How To Value Customers' Social Networks

Graham Hill
Guru
Member

Posted 13-Dec-2006 09:27 AM
Fellow CRMers

Social networks are big news at the moment. And are generating big money too.

Google recently bought YouTube for USD1.65Bn. Not bad for a start-up! And NewsCorp bought MySpace for USD580M. And Facebook was recently offered USD750M by Viacom but turned them down.

But how should individual customers in these social networks be valued? In particular, how should the social connections that they have with each other be valued?

Any ideas?

Graham Hill
Independent CRM Consultant
Customer Value Management Guru

David Jackson
Member

Posted 15-Dec-2006 01:34 AM
Graham

I have been looking at this and a few approaches have crossed my mind. In no particular order:

First, do you seek to value individual customers or the size and connectivity of the network. For example, is a very large network where each member has only a few connections got more value than a samller network with very dense connectivity. The very essence of a network is interaction. So one measure might be the number of connections each member has—as LinkedIn publicises for each member. This could be refined to number of connections of a particular type or purpose.

The activity level of an individual member—the more active they are, the more opportunity they have to shape the opinion of the network.

The value that other members of the network place on the activity of an individual—a way of assessing the influence of an individual member.

If you are looking to exploit a network's financial potential (advertising or selling) then you will need to do some segmentation and valuation. This will of course have to be contextual to the commercial purpose.

A simple starter for 10. Would love to hear other people's ideas.

Dave J

Jeremy Cox
Member

Posted 18-Dec-2006 08:26 AM
Funnily enough, I've been using Zwicki 'buzz cloud' which [provides a report on search traffic using the specific words I added

Currently I am worth the princely sum of $175

Jeremy Cox MA DipM
Managing Director
The Wisdom Network Ltd,
www.thewisdomnetwork.com

Graham Hill
Guru
Member

Posted 18-Dec-2006 11:14 PM
David

You ask whether I am looking to value individual customers or the entire network.

Surely they are both inextricably linked, but not in an additive way. The (financial) value of a whole network is logically dependent upon the number of people in the network and their activity. A large network should be more valuable than a small one. An active network than an inactive one. And as a network becomes bigger and more active, its value grows disproprotionately to the number of additional members or their activity.

Ditto for individuals within the network.

As we expand our understanding of customer behaviour from the customer as an isolated individual making decisions autonomously, to the customer as a social individual making decisions heavily influenced by friends and family, our understanding of customer value changes accordingly.

But my basic question remains. Just how do you value a network? And just how do you value an individual within the network?

Jeremy

Do you know how Zwicki "buzz cloud" works? How do they arrive at the princely sum of GBP175? Who is the valuation relevant to? And what would you have to do to increase your value?

Graham Hill
Independent CRM Consultant

Vladimir Dimitroff
Member

Posted 19-Dec-2006 04:25 PM
Graham,

You may consider looking into the recent progress in SNA (social network analysis), both as academic discipline and business technique (including an emeging class of software dedicated to business applications).

In the telecoms sector I've come across some very interesting work carried out by Irish outfit Idiro and early adopters of their solutions (mostly among mobile operators).

I have also seen some good stuff from Fleming Madsen who runs Onalytica—although deployed mostly in 'market research' mode, his method and tool measure influence and are very appropriate for your intended Value purposes. (Not sure what exactly you have in mind but imagine oyu might be seeking to enhance a LTV model to reflect networks in addition to other value components?).

I have also seen InFLow—more of a 'mapping' application for social networks, but also with potential to rank and quantify 'connectedness'. Overall I get a feeling a lot of people are doing interesting work in this area and expect a lot of innovation to happen any moment. In fact, I have an interest and 'appetite' to develop similar stuff, have mobilised some capable offshore resources and will gladly collaborate with any interested CRM Guru members Smile

Best,
V.

Vladimir Dimitroff
PRISM Consulting (UK)
vdimitroff@prism-gb.com

Graham Hill
Guru
Member

Posted 19-Dec-2006 11:53 PM
Hi Vladimir

Even though we have never met, I feel I know you through your many postings and our mutual friends.

You are of course right. SNA is a very powerful tool to understand the dynamics of social networks. I have been actively involved in SNA since I first used it to harness the nodes in the email network to selectively inform the "grapevine" during a large-scale government department change programme in 2001.

But that is not the issue. the issue is how to VALUE individuals within the network and the network as a whole.

As a recent editorial in the New York Times points out—http://www.nytimes.com/2006/12/17/business/yourmoney/17...f=slogin&oref=slogin and tip of the hat to Pete Blackshaw's Consumer Generated Media blog http://notetaker.typepad.com/cgm/2006/12/you_know_youre_.html for the link—understanding networks, key individuals within them and the value they influence is important in today's business.

Graham Hill
Independent CRM Consultant

PS. I know of Idiro, but find that a Finnish company Xtract—http://www.xtract.fi/main.php?main=index—have better thought leadership in the application of SNA and more experience in delivering SNA-powered benefits across different industries. I will look at the other two companies you mentioned.

Richard Elgin
Member

Posted 16-Feb-2007 09:02 AM
Graham, Vladimir

It seems everyone has different opinions on how SNA can be leveraged for the benefit of business esp. CRM. I see Duncan Watts recently had a very interesting take on this in the most recent edition of the Harvard Business Review—see http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/...0702A.jhtml#section1

By the way, I have come across Idiro also in my work—they seem to have strong traction in telecoms industry particularly here in the UK. Not aware of Extract but will check out.

Personally, I believe that the data available for analysis is fundamental to the issue being addressed. As in, analyzing ISP data is not the same as analyzing telecoms data. Some 'social network' data can be mis-leading as it is opt-in (e.g MySpace, Bebo etc). Other data, such as telecoms, is more reflective of a person's true social network. E.g in online digital communities people can adopt an alter-ego which is quite different from their real world personality, whereas telecoms data is more reflective of a person's true social network. These are additional issues that have to be taken into consideration which trying to understand and value a customer's social network.

Richard

Graham Hill
Guru
Member

Posted 17-Feb-2007 11:50 PM
Vladimir, Richard

This is clearly an interesting and potentially very important aspect of customer business.

In addition to Duncan Watts (& Stephen Strogatz), take a look at the work of Mark Newman and Albert Barabasi on network basics, and Stan Wasserman, Valdis Krebs and Rob Cross on social network analysis.

I have posted a couple of times already on this issue on my CRMGuru Blog at http://www.customerthink.com/gurublog/graham_hill.

Feel free to add your own comments. Online social networks (like CRMGuru) are supposed to be multi.dimensional affairs.

Graham Hill
Independent CRM Consultant
Interim CRM Manager