At Digital Hollywood, I caught up with Julie Supan, VP of Marketing for Ning. Ning, a site that lets you set up your own custom social network, has just announced the launch of a virtual gifts platform that allows users to buy and sell virtual goods using Ning’s virtual currency.

I thought it was an exciting announcement as I have written a lot about how to make social networking profitable by turning communities into economies.

Julie describes how Ning’s 1.6 million social networks can now start making money by selling virtual gifts. The net revenue(after Paypal fees) from the gifts is split between Ning and the social network.

Ning’s virtual currency called credits, converts into US funds at a rate of approximately 1 credit to $.02. To help get users started with virtual gifting, Ning will give 100 complimentary credits to all users. All Ning virtual gifts will be priced at 75 credits each, so Ning hopes that each user will get to send one virtual gift as a way to try out the feature.

I hope Ning finds more ways to extend how social networks can use the currency to pay users to take surveys or other actions that will help the networks make some real money.

Here’s the interview with Julie:

 

 Digital Podast 64 - Ning Launches Virtual Goods [4:22m]: Play Now | Play in Popup | Download

At the recent Digital Hollywood conference, I met with Tom Gerace, CEO of Gather.com.  Gather is a social network focused on the over 30 crowd and with a tagline of “The Best Conversation Online”.  The social network is oriented by topics such a politics, music, cooking and movies with strong incentives for users to create posts on these topics. The site gives people on the network “Gather Points” for participating.  These points can be cashed in for gift cards at Starbucks, Target and Amazon.

The site has been quite successful recruiting members and now has 2 million users.

Tom and I had a great conversation about Gather and what they are doing to make the site a success.  I was especially intrigued by their use of social campaigns as a way to monetize the social network.  In these campaigns, users are recruited to try products and then write about them.  Tom describes how that leads other people in the network to also get involved, try the product and write about it.  It’s an interesting idea that looks like it could be adopted by other people who have built communities.

This is an example of one more great way to turn a community into an economy.

 

 Digital Podcast 57 [15:56m]: Play Now | Play in Popup | Download

One of the most interesting presentations at the VentureNet show, was given by Mego.  They make a portable widget that contains your user profile.  The widget is completely customizable and can be plugged right into any social network or blog.  Wouldn’t it be nice to have one place to update your info and have it published out to all your social network sites.

I spent a few minutes making an example Mego widget.  It was a pretty easy four step process.

Here’s the result:

You can make your own at Mego.com

In Digital Podcast 52, Andrew interviews Jonathan Strietzel, Co-founder and Chief Creative Officer of Big Stage, whose breakthrough technology allows users to create and integrate life-like 3-D avatars of themselves into movies, videogames, commercials and other digital video content using just three digital face photos.

Imagine if you and your friends could star in a music video, famous movie clip, or commercial as realistically as if you were around for the shoot. Jonathan describes the company and the potential that its technology has to transform advertising and the audience relationship with movies, television and videogames.

 

 Digital Podcast 52 [23:00m]: Play Now | Play in Popup | Download

In the interview, Jonathan describes his early start as a wunderkind discovered by SoCal VCs (0:00), his insight into the coming importance of personalization as he discovered the technology behind Big Stage (2:45), and how he helped move the technology to become consumer internet capable and fundable (7:05).

He talks about the current business, his monetization model through brands and content partners based on the technology’s dramatic impact on advertising effectiveness (11:35), and what the big media networks are seeing in terms of monetization and CPM rates (16:12). He also describes privacy considerations (17:40) and the other cool non-advertising stuff, like videogaming and short internet adventures, that Big Stage will be making possible (19:05).

Jonathan Strietzel is co-founder and chief creative officer of Big Stage. He brings 10 years of experience as an entrepreneur in the entertainment and technology industries, including founding Stritz Studios, a boutique special effects studio. He has also invented multiple systems for delivering digital advertising and currently holds a U.S. patent for his work in particle-based advertising. In addition, Jonathan has worked with numerous TV studios and Fortune 500 companies, including developing the highly publicized online clue delivery system for NBC’s “Treasure Hunters.” Jonathan graduated from Chapman University with a Bachelor of Science degree.

[tags]Digital Hollywood, Big Stage, Jonathan Strietzel, Virtual Reality, Avatar, 3D[/tags]

Yahoo’s CTO Ari Balogh opened his speech at Web 2.0 Expo speaking about about 3 big bets: being the most important starting point for the web, being a must buy advertising property and being open.

He says that Yahoo has been open for a long time. They have lots of open API’s. Flickr is the second largest of these.

He wants to take “open” to a whole new place. He wants to open up all the assets to developers. They want to open up the social network that is Yahoo. It sounds like they have been learning from Facebook and OpenSocial. They seem to recognize that they have the ability to be the worlds largest social platform if they can get this right.

He announced the opening of the beta for search monkey. He says that Yahoo’s open strategy is not just about opening up the search page, but opening up all the aspects of Yahoo.

They will have an application platform and a social platform. They are going to unify profiles across Yahoo go make social possible. The third element is to re-wire all the properties of Yahoo so that there is a consistent API across the different experiences.

They want to rewire the entire Yahoo experience to be social. They don’t view social as a destination. He provides an example of social being used to highlight mail in email system, highlight what’s important to friends in My Yahoo or on the sports page.

Y! OS (open strategy)

• Rewiring Yahoo
• Open Yahoo to developers like never before
• Making Yahoo more social
• Making Yahoo portable