The spring of 2006 will go down as a curious moment in the annals of buzz. The mainstream-media steamroller caught up with a bona fide cultural phenomenon, then flattened it into a cliché before the average person knew what all the fuss was about. That's ironic, because the fuss was about the average person—that is, his or her participation in what's known variously as "social media," "social networking," "user-generated content," the "live Web" or the dreaded "Web 2.0." But don't worry, this isn't yet another story getting all up in MySpace or metaprofiling Friendster profiles. This is about how those sites, and their successors, are growing up—and about their impact on how business gets done. Companies, whether they sell software, movies, or dog food, are changing the way they communicate, make decisions, and develop and market products, all because of the exponential rise of new tools that allow people to express themselves more easily online—and on the streets.
Two major examples of the networks' real-world power broke barely a week apart. On Monday, March 27, about 40,000 mainly Latino high schoolers in Los Angeles played hooky to protest the Senate's proposed bill to crack down on illegal immigration. It was believed to be the largest such demonstration in L.A.'s history, double the size of the historic Chicano walkouts of 1968. Through the week, thousands more walked out in California, Texas, and Florida. Then, on Tuesday, April 4, 24-year-old Sandi Thom signed a £1 million, five-album deal with RCA/Sony BMG out of her basement in London, live via Webcast. She had just finished 21 straight nights of live performances—also Webcast from her basement. By the end, Thom was pulling in a nightly audience of 100,000 listeners. In both cases, the "audience," whether of pissed-off students or besotted roots-rock fans, was drawn together, at least in part, by word of mouth on social-networking sites such as MySpace, the two-and-a-half-year-old company with an unbelievable 72 million members.
"In the beginning, there was sociability," proclaims Danah Boyd, the 28-year-old savant of social networks. But in the first-generation Web, technical barriers meant that the pleasures of group communication online were limited to the geek subculture. Blogs, then social networks, changed all that. A PhD student at UC Berkeley's School of Information, Boyd is helping invent the field of Internet anthropology. The occasionally boa-clad Burning Man attendee has studied online social behavior from Usenet (the early-1980s bulletin board for groups such as alt.rec.camping) to Craigslist; Friendster; Tribe.net; Blogger; and now, armed with a research grant from the MacArthur Foundation, MySpace. Separately, she looks at social media for Yahoo Research Berkeley, a major initiative by the company to work closely with academics in the hope of figuring out where the Web is going next.
Boyd's point is that while first-generation Web sites were all about human-computer interaction, culture now drives the Web and its design. "What you're seeing now is people interacting not just… with 'the computer' or with 'information' but with other people," she says. "You have to bring out the sociology and anthropology." Personal connections—forged through words, pictures, video, and audio posted just for the hell of it—are the life of the new Web, bringing together the estimated 60 million bloggers, those 72 million MySpace users, and millions more on single-use social networks where people share one category of stuff, like Flickr (photos), Del.icio.us (links), Digg (news stories), Wikipedia (encyclopedia articles), and YouTube (video).
This hive of activity has already generated a lot of noise, but what most observers have yet to realize is just how productive the hive really is and how powerful it can be when it swarms in a particular direction. In fact, it's hard to overstate the coming impact of these new network technologies on business: They hatch trends and build immense waves of interest in specific products. They serve giant, targeted audiences to advertisers. They edge out old media with the loving labor of amateurs. They effortlessly provide hyperdetailed data to marketers. If your customers are satisfied, networks can help build fanatical loyalty; if not, they'll amplify every complaint until you do something about it. They are fund-raising platforms. They unify activists of every stripe, transforming an atomized mass of individuals with few resources into an international movement able to put multinational corporations and governments on the defensive. (Those immigration protests played no small part in stymieing Senate action over immigration.) They provide an authentic, peer-to-peer channel of communication that is far more credible than any corporate flackery. And all this after only four years or so in development. On the day you read this, a quarter of a million more people will jump onto MySpace, each with her own particular purpose in mind.
Medium = Message
New ideas generated on social networks may be worth a hell of a lot more than advertising.
