Corporate Image and Social Networks

I'm starting work on a larger project about the economics of online video, but before I delve into that, I thought I'd kick around a few ideas about its possible antecedents. I see online video as a combination of online social networking (which has roots in social network theory in general) and film/TV (so film theory of all types might be useful). Some users treat it like TV: passively watching hour after hour of viral vids or, if you're more creative, generating episodes of the webshow that you hope will launch your career in showbiz. Others use it as a way to interact with people, either by making videos or frequently commenting on others' videos. I'd suspect that most users use it as some combination of both.

Let's start with the social network side of things. I'm interested in why some social networks get popular and others don't. The allure of social networks, as I see it, is the ability to make contact with other users. The network host, be it Facebook, MySpace, Virtual Laguna Beach, or what have you, is just a venue that has some special characteristic (an incentive) that draws in some people. If those people are cool and plentiful enough, other people will come to socialize with them. Maybe that incentive is brand association. Maybe its some new way of interacting with people (an easy way to check up on what you're friends are doing, or a way of sharing photos or playing games with friends). Maybe the network is a hub for people to exchange valuable information about stuff like Yahoo.answers.

Social networks can make money in several ways. They can promote an existing product. If, say, Jergens were to have a forum on which members could discuss the finer points of makeup, the venue itself (along with plenty of banner ads, I'm sure) would act to promote the real-world product, and members would tolerate that as long as they were getting useful info and the pleasure of interaction with other members. Maybe Bud.tv is an example for the online video world: its centered around a product, the videos act as entertainment to get people there, and the socializing with other members keeps them there. Its not truly "user-generated," as the shows are produced in-house, but still, there's a community centered around a product.

Social networks could also sell adspace to all sorts of different products. When I think of video sties, I think of collegehumor.com, or YouTube for that matter. But more broadly, we could think of the current incarnation of Facebook or perhaps MySpace (though MySpace tends to advertise only the properties that its parent company, NewsCorp, produces). People come for the socializing, they stay for the advertising.

But here's the key distinction between a Bud.tv and a Facebook. One started out as an obvious attempt by a large corporation to sell its wares while the other started out as a small-scale ad-free social network designed to connect people. What I'm getting at is that the trend setters that advertisers covet probably won't go to a site that they see as corporate in order to socialize with other trend setters. They'll only go to small start-ups like the Facebook of 2004 or the YouTube of 2005. Facebook and YouTube needed some sort of innovation or entertainment to lure people there in the first place, but they don't have to overcome the "lame factor" that corporate sites like Bud.tv have to overcome. Bud.tv, or the hypothetical Jergen's forum, have to have an incentive that is that much more appealing to the public (specifically the trend-setters in each demographic) in order to lure them there.

So if you're a big corporation, you can either create some sort of appealing innovation or content to lure the trend-setters (and once they're there, try not to be too pushy about your product, less you scare them off), you can advertise on someone else's social networking site, OR you can acquire a fledgling social network. If you do this too early on in the life of the fledgling site, trend-setters will probably jump ship and your site will be sunk. But if you wait long enough, there will be so many people on the site and so much momentum that they won't jump ship just because the site is now owned by Viacom. You'd really have to fuck with the site to get enough people to leave to make a difference.

So the cycle goes like this:

• Some undergrad invents some new application and starts a site.
  
• Trend-setters flock to the site and start networking.
• Undergrad sells site to larger company, resulting in some attrition.
• Larger company sells ad space, makes millions.

There are an endless number of applications that could act as draws for those trend-setters. But I think whether you're an undergrad or NewsCorp, you've got to offer people some new way of interacting. You can't just give them content and expect a community to form around that, unless its ridiculously convoluted content that millions of people love to talk about (see Lost).

I really think that what people think of the companies that own and advertise on these sites will determine their success. Corporate image acts as a discount, meaning that users will go to the site with the coolest people, the most innovative applications, and the best content, but if any of those are really that much better than another site that isn't owned by NewsCorp, then they'll go to the other site. For this reason, big corporations can acquire social networks late in the game (MySpace) but they can't start them up.

Fewer, Better

On the year-in-review podcast of NPR's "The Business," I heard Cynthia Littleton of Variety make some pronouncements about the state of the TV industry that sounded similar to a few predictions I made in a paper last spring, specifically that the internet would take on the speculative role of nurturing lots of new talent while TV would move towards the "fewer/better" model of production that film studios adopted in the 60's when TV came on the scene. Her long term prediction that "all the execs are talking about" involves a ratcheting down of the budgets committed that is, ultimately, a correction of an extremely wasteful practice. "I think what you're really going to see is people going more to a cable model of developing fewer pilots, putting more time and energy and sweat into casting them, honing them, perfecting them...In the long term, if it helps cut a lot of the fat out of the TV business, it could be a good thing."

There are two forces at work: the inertia of the well established entertainment industry and the opportunities for dramatically increased efficiency in terms of getting the desired entertainment to the appropriate audiences (whether or not that entertainment is deemed "high quality") that new production and distribution technology permits. Institutional inertia can keep obsolete impractical, inefficient systems in place for awhile. But there's something about the openness and immateriality of online video creation and distribution that makes me believe that its revolutionary momentum won't be slowed by stick-in-the-mud institutions.

Let's compare two ways of making money by buying visibility for your product on an entertainment program.

The Upfronts: representatives of products show up to a yearly convention and look at pilots produced by established production companies, auteurs, and studios. They make a speculative decision based on the track records of those involved and the perceived appeal of the show as wehther or not to buy time on that show.

Online: Joe Nobody and 5 of his friends create a compelling, hip, humorous web series, build an audience on YouTube, then take their show off of YouTube and show it exclusively on their own site with advertising. In this model, the advertisers buy space/time on the creators' site based on established (not speculative) audience figures. What would be even better is if the next online auteurs wouldn't stretch serial narratives way beyond their breaking point (lonelygirl15 is still going. Enough already), but rather they created finite, stand alone serial narratives more like the extended-film or novel-esque stories of each season of The Wire. Then, based on their successful reputation of garnering an audience for that first low-budget series, they get more ad $ upfront for their next project. So yes, that reintroduces speculation to the equation, but its based on a reputation that can be established at a far lower overhead than on TV. Millions of $s go into developing pilots that don't hit. Could this really last?

Its just a tightening of the feedback loop that's always been integral to all forms of communication.