Poking fun is now a serious business

Online social networking has emerged from nowhere over the past couple of years to become one of the web’s biggest business opportunities. Lorraine Mallinder reports.

With platforms such as Facebook and MySpace now de rigueur among a surprisingly wide range of people, from politicians to pop fans, advertisers are thinking up new, innovative and, occasionally, intrusive ways of getting their message across.

Today, 42% of European internet users regularly visit sites such as Facebook, almost double the amount that were signed up last year, according to a report unveiled this week (12 November) by UK-based lobby the European Interactive Advertising Association (EIAA). Communicating via social networking sites is the third most popular online activity across Europe, just behind searching and emailing.

The explosion in the popularity of social networking forums seems set, however, to open the door to a new era of consumer-led advertising. "Marketers need to be aware of how powerful social recommendation on the internet can be," says Alison Fennah, EIAA’s executive director. "As a result of the increased levels of online interaction, Europeans are continuing to embrace new online social media applications and technologies." These developments, says Fennah, highlight the potential power of word-of-mouth marketing, whereby consumers spread the word about products.

Facebook and MySpace are the two main contenders in the multi-billion social networking market. The duo are backed by two of the IT world’s biggest players, Microsoft and MySpace respectively.

Microsoft purchased this month a $240 million (€163m) stake in Facebook. The site’s estimated value is $15 billion (€10.27bn) Invented only four years ago by Harvard student Mark Zuckerburg, Facebook allows friends to communicate with each other, with options that allow the users to decide how much of themselves they want to reveal. Its membership, which stands at more than 52 million members (at last count) is estimated to be growing at a rate of 3% per week.

Media mogul Rupert Murdoch was quick to see the opportunities inherent in social networking, buying MySpace for $580m in 2005. The site currently has 190 million members, almost four times that of Facebook, but is said to be losing ground fast. Such are the stakes that MySpace has now aligned itself with Google with the aim of squashing its major rival, Facebook.

The Google-led alliance, which also takes in smaller networks, was set up two weeks ago (1 November) with the aim of making it easier for web developers to code applications that operate across networks. Google eventually wants to help sell advertising for sites.

Facebook last week unveiled a word-of-mouth marketing system that blurs the line between content and advertising. The technology departs from usual practice, allowing advertisers to create special pages that users can then create links with as ‘fans’ rather than ‘friends’. ‘Fans’ can submit product reviews and allow advertisers access to their own network at a fee. The system has been criticised since its launch for its exploitative properties, generating talk of a backlash.

Cornelia Kutterer, a senior legal adviser at Brussels-based consumers’ organisation BEUC, expresses doubts. "It’s a worrying development in the online market, both in terms of advertising technologies as well as advertising psychology. It is very intrusive," she says.

BEUC is already following the European Commission’s scrutiny of the proposed merger between Google and DoubleClick, a company that monitors consumer behaviour to help advertisers track the effectiveness of their strategies.

The Commission’s competition department is currently reviewing the deal, but Neelie Kroes, the competition commissioner, has signalled that the investigation will not cover privacy issues.

"This is becoming an increasingly relevant issue for us," says Kutterer. "It is time for the Commission to address these developments to protect consumers, particularly young consumers."

Facebook’s EU appeal

• Such is the growing influence of Facebook that its tentacles extend as far as the EU quarter. The European Commission and the European Parliament both have their own networks within the site, the former boasting 2,315 members and the latter 414, figures which will no doubt have changed by the time this article goes to press.

Facebook’s EU members include UK Socialist MEP Claude Moraes, UK Liberal MEP Sajjad Karim and Swedish centre-right MEP Christofer Fjellner.

Parliament President Hans-Gert Pöttering and Commission President José Manuel Barroso can also be contacted, or ‘poked’ in Facebook parlance, although their entries are believed to be spoofs.

Online social networking has emerged from nowhere over the past couple of years to become one of the web’s biggest business opportunities. Lorraine Mallinder reports.