As in the first Internet boom, many social-media companies started out as hobbies for their founders. Jonathan Abrams, the guy who started Friendster in 2002, one of the early examples of its kind, just wanted a better dating service. But the difference on today's Net can be found in one thing: adwords. Those pay-per-clicks remain the most obvious way of monetizing the Web—and the reason venture capitalists and big companies are interested in growing these networking sites in the first place. Yet the productive quality of social networks only starts with directing eyeballs to banner ads, a fact that has eluded most business-world observers. Take one limited (and well-traveled) example: Rupert Murdoch's acquisition last summer of MySpace for $580 million. The deal was covered mainly as a giant real-estate transaction, the buying of the right to serve ads to a place where millions of teens hang out. And it was certainly that. But News Corp. clearly sees a bigger upside: Social networking, after all, is a new channel for media, Murdoch's core business. Not only will the site generate simple ad revenue, but it's also a gold mine of new ideas and tastes, a buzz-building machine for brands, and a vast pool of new talent and content for outlets such as the newly formed MySpace Records or even, says News Corp., TV. Over the years, those opportunities might be worth a hell of a lot more than ads. Similarly, Yahoo has bought Flickr and Del.icio.us, and it's sharing metrics on its half-billion users with researchers such as Boyd, simply to learn more about how and why people interact on the Web and to give them more reasons to do so.
"Social networking isn't a product or, God forbid, a company, but a feature that lives in service of some other mission," says Bradley Horowitz, head of technology development for Yahoo. "The spirit of social computing is the concept of leaving value in your wake." That value starts with expression. Users of social-networking sites are producing and freely sharing a whole universe of content for others to consume. Some of it approaches journalism in quality, some approaches art, or advertising, and a great deal of it is more fun and appealing to the 18-to-34 target demographic than whatever is on TV. Why watch fake "reality" shows when you can connect with actual reality? In Boyd's analysis, networks such as MySpace and Flickr are amplifying and speeding up what the hippest kids on the street always did: incubate trends, nurture subcultures, and remix styles. For media and Web-portal companies, then (and really, what's the difference these days?), the new social gadgets can look like a magic money machine. Rather than exhaust yourself producing what you think the kids might want, you sit back and let them show off for one another. "Our core asset is the audience and community that exist on our site," Horowitz says.
How that community can feed—or destroy—an existing business is fast becoming the most important analytical challenge in the marketplace. Rock stars, long expert at connecting intimately with crowds of thousands, have been the prototypical new-Web marketing geniuses. Musical Cinderella stories such as Sandi Thom, emo kids Fall Out Boy, and Britain's Arctic Monkeys—all pop-culture phenoms made online—are only a few examples of how the network can manifest itself in the nonvirtual world. So is the movie Snakes on a Plane, starring Samuel L. Jackson. The absurdist title alone made the thriller a cult hit online, though it won't be released until August. New Line Cinema and director David Ellis heeded the first tenet of life online—respond to what people are saying—by reshooting for five days, cranking the film up from a PG-13 rating to a solid R. Then New Line teamed up with TagWorld, a next-generation social network, to offer a songwriting contest: People submitted their tunes, TagWorld members picked the finalists, the filmmakers are choosing the winner, and that song is slated for the movie's soundtrack.
How much bigger could this stuff get? Well, one out of three South Koreans already has a "minihompy" (mini homepage) on Cyworld, a social-networking site coming to America later this year. But it is TagWorld, a startup based in Santa Monica, California, that represents the most ambitious vision yet of what online communities could be. Bloggers are calling TagWorld the "MySpace killer" for its deep menu of services, which integrates features from seemingly every successful network out there: blogging, of course, plus a multipage site; a gigabyte of storage; a music player that serves up your own tunes (as well as those pulled down via a Music Discovery Engine); classifieds; and photo-, video-, and bookmark-sharing. As the name indicates, all of these bits of data can be tagged with short, descriptive names ("Dave's party," say) for easy search and retrieval by other users.
Evan Rifkin and Fred Krueger, TagWorld's cofounders, are serial entrepreneurs who funded it from their successes in the dotcom days. The community added 1.4 million members between November 2005 and April 2006, healthy growth for a site still in beta, but Rifkin is confident that he'll have 100 million members within a few years. "This is the beginning of social networking," he says, walking me through his personal TagWorld site over the phone. "User-generated content on the Internet will dramatically increase…. We don't think this is a coolness issue. We believe people want to live their lives online."
My (Smarter) Space
TagWorld's advantage isn't its jukebox or some widget, it's the information the site gathers.
