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Monetising and engaging your community through value chain mapping

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8th Apr 2010
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Value chain mapping can improve the way community sites serve their community whilst simultaneously growing their revenue. Alexander Dean outlines the theory and provides some practical advice for owners of social networks.  

The growth of social media is a hot topic these days, but the success of services such as Facebook and Twitter has tended to overshadow the part played by independent, niche community sites. Like the gorillas in the ring, these smaller sites want to drive value for their users, and in so doing also grow their own revenues. Unlike the gorillas, however, niche community sites have opportunities to develop highly specific, high value functionality tailored to their particular communities.

At Keplar, we have been advising a growing number of these niche community sites, as well as web publishers looking to grow communities around their content. For these clients we have taken process mapping tools used in lean methodology and applied them to social networks to identify where value is created. This is "value chain mapping" – a technique that aims to improve the way community sites serve their community whilst simultaneously growing their revenue.

Let's explore this technique a little further so that you can understand the theory and take away some practical advice for your own social network.
Vertical social networks: a primer
For this article, let's focus on "vertical" social networks – community-oriented websites which focus on one content area, interest group or demographic. We use the word vertical to distinguish these community sites from general-purpose social networks such as Facebook and Twitter. For this post we use Mumsnet, the UK website "by parents for parents", as our main example.
So, what does a vertical social network look like? Typically these sites provide their user community with a set of "soft tools" such as forums, profiles and articles, all designed to support the site’s users in socialising, sharing knowledge and fulfilling specific needs. On Mumsnet, those user needs would include childminding, keeping their child healthy, and finding a kindergarten.
On the monetisation side, vertical social networks generate most of their revenues through advertising – showing users targeted or general banner ads but also directing users towards relevant businesses for a fee (see for example the Mumsnet Mall). It’s a delicate balancing act for the site owners as communities respond badly to advertising which they deem excessive, irrelevant or dishonest.
So, what’s wrong with this model?
The current model is far too narrow
The fundamental weakness of this approach to a vertical social network is that it’s far too narrow. To continue with the Mumsnet example: parents are an important part of the parenting ecosystem, but they are only one part of it. There are many other people and organisations who have a direct or indirect role to play – from the children themselves through to care providers (e.g. childminders, paediatricians), merchants (e.g. toy shops, pharmacists), manufacturers (e.g. buggy makers) and educationalists.
In short, parenting is a huge, complex ecosystem of which parents are the most important part – but they are only one part. And a site which only gives a voice to one player in an ecosystem is an echo chamber – think of the House of Commons without the Opposition, or eBay without the sellers. These sites are facilitating peer-to-peer communication between their narrowly defined interest group, but they don’t truly fulfil that group’s needs, because they don’t allow them to build real relationships with the wider ecosystem.
So why not approach vertical social networks differently, based on the idea that these sites need to expand to accommodate – and serve – as much of their respective ecosystems as possible. Indeed, it is only by this expansion that the user needs of their core interest group (e.g. parents) can be properly met.
Mapping value chains
If this is the theory, then how does a site such as Mumsnet go about incorporating its wider ecosystem – isn’t this a Herculean task? Fortunately, each ecosystem breaks down into a set of smaller, discreet value chains. By a value chain we mean a set of people or organisations which pass value in one direction to fulfil a user need, for example the value chain for childminding looks something like this:
Our approach is to incorporate these individual value chains into a vertical social network to better serve these user needs. We do this by "mapping" these value chains into the network – in the case of childminding this would be a three step process:
  1. Extend the network to allow agencies and childcarers to have individual profiles on the site.
  2. Provide discovery tools to allow parents to find and evaluate these childcarer profiles on the site.
  3. Provide market tools to allow parents to buy childcare from providers through the site.
With this value chain mapped into the social network, parents are now able to discover and buy childcare without leaving the site. We are leveraging all the powerful attributes of social networks – discovery, reputation, communication – and applying them to solving a specific user need. Incorporating more of the ecosystem is then simply a case of "breaking off" more value chains, mapping them onto entities within the social network and providing the necessary tools to connect them to users.
If this is the approach, what is the impact on the site’s bottom line? The impact can be considerable, because whenever a service is fulfilling key user needs there are significant revenue-generating opportunities. To go back to childcare: in the UK alone this is a £4.1 billion market. If a social network can model a value chain like childcare then there are various ways of capturing a slice of that value – perhaps a small slice, but certainly much higher than any revenues from current advertisers from that value chain. Wahanda, the health and wellbeing network, is a great example of a site which has mapped its key value chains and is capturing value as a result.
Conclusion
In summary, then, value chain mapping is a way for vertical social networks to break out of their current narrow focuses and start comprehensively fulfilling their user’s specific needs. In doing so they can directly capture value from their respective ecosystems, in addition to the indirect revenues they currently make from advertising.
A social network can start small with this approach – we recommend that network owners reading this start with just one user need: take that user need, understand the value chain that fulfils it and make sure that the relevant organisations and people have a space within your network.

Alexander Dean is a specialist in product and technical management and architecture at Keplar LLP.

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