Selling Social

With question marks over the ability of so-called "general" social media sites, such as Facebook and MySpace, to make money, what commercial case is there for social media?
Selling Social
Selling Social
Steve Vaile, CEO, H2O New Media.
Steve Vaile, CEO, H2O New Media.
Encouraging membership and user contributions on a web platform enables companies to build a data asset while acquiring free content.
Encouraging membership and user contributions on a web platform enables companies to build a data asset while acquiring free content.

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With question marks over the ability of so-called “general” social media sites, such as Facebook and MySpace, to make money, what commercial case is there for social media? Digital Broadcast spoke to Dubai-based H2O New Media about the value of enterprise social media in the broadcast and entertainment industries.

Seven of the world’s ten most visited websites involve at least some element of social media. Despite the main players’ inability to turn traffic into revenue, there are an increasing number of smaller social media companies finding a thriving market for tailor-made, specialised platforms.

H2O New Media caters develops tailor made for social media platforms for enterprises looking to exploit the opportunities they can present.

“We looked at the trends and noticed that every media platform over time fragments into niche areas,” explains Steve Vaile, CEO of H2O New Media. ”I remember when there was one TV channel in the UK and you had to wait till 6pm for the second one to start. Now there are hundreds of satellite channels and some significant niche broadcasters like the Discovery Channel. We saw social media as the next sector to fragment just as print, radio, TV and regular websites had previously.”

Vaile admits to almost “accidentally” falling into the social media business. After establishing Dubai Lime – an entertainment and arts online community – he began to receive requests to develop social media applications for an increasing number of third-party media companies until the foundation of H2O had been laid by sheer market demand.

“It’s a year since we started the business. We have acquired more than 50 customers, our first year’s revenue was US$600,000 – which isn’t bad for a company in its first year – and the target for 2009 is between $1.5 and $3 million. We have a software platform that allows us to come to you as a company and provide you with your own customised social media platform. It’s basically Software as a Service (SaaS).”

As broadcasters face increasing competition from alternative sources of entertainment, viewing figures have declined. Of the top 20 highest rated telecasts in the US, the most recent was from the 1996 Winter Olympics.

“If you look at the leading TV programmes from the 1950s and the viewer rates for primetime TV today, it is one tenth of what it was. There really is a lot of competition and broadcasters are going to need to redefine their business models,” claims Vaile.

“Whether you are a broadcaster or a web-based publisher, one-way communication is not as valuable as having an audience that is actively interacting with your content. If there is a news story online and I can submit a video blog on what I think of the story, then that creates a content asset for the media operator and creates the data asset as well. CNN does this well with iReport and the others are following suit.”

Vaile is adamant that Middle East content-based business has no other way to turn but the user generated content (UGC) and viewer community path.

“This is not something that is going to happen, or is happening…it has happened. The removal of media restrictions and freedom of press across the Middle East is happening. Regulators can block as many sites with as many filters as they want, people always find their way round these blocks. The authorities have to accept UGC and citizen journalism,” states Vaile.

In order for emerging media business models to succeed in the Middle East, Vaile believes the industry itself needs to embrace social media applications and the creative and commercial benefits that they enable. With the region now boasting the second highest rate of internet adoption the pool of consumers open to social media networking is expanding all the time.

“The region has always tended to lag a little in technology and media adoption. What tends to happen in the Middle East market is that it will be behind for a period and then it will invest in and adopt the most recent technologies and suddenly leapfrog its US and European counterparts. We have seen that with some of the WiMAX adoption in places like Bahrain,” observes Vaile adding that he sees no immediate technological barriers preventing the main players from exploiting the opportunities that social media presents, with existing portals growing steadily.

So what exactly are these benefits that Vaile and H2O are championing?

Vaile says that as media companies continue to experiment with various business models and look to find their new positioning, social media could provide several vital tools for content generation and delivery, marketing, and cost saving.

“If a broadcaster is supported by advertising and their market moves to the internet, it needs to have a solution in place or its revenue will fall through the floor. I am 35 and I do not consider myself up to date with the latest gadgets, yet I still watch YouTube and other online platforms more than I watch TV.

"In fact last week I cancelled my TV subscription services simply because I wasn’t watching them. If I can get everything I want online, then people aged 16 to 25, the group advertisers want to target, will be more than capable of doing the same.”

The fact that the Middle East’s demographics are heavily skewed towards youth (one in five people are aged 15-24 according to the UN) in comparison to other markets indicates that these trends should be adopted in the region with little resistance.

Social media is not just about following a trend for the sake of not missing a fad and Vaile is quick to highlight the business case behind it.

“Everybody knows that if you distribute a print title online instead, there is a significant cost saving. If you have a community built around your online publication, you benefit from user generated content, one-on-one interaction, affinity marketing and of course the creation of a data asset,” says Vaile.

“A media company could use Facebook advertising to drive its business or it could develop its own vertically focused community where it can conduct the one-on-one marketing element within its own infrastructure and can own the data asset, maintain, control, manipulate and monetise that database,” explains Vaile.

A continued diversification of revenue sources is inevitable, Vaile claims. He predicts a sustained period of consolidation in the near future.

“There is a swing [toward new revenue streams] and broadcasters are asking themselves how they are going to make money,” claims Vaile.  “The advertising models are changing, the markets have shifted and the things that are driving spending are changing. We will see some merger and acquisition activity and some telco operators acquiring media companies three to five years from now.”

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