TagWorld's real competitive advantage, however, isn't its jukebox or some other widget. It's the real-time information the site gathers. Musicians who post their music and videos online will be rewarded with demographics on exactly who is listening and where, bloggers will see exactly which other members are reading them, and advertisers, once there are some, will be able to find out similar information (within privacy guidelines, of course). That kind of supermuscular data and easy, automatic feedback makes TagWorld's platform even more potentially valuable to businesses than the current generation of social networks. "It's really the way business will be conducted going forward," says Rifkin. "Businesses can have a lot of data without putting the work into it. Let's say you are sitting on your computer listening to Bloc Party and automatically that info is posted on your Web site. You've generated content by the act of doing something for yourself. That information will automatically get pushed to me, as a marketer, and I get a list at the end of every day." In other words, when you press play on your music player, that choice could become a bit of autogenerated content, and a piece of easily aggregated and invaluable marketing information (e.g., the number of urban 19-year-old girls who downloaded the song yesterday).
The key here, however, is that networked consumers are not passive participants in the consumption process. It's easier than ever for them to ferret out unbiased, independent information about companies, products, or brands—and to post in turn their own highly biased opinions about the same. The wattage of social networking means those personal opinions can be set to music, Flash-animated, and propagated around the Web; the more interesting or entertaining or useful they are, the further they travel. The emergent power of those collective judgments shows up in a 2006 survey of "opinion leaders" by Edelman, the huge international PR firm, which found that 68% of respondents rated "a person like yourself or your peer" as the most credible spokesperson about a company. That number has tripled since 2003. What's more, 36% of respondents said that if they don't like a company, they go online to say so. And a Pew Internet & American Life Project survey released in January found that 60 million Americans consulted the Internet for help with major life decisions, including big-ticket purchases. When it comes to information, the balance of power has truly shifted to the consumer.
Vision Critical, a Vancouver-based market-research company, was built on the premise that online feedback can make or break companies. Vision Critical constructs custom online communities for large companies to get far more detailed data and better response rates than traditional market research delivers. The idea is to build relationships with "panels" of thousands of users who are folded into the decision-making process and given feedback on their feedback. One major retailer, for example, offered teenagers the chance to help choose its new spring line online. "It's only in the past year and a half that we've had companies start to embrace this," says Jason Smith, the company's senior VP of sales and marketing. "There are some statistics saying that almost 50% of market research is being done online." Vision Critical built another unbranded site, called Pet Talk, for a major company in the pet industry. "Pet owners can upload photos of pets and share stories," says Smith. "Keeping connected that way builds trust. We're connecting in a way that's not just marketing to them." When the company sends a Pet Talk survey to these thousands of members, response rates are much higher and the data much deeper, because respondents feel like a part of a community. (We'll see how long it takes Pet Talk members to find out who's behind their "community"—and how they feel about it.)
Social media is far from being all cupcakes for business, however. In expressing and funneling the ever-changing will of the people, it remains a fiercely independent and mutating beast. Chevrolet's foray into user-generated marketing backfired in March because it misread its audience and lost control over its own campaign. Chevy offered up a Web contest to create an ad for the Tahoe, but the entries that got passed around, blogged about, and eventually covered in the mainstream media were all about the SUV's abysmal gas mileage and melting polar ice caps.
The average person's opinion becomes even scarier to companies (and governments) when someone starts aggregating those opinions and targeting them for maximum impact. It was no accident that a political protest was one of the first real-world demonstrations of social networks' power. Activists adopted these new technologies early on because the tools mesh perfectly with the goal of connecting and empowering individuals. "Those of us in online activism have been thinking about these issues for years," says Alexandra Samuel, head of Vancouver, British Columbia-based startup Social Signal. "Suddenly the tech world and the business world are interested in collaborating and building communities." Samuel wrote her 2004 poli-sci dissertation at Harvard on "hactivists" who use legal and illegal means online to do things such as protest international trade agreements; her startup builds and grows customized online communities. And while her first clients were all nonprofits and government agencies, now she's getting approached by businesses, including Canada's largest credit union. "The name of the game now is to engage the user in creating value," she says.
"We're honestly at the very very beginning of this," says Vision Critical's Smith, of the use of social networks. "This community concept is just going to grow and expand." That expansion will be driven not just by the technology but also by the various causes of the people who use it. The new Web, after all, lets us create value just by doing what comes naturally: speaking up.
Anya Kamenetz is the author of Generation Debt (Riverhead, 2006). She lives in New York.
A version of this article appeared in the June 2006 issue of Fast Company magazine.