Friday, March 14

What does it cost to get a social network user to churn?

Saucy social networking social networker Laurel Papworth has cleverly pointed out that AOL's announced acquisition of Bebo may jeopardise Yahoo7's big partnership deal with Bebo in Australia, since AOL Australia and Yahoo7 are competitors locally.

It'll take a while for the deal to go through and international partnership deals to be rejigged, perhaps as much as a year or so for them to get around to figuring out what to do with a market as small as Australia, but it would be reasonable to expect that AOL Australia would want the Yahoo7/Bebo deal to be unwoven asap.

Laurel says the Bebo deal represents as much as half Yahoo7's available ad inventory. Holy CPM, Batman! No idea if that's correct, but that's a big kick in the guts to lose that many eyeballs with only 6-12mths warning.

Before I pick my jaw up off the floor, there's something else that leaves me agape. I haven't reported on the deal yet because I've been waiting for the perspective to be able to see the deal from AOL's valuation side of things. Surely it would make sense if I gave it time. But nope. No sense yet.

So, what's with AOL offering $850 million, in cash? Is it all upfront? Or are there performance metrics Bebo needs to make to collect most of it? Did anyone tell AOL this business was started by a couple of people only three years ago? Did anyone point out that since most of AOL's customers are in the US, they don't want a Bebo account because they're either wedded to Facebook or MySpace already?

Speaking of which, where are the studies looking at the cost of getting someone to churn from one social network to another? Has anyone looked at that yet? If I've been focused on my Facebook account for one, six or 12 months, what's it going to cost a competitor to get me to switch to their product?

Personally, I'm all over Facebook, a bit active on MySpace, and on Bebo, I'm an "unengaged user" - i have an account there, but only to see how it works and browse through the kinds of users to be found there. So Facebook has me as an "engaged user" - using it several times a day, with almost all my real-world friends connected, and a big social history stored there. This animated blackboard toy is the only thing I really like about Bebo right now.

I don't have any numbers, but intuitively, I think there are two kinds of social network user: engaged minority and non-engaged majority. The non-engaged majority will churn quite easily, but because their engagement is low, they're not worth very much to you and will churn again to your next new competitor. The engaged user is, I'm guessing, extremely hard to dislodge, even if you give them the means to migrate all their content, social history and reputation to your new social network.

Yet the network effects that give a social network its value depend entirely on those highly-engaged users. In other words, if you succeed only in acquiring another network's unengaged users, you've failed. They won't stick because they don't care about documenting their social history, and they won't stick because you don't have the engaged users you need to keep the unengaged connected.

That's my guess, anyway: would love to see the numbers if you have them.

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