Understanding Users of Social Networks

Published:	September 14, 2009
Author:	Sean Silverthorne

If the ongoing social networking revolution has you scratching your head and asking, "Why do people spend time on this?" and "How can my company benefit from the social network revolution?" you've got a lot in common with Harvard Business School professor Mikolaj Jan Piskorski.

Only difference: Piskorski has spent years studying users of online social networks (SN) and has developed surprising findings about the needs that they fulfill, how men and women use these services differently, and how Twitter—the newest kid on the block—is sharply different from forerunners such as Facebook and MySpace. He has also applied many of the insights to help companies develop strategies for leveraging these various online entities for profit.

Addressing network failures

"Online social networks are most useful when they address real failures in the operation of offline networks," says Piskorski.

They can address some basic search failures: "It's hard to know what my friends are up to, but online I can catch up with them quickly." But they can also fix bigger search shortcomings, such as those related to establishing new relationships.

"If I am looking for someone who can help me with my start up, I would ask my friends if they know such a person, and if they don't, I would ask them to inquire with their friends. The problem is that those friends of friends don't always have an incentive to help, so they won't work on my behalf. But here is where LinkedIn comes in handy—there I can go and search through the network of my friends of friends and find the person I am looking for."

Online social networks also can improve people's ability to use offline social networks as "covers." This is very salient on LinkedIn. There, people display a lot of information about their careers, which makes them available to headhunters and other employers as passive candidates. But they also establish relationships with others to stay in touch with peers and to make new contacts. This network allows them to establish plausible deniability that they are not looking for a job, even if they are.

Empirical evidence

With these general ideas of why people use these sites, Piskorski examined weblogs of social networking sites (not LinkedIn) to see what people did when they were online. "I just wondered why people spend so much time on these sites; what do they do?"

The biggest discovery: pictures. "People just love to look at pictures," says Piskorski. "That's the killer app of all online social networks. Seventy percent of all actions are related to viewing pictures or viewing other people's profiles."

Why the popularity of photos? Piskorski hypothesizes that people who post pictures of themselves can show they are having fun and are popular without having to boast.

Another draw of photos (and of SN sites in general) is that they enable a form of voyeurism. In real life there is a strong norm against prying into other people's lives. But online enables "a very delicate way for me to pry into your life without really prying," the researcher says. "Harvard undergrads do it all the time. They know all about each other before they meet face to face. 'Oh, you're that guy that did that internship in D.C. last summer.' "

Piskorski has also found deep gender differences in the use of sites. The biggest usage categories are men looking at women they don't know, followed by men looking at women they do know. Women look at other women they know. Overall, women receive two-thirds of all page views.

"This was a very big surprise: A lot of guys in relationships are looking at women they don't know," says Piskorski. "It's an easy way to see if anyone might be a better match." Again, online networks act as cover.

Then came Twitter

Piskorski says these findings do not hold for one network: Twitter.

Looking at who uses Twitter, which restricts users to 140-character messages, Piskorski and student-researcher Bill Heil (HBS MBA '09) found that 90 percent of Twitter posts were created by only 10 percent of users. This was not surprising, he says, because the technology uses words without photos to communicate.

"Only the people who are willing to put themselves out there publicly in words to people who they may not know will use Twitter. Some people will find this incredibly appealing, others will find this too scary."

"Women actually say things, guys give references to other things."

But the remarkable finding was the gender dynamics. According to the research, there are more women on Twitter than men, women tweet about the same rate as men, but men's tweets are followed by both sexes much more than expected by chance.

"That was stunning because on all these other social networks you see the opposite," Piskorski says.

Piskorski and Heil are now doing a follow up study to see whether this is because there are no pictures on Twitter or because men and women say different things. Early results suggest that women create fewer links in their tweets than men. "Women actually say things, guys give references to other things." But even accounting for these differences, the researchers still saw differences between how men and women are followed, perhaps pointing to a fundamental representation of the role of men and women in society.

"No one uses MySpace"

To continue on the issue of online representation of offline societal trends, Piskorski also looked at usage patterns of MySpace. Today's perception is that Twitter has the buzz and Facebook has the users. MySpace? Dead; no one goes there anymore. Tell a marketer that she ought to have a MySpace strategy and she'll look at you like you have a third eye.

