5th September 2012
Let's take a current mighty force on the web, Reddit. At present, this site, founded by graduates of the University of Virginia back in 2005, boasts a staggering three billion page views a month.
But this relies on its users returning, and those who get the most ‘thumbs up' for the articles they flag as worth reading continuing to post and inspire commenters. Its success isn't purely based on page views – but ensuring it keeps a tight grip on its ‘super users'.
After all, social media users are fickle…
But unfortunately social sites can't draw up contracts to sign up users for life, or dish out cash without controversy to keep them loyal – the beauty is we have a choice and, if we want to disappear from Facebook for example, we can.
Who remembers social media sites Friends Reunited or My Space? They were once the talk of the social town, but are resigned to the history books as this is one area of business where fashion changes as rapidly as the clothing kind.
Who can say with total certainty that today's hot social media members such as Twitter, Facebook, or LinkedIn will still be still with us in a decade's time? It all depends on what the users want to do, and where their focus shifts. Take Apple, the current top dog in technology – but not always. Not long ago that crown went to Microsoft or Nokia.
You only need to consider how quickly users shifted from Digg to rival Reddit to realise how fickle people can be. Digg was once the poster child of Web 2.0, whose value sank from a hefty $164 million to a paltry $500k in just a few years. Its decline saw its audience slide from 30 million to 8 million in little more than a year.
These days its Reddit describes itself as "the front page of the internet", says the Independent. It has managed to avoid the sort of sudden moves that could have enraged its users – but will this last?
Even so, big businesses place faith in the success of sites like Reddit. It is owned by Advance Publications, the home of Condé Nast. The magazine company bought Reddit back in 2006 for a reported $20 million.
There is no doubt that Reddit is current hot property, and that its owners have managed to pay attention to the community rather than alienate it, but the key is to keep this intact. Particularly the big players.
Take a look at other businesses, where ‘Locking in' stars works well – particularly the asset management world.
For example, Henderson agreed lock-in terms with a number of Gartmore managers following its takeover. It also paid millions to lock in certain New Star directors following its takeover.
Just as asset managers want star managers on their side, so social sites need super users.
Once you have super users on your side, they can be a powerful tool. And they're far more cost efficient than an expensive marketing department or bonus scheme.
At present social sites can't force a contract on those with the most pull and knowledge on their sites, unlike other businesses, so it's a case of crossing fingers and hoping they don't jump ship and wreck investment success.
At its heart, social media is all about community. And the right community of like-minded goal-seekers with the knowledge is where the power lies – and the investment appeal.
Bigger is not always better. Often there is an inverse relationship between the size of a community and the strength of the community, so retaining the strongest users is key.
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