introduced Places (its geo-location service), we couldn’t help but contemplate the stream of new revenue-generating opportunities now available to this enormously successful (and still private) enterprise. Aside from attracting new users (if that is even possible), a location-based offering will likely increase the frequency of visits by active users: offering a significant opportunity to increase advertising revenues. Targeted advertisements and promotions based on a user’s location and the frequency at which a given customer visits a retailer / restaurant / service provider would be a win-win for both Facebook and its advertisers.

What this means for Foursquare: As many are aware, Facebook isn’t the first in its geo-location offering. Foursquare is a social media network which allows its users to “check in” as they visit retailers, restaurants, parks, and every other conceivable location. The simple service allows users to locate their friends, share their location with others, offer insights & suggestions about any given location, and receive targeted offers and promotions from participating companies.

We like this form of advertising, given the fact that it is relatively cost-effective for advertisers, extremely targeted, and technologically forward-looking. Our main concern with Foursquare is whether it continues to be relevant given the launch of Facebook’s Places.

That begs the question, what are the key value-driving attributes of any social media company? In our view, social (and professional networks for that matter) have three primary drivers of value:

Uniqueness of Network • Value of Content • Quality of Platform

We believe that the long term success of any social media offering requires success in each of the three aforementioned value drivers. Applying this methodology to Foursquare, we acknowledge that the platform has sufficient quality (easy to use on a mobile device at a reasonable speed in an urban setting). The content is relatively valuable (essentially tweets organized by location and coupons / promotions reserved for Foursquare users). Assuming the content continues to develop in terms of depth and quality, Foursquare appears to be on the right track.

Uniqueness of Network

That is the $64,000 question, but we believe Foursquare passes the test. While not the deepest of networks, Foursquare is unique in that the network was built upon its geo-location functionality. Users of Foursquare know:

  • You invite someone into your network, and they know your location, every time you share it. You pop into Starbucks every Saturday at 10AM? It’s public knowledge to your network.
  • You frequent a local boutique clothing shop three times per week? Your friends will know, in fact, they will know you are there, now, real time.

Given this unparalleled level of transparency, Foursquare’s network has evolved in a fashion unique unto itself. For starters, the average size of a user’s network is smaller (do you want your boss to know where you were Tuesday night?)

Compare that to Facebook. You want everyone to know that you are planning a vacation to Ireland? Post it on Facebook.  In fact, Facebook’s sheer scale is part of its uniqueness. A recent study found traffic on Facebook could soon surpass Google, more than significant when one considers GOOG’s nearly $150b market cap.

The key takeaway

Foursquare developed a unique network & unique content. To the extent that it can continue to deliver exclusive, value-enhancing content to its users: Foursquare will continue to thrive, albeit in a niche market.

While its ultimate market share will be significantly impaired by Facebook’s Places, the offering by its much larger competitor doesn’t, by definition, mean impending doom. Foursquare (for now) has the “uniqueness factor” going for it. To the extent it can continue to deliver on the other two key social media value drivers, the Company can continue to create value for both stakeholders and customers, alike.

Despite Facebook’s dominance, there is room for multiple players, provided they execute on three primary value drivers:

Uniqueness of Network • Value of Content • Quality of Platform

Boost profit & growth with Business Performance Planning

Click to learn more!

Explore

Management Consulting

Click here for more about management consulting & read a collection of our recent case studies


Own it.

Own it.

Whenever someone says they want to “manage” something, I cringe.

I immediately ask myself, is there a better word? After all, words matter. The words we chose carry deep significance, not just because of their inherent meaning, but because they give insight into our actions. They cast light on our motivations.

So when people tell me they’re going to manage something (or even worse, manage-through something), I immediately try and discern whether they’re setting themselves up for failure.

After all, ownership breeds success. Management reeks of passivity.

read more

Business Performance Planning

Take your business to the next level. Boost profit & growth with a game plan used by multinational corporations

Research & Insights

Our latest thinking on business strategy, financial strategy, as well as a collection of our latest case studies

About Bridgesphere

Learn more about Bridgesphere, its founder, and how we help clients solve their most complex problems

Schedule your free consultation

or call (888) 995-0818 to learn more!

Schedule
Share This
Christopher Catapano, Bridgesphere Strategic Planning

Like what you're reading?

Join our newsletter to receive our latest research & insights!

You have Successfully Subscribed!