But Piskorski points out that MySpace has 70 million U.S. users who log on every month, only somewhat fewer than Facebook's 90 million and still more than Twitter's 20 million in the U.S. Its user base is not really growing, but 70 million users is nothing to sneeze at.

So why doesn't MySpace get the attention it deserves?

The fascinating answer, acquired by studying a dataset of 100,000 MySpace users, is that they largely populate smaller cities and communities in the south and central parts of the country. Piskorski rattles off some MySpace hotspots: "Alabama, Arkansas, West Virginia, Oklahoma, Kentucky, Florida."

They aren't in Dallas but they are in Fort Worth. Not in Miami but in Tampa. They're in California, but in cities like Fresno. In other words, not anywhere near the media hubs (except Atlanta) and far away from those elite opinion-makers in coastal urban areas.

"You need to shift your mindset from social media to social strategy."

"MySpace has a PR problem because its users are in places where they don't have much contact with people who create news that gets read by others. Other than that, there is really no difference between users of Facebook and MySpace, except they are poorer on MySpace." Piskorski recently blogged on his findings.

From social media to social strategy

Corporate marketers by and large struggle with how to use social networking sites to reach potential customers, says Piskorski, who advises companies on this subject. The problem is that execs think of online social networks as social media and treat it as another channel to get people to click through to a site.

It doesn't work that way.

For one thing, findings show that people don't click through on advertising on social networks. "A good analogy is to imagine sitting at a table with friends when a stranger pulls up a chair, sits down, and tries to sell you something while you are talking to your friends. You will not get far with a strategy like this."

"To be successful, you need to shift your mindset from social media to social strategy," he continues. A good social strategy essentially uses the same principles that made online social networks attractive in the first place—by solving social failures in the offline world. Firms should begin to do the same and help people fulfill their social needs online.

To continue the earlier analogy, "You should come to the table and say, 'Here is a product that I have designed for you that is going to make you all better friends.' To execute on this, firms will need to start making changes to the products themselves to make them more social, and leverage group dynamics, using technologies such as Facebook Connect. But I don't see a lot of that yet. I see (businesses) saying, 'Let's talk to people on Twitter or let's have a Facebook page or let's advertise.' And these are good first steps but they are nowhere close to a social strategy."

Social Media Leads the Future of Technology

Published:	November 10, 2008
Author:	Martha Lagace

Internet-connected televisions, social media, and the power of simplicity were all cited as launch pads for future innovation in technology, according to a panel of experts that convened at Harvard Business School as part of the HBS Centennial Business Summit in October.

And though advertisers love the Internet, to what extent they can capitalize on these transformations remains an open question.

HBS professor David Yoffie moderated the session on "The Technology Revolution and its Implications for the Future," with panelists James Breyer (HBS MBA '87), partner of the venture capital firm Accel Partners; Susan L. Decker (HBS MBA '86), president of Yahoo! Inc.; and Eric Kim (HBS MBA '81), senior vice president and general manager of Intel Corporation's Digital Home Group.

The first computer, the ENIAC, cleared the path for future innovation in the late 1940s, said Yoffie, who set the context for the ensuing discussion. Today, millions of Web users generate free content, and we are witnessing an "explosion" in video and cell phone use, he continued, with more than 100 million smartphones already in use. In addition, there is the phenomenon of virtual worlds, where approximately 217 million online players interact.

This is an evolving landscape, with much growth remaining, Yoffie said. Of 6.5 billion people in the world, about 1.5 billion have Internet access, more than 300 million have broadband access to the home, and 3 billion have cell phones, a growing number of which offer Internet access.

What these statistics suggest is that "the most precious currency today is information," said panelist Jim Breyer, an early investor in Facebook and a director of Wal-Mart Stores. "Each year there is more information created on the Web than in all the previous years combined. Investment initiatives are around participating in the information flow. We [at Accel] are interested in companies that help us understand how to structure information, communicate, categorize some of that self-generated information, and then act on it."

A sticking point currently for businesses is spanning the gap between the physical and the digital world, he continued.

