2009 is going to be a difficult year – no doubt about that. We have given up on central bankers, economists and politicians – none of them predicted the current mess – so we are going to rely on astrology. It seems that Saturn is no longer retrograde in Virgo on May 17th.

Although we may not truly understand what this means, we have decided to make May 17th the date when we begin to see some recovery in the market. This may or may not be so, but at least it gives us something to work towards.

In early December, we looked at the calculation of risk for business in adapting to the new media. Since then, we have seen some contradictory evidence in the market about the value of these new techniques.

Let us just take two stories that seem to tell very different tales and see what, if anything, we can learn from them.

Tory Waste and Gaming Enthusiasm

The Financial Times recently reported that the Conservative Party had spent £500,000 to build an ‘army of online supporters’. The newspaper revealed that this effort had resulted in only one person signing up to iVillage, one of four targeted websites – the others were Facebook, MySpace and Bebo.

The Conservative Groups on MySpace and Bebo had fewer than 500 members at the end of the project. Facebook may have achieved 11,000 members but this scarcely reached the Obama Campaign levels of over two million.

On the other hand, a social games entrepreneur, in the same edition of the newspaper, claimed that social networks had given his company, Playfish, ‘the ability to gain a huge audience in just a year with virtually no market expense'.

He apparently started with 100 players and now has 38 million (he claims) across the Facebook, MySpace and Bebo platforms. We then had a somewhat effusive investment adviser claiming that ‘social networks are the new countries, the new geographies’.

So, which is it? Are social networks ‘damp squibs’ or are they exciting new business models that will make a lot of people very rich. Well, neither really.

In the one case, over-enthusiastic political strategists blow half a million pounds on faith and hope and, in the other, the 38 million games-players are assumed to have cohesion and value simply because they are, well, 38 million.

You could see the PR adviser salivating over the lovely idea that because 38 million is the same as the population of a small country then we can all be seduced into thinking that Playfish has the potential productive capacity of a small country.

And the cross-over between the two stories? Naturally it has to be the belief that the Obama Campaign somehow presents a new model for handling both politics and commerce and that a) political parties should be investing in social networks and b) business can make serious money out of them.

Well, We Are Not Yet Convinced And Here Is Why …

The Obama Campaign’s remarkable ability to mobilize 2 million Americans was ‘sui generis’. It cannot be replicated easily without one factor that is not easily reproducible - Mr. Obama himself. The purpose of an admittedly brilliant campaign was extremely simple.

This was to get centre-left activists to organize themselves and others to ‘get out the vote’ for a charismatic person who offered an emotional connection (‘hope’) and then to remind people to make sure that they actually did put their cross on the ballot paper on the day.

This was a very simple on-off political purchase, an immense and expensive programme for high stakes at a single moment in history based on a unique convergence of emotional responses. It was not only the funds and the machinery offered by the new platforms like Facebook that were required.

What was necessary was the availability of a product that the users of these platforms already wanted to believe in and that they were prepared to invest their time in promoting. It was like theatre – the willing suspension of belief.

Now let us return to the Conservative Party in 2007/2008 when the £500,000 was laid out? If you were not already an ambitious policy wonk or political groupie, what possible incentive would you have to get involved in signing up to a Facebook Group.

There was no election in the offing and no individual candidate or policy that could be crystallized into an emotional revolt or passion. This was just another tweedledum/tweedledee party in a political system that has long been thoroughly distanced from its electors.

All you might get, by signing up to a Facebook Group, would be the dubious pleasure of committing yourself to a political party well in advance of seeing its ‘offer’ on the table and the consequent probability of being bombarded with political propaganda through its Messaging system and Updates. Why bother?

Freebies and Commerce

Now let us look at the other side of the equation. Two million people on a list must have value, so surely 38m on Playfish’s list or the many more millions on Facebook or on MySpace’s lists must have more value still.

By this estimate, this small developer of games applications should be valued very highly and, if it is to be valued highly, so should every company that can accumulate names on a list.

We have absolutely no view on the value of this particular company (far from it) but we do have a view on the hysteria being generated about these types of company in general. Playfish actually looks rather interesting from its web site, especially in a mobile phone context, but our caution remains.

Any large list should have value in creating Opportunities To See [OTS], assuming the members sign up to e-mail alerts, re-enter the site frequently and/or actually notice any revenue-generating advertising that might appear.

A big enough list should at least meet the economic value of spam at its worst – that is, if enough crud goes out, some people will inevitably notice something and pay to access it. This is, of course, what keeps Nigerian fraud scams in business.

But how do we actually behave within social networks? Well, we rarely pay for anything and this has its effect on our susceptibility to messaging. I get a massive array of free information and services from across the internet.

Yet no-one will be able to make me pay for it because a) I want it rather than need it and b) there is a very high chance that if someone tries to make me pay for it, I can go elsewhere and get the same or better for free.

This posting to you is analogous. You get it free because it suits me to introduce you to TPPR and Pendry White, two very fine communications companies. You can ignore it, bin it, enjoy it, despise it but you won’t pay for it.

You will only pay for something that the two companies can do to solve some problem you may have that you need to overcome to make money. This Posting just says that we are around, we are sometimes very clever (or think we are) and that you can try calling us to review a problem - and that’s all.

Cash and OTS

I have to really, really want or need something in order to pay for it and so do you. That is going to be even more so during the next eighteen months of unrelieved economic gloom.

In fact, the creators of these networks also need me (and you) more than I need them because they want to show advertisers that the OTS is truly worth spending money on. You and I are one umpteenth-millionth of that ‘sell’.

But how can OTS be guaranteed? Well, we have two problems straight-away. The first is that the use of social networks is far less than the flow of e-mail alerts and registrations implies and the second is that how I look at advertising is related to the medium.

The link between free space and bought space is very different from that in broadcast or print advertising if only because I am not being spoken at by the whole medium but am controlling and speaking for myself within the free side of social networking.

I would suspect that my experience is typical. I will register on many sites that I will not subsequently use except as bookmarks ‘in case of need’. I will let e-mail alerts accumulate in my Outlook Junk Folder until I purge them en bloc or de-register when one or other becomes truly insufferable.

These registrations and these alerts appear to suggest that I am far more engaged in these sites than is the case. The OTS might rely on various more technical considerations but being signed up or receiving e-material is not the most reliable.

And then, how do I use the sites? Are they a production (like broadcast) where, unless I can bother my backside to make a cup of tea, I will see the advertisements as the price for being able to watch the drama?

Or is it like flicking through the pages of a newspaper sequentially so that a variety of advertisements, some focused on my interest area, appear integrated with the text?

But I don’t sit passively or browse within sites, I go straight to the pages that matter and browse between sites that matter partly because they are not cluttered with advertising.

Facebook and the Top End of the Market

When I am on a social network site, I am not passive at all. I go on it to do something, so the advertisement is not the ‘price’ I pay for access in the same way as broadcast. It is at the corner of my attention which is focused on active communication.

Similarly, I do not work through a page which the Editor has constructed to attract my interest. I work through pages that I and people I like or appreciate are constructing, sometimes in real time. If someone shouts at me, I will turn them off.

Facebook is getting rather good at introducing me to its advertising. Yet if I go to my Facebook Home Page, I see no advertisements. Elsewhere, the advertising is restricted to one side banner (obscured if, like me, you keep your bookmarks permanently open in Internet Explorer).

In fact, I appreciate and sometimes click on Facebook advertisements. Because I am conscious of what I want and need, it does not test my patience. It knows that I am in charge. But the model can only work at Facebook levels of scale where I do visit it every day for some reason.

Large numbers of members may well provide, in due course, a business model centred on the sale of online advertising and of additional subscription services but we have to be very careful about being seduced into some belief that numbers alone mean anything.

The numbers have to be proved to be reliable and of persons with a long term and consistent commitment to the product in a world where time is at a premium (even in a recession).

Obama is certainly not the model that should be quoted in this context. It was a charismatic, low-cost single purchase that took place within a very delimited period of time.

Business success is rarely successfully built on that model – perhaps it works for the pop concert, the one-off album or the single bestseller for the artist or author but promoters and publishers have to keep repeating the trick or go under.

Recent Client Notes [Subscription Only]

Global

10.12.08 - The Global Economic Situation
11.10.08 - The EU Summit Today
12.10.08 - Arab Politics: Anti-Western Conservative Ideologies
14.12.08 - Update on Economic Events
15.12.08 - Update on West Asia
17.12.08 - The Global Economy and 'Uncharted Waters'
19.12.08 - From Boom to Bust: OPEC & The Sliding Oil Price
21.12.08 - West Asia: War Pressures Increase
22.12.08 - The Crisis in European Environmentalism
22.12.08 – Instabilities in the East
23.12.08 - The Knock-On Political Effects of the Economic Crisis
24.12.08 - Further Notes on Political Aspects of the Economic Crisis
27.12.08 - Post Christmas Review of the Economic Mood
27.12.08 - Continued Strains in the East
27.12.08 - Preparing the Ground for Obama in Europe
29.12.08 - Continued Tensions in West Asia
30.12.08 - Economic Expectations For 2009
31.12.08 - The Financial Times Predictions for 2009
31.12.08 - Russia In Pain
03.01.08 - EU Frustration at the Russian-Ukrainian 'Pantomime'
04.01.09 - Assessing West Asia at New Year
06.01.09 - Update on the Eastern European Gas Supply Crisis

Domestic

12.10.08 - Guns and Butter: The Crisis in UK Defence Spending
19.12.08 - The UK's Growing Sterling Crisis
21.12.08 - The UK Economy in New Year Melt-Down
27.12.08 - The Deteriorating Economic Situation in the UK
30.12.08 - Update On The Troubled UK Economy
02.01.09 - The Essential Flatness of British Politics
04.01.09 - The UK Economy at New Year

In addition from 28.12.08, there have been daily reports on situation in Gaza.

www.tppr.co.uk

www.pendrywhite.com