"Right now there are significant problems understanding how to take what we are getting at point of sale in the physical world environment—very valuable info on customers—and how to integrate it with all the information that is being generated on the Web. To date, there is no company that allows one to take quickly all this information 'in the cloud' and integrate it with the vast arrays of information in the physical world."

Difficulties aside, Breyer said the promise of technology meant that innovation to solve a problem could arrive from any quarter: prominent companies, nonprofit enterprises, "two students in a dorm room, or mothers or fathers after they have done their school pickups." He continues to be impressed by businesses that start with little capital—anywhere from $10,000 to $50,000—yet get to scale quickly and build new applications on the Web.

Sleeping by the cell phone

Just as technology is influencing society, society is increasingly making demands on technology, said Sue Decker of Yahoo!

"The way we live, love, communicate, and work will influence technology, and the greater population will be exercising an increasing amount of control," she said. Decker cited statistics suggesting that in 2007, 12 percent of newlyweds met online. In addition, of the users in the United States, half sleep with a cell phone or other electronic device nearby, and married couples usually do not share cell phones.

Innovation will serve people who want simplicity of technology usage. As the network gets larger it becomes less relevant to individuals, she said, so people want to organize their experience according to their own interests. "Companies that will do pretty well will create a dashboard of simplicity that is very open to the whole Internet, not just to the company it may be associated with, and will elevate social connections in a way that drives dollars."

How exactly social connections will drive dollars remains to be seen, she added. Although some sites such as Yahoo! include premium services that require fees or subscriptions, the largest business model by far is advertising: a $45 billion industry globally that has been growing about 20 percent per year, said Decker. Advertising on the Web is very effective in the sense that advertisers can reach great scale and do precision targeting. The challenge is to discern consumers' intent.

"Search is unbelievably efficient because you look at a little query box. You can tell exactly what people care about, and you can serve an ad that is relevant at scale. In social media, that is very difficult to do. It's very hard to know what people care about with respect to buying things, because you are inferring intent, you're not taking intent directly from the consumer," said Decker.

"Advertisers really want to be there: They love the demographics, they are increasingly comfortable with some of the brand risks of what that might mean. But Internet advertising still doesn't perform very well, and that's a challenge. How do you serve the right ads to the right user and understand what it is that that individual would be interested in buying?"

TV and the Internet

Pressure has been building for a merging of television and the Internet, said Intel's Eric Kim. Consumers now expect Internet service everywhere, with implications for entertainment and advertising.

For almost 90 years, the television has been a one-way device, and it should be a two-way device. "This is not a new idea," Kim clarified. "Many attempts have failed. It primes us for success." Prices of televisions are going down, and the industry as a whole is mature, leaving an opportunity for the Internet to disrupt both the value chain and the content industry. Advertisers, for their part, continue to feel comfortable placing ads on TV, gauging that their dollars will not be wasted. Emerging markets further propel the growth potential for innovations combining the Internet and television, which is a natural, low-cost, and ubiquitous way for people in emerging markets to engage with the Internet, he said.

"We think there's a lot of room for innovation here and a lot of room for richness and choices," Kim concluded.

"There is no silver bullet in a lot of these economic models," added Breyer. "It's almost always the case that the business models shift in every successful company. I think it's our job as board members, CEOs, and investors to find breathtakingly brilliant entrepreneurs who then try to find breathtakingly brilliant operating executives who also understand the products, and try to spend a great deal of time finding pockets of monetization. There will be a great deal of experimentation. Some of it will work and a lot won't. Five years from now, many of them will have found highly successful business models," but it is tricky at the beginning of a new venture to predict what those models might be.

A dashboard concept is very important as the key to innovation, said Decker.

"Increasingly, companies will find ways to leverage whatever social networks you're in, find ways to service those in ways easy for you to access, and try to go for more simplicity," she said. "Simplicity is the single thing people really want. It's going to get faster in terms of technology. There's going to be more opportunities and interconnections.

"But fundamentally, removing the complexity and adding simplicity so you can easily access in an open way everything you want, and leverage a lot of social connections rather than going to multiple ones, is how the user experience will evolve."

Social Network Marketing: What Works?

Q&A with:	Sunil Gupta
Published:	July 27, 2009
Author:	Sarah Jane Gilbert

When marketers want to reach users of social networks such as Facebook, MySpace, or Cyworld, they have two choices: buy advertising or start a viral campaign.

New research by Harvard Business School professor Sunil Gupta suggests that viral may be the way to go in these connected worlds. But first it's important to understand both who influences purchase decisions in online communities and which groups of users can be influenced.

"Viral campaigns truly leverage the network aspect of these social networking sites."

"By understanding the social network of users, firms can better understand and influence consumers' behavior," says Gupta, who coauthored the working paper "Do Friends Influence Purchases in a Social Network?" [PDF] with Raghuram Iyengar, of the Wharton School, University of Pennsylvania, and Sangman Han, of Sung Kyun Kwan University in South Korea.

Gupta recently discussed the research with HBS Working Knowledge.

Sarah Jane Gilbert: Your research attempted to answer this question: Do friends within a social network influence online buying behaviors of others in the group? What did you discover?

Sunil Gupta: To answer this question we used data from Cyworld, an online social networking site in South Korea with almost 21 million members. Cyworld users buy virtual items to decorate their home pages. Our research shows that some users are influenced by the purchases of their friends while others are not.

Q: One of your findings was that certain types of group members are more influenced by social pressure than others. Can you discuss the distinctions among user groups and how they influence buying?

A: We found three distinct groups. Low-status members (48 percent of the users in our sample), who are not well connected to others, are generally unaffected by the purchases of other members. Middle-status members (40 percent of the users) are moderately connected and show a strong and positive effect due to friends' purchases. In other words, this group shows strong "keeping up with the Joneses" behavior.

Members of the high-status group (12 percent of the users) are well connected and are very active on the site. However, these users show a negative effect due to friends' purchases because they want to remain distinct. Instead of buying items like the other members, this group tends to pursue non-purchase-related activities (e.g., uploading their own content).

Q: Were you able to quantify social influence in terms of how it increased or decreased the percentage in sales revenue?

A: The impact of the low-status group on revenue is negligible. Social influence increases revenue from the middle-status group by 5 percent. In contrast, social influence leads to almost a 14 percent drop in revenue from the high-status group.

Q: Despite the ability to gather millions of users, the business viability of social networking sites seems uncertain. Is there any good news in your findings for the Facebooks and Twitters of the world?

A: Following the success of Google, social networking sites such as Facebook have been trying an advertising-based business model. However, studies show that the click-through rate of ads on social networking sites is extremely low—simply because people don't go to these sites to seek information about specific products. Therefore, the advertising-based business model has had only limited success on social networking sites.

If the purpose of advertising is to influence consumers' purchases, our research shows that there is another way to influence their behavior. Imagine that Sony wants to promote its new digital camera. Sony can either advertise on Facebook and accept a very low click-through rate, or give away free cameras to several Facebook members (potentially at a lower cost than advertising) and generate a viral campaign. Our research shows that this viral campaign is possible. We further show what type of users are more likely to be influenced by such a campaign.

Interestingly, Sheryl Sandberg [HBS MBA '95], the new COO of Facebook, recently talked about such a campaign. On Valentine's Day, Honda offered 750,000 Facebook members a heart-shaped virtual gift complete with the Honda logo that could then be passed on to other members. It is exactly this type of viral campaign that has the potential to be an enormous source of revenue. Unlike banner ads, these viral campaigns truly leverage the network aspect of these social networking sites.

Q: What are some key takeaways from your work for retail and other online sites in general hoping to influence online purchasing decisions?

A: The fact that people are influenced by their friends is not new. We all know it at some level or the other. However, by understanding the social network of users, firms can better understand and influence consumers' behavior.

Consider a cosmetic company such as Mary Kay. Its Web site currently allows consumers to upload their picture and try different cosmetics virtually to see how they may look before making a purchase. However, if users (especially young consumers) really value the opinion of their friends, Mary Kay may benefit from linking its online site to a social networking site such as Facebook where users may even get instant feedback from their friends before making a purchase.

Q: What are you working on now?

A: I am continuing my research to better understand how information and influence spreads in social networks. I am also working on understanding the relative role of offline and online advertising to determine how firms should optimally allocate their resources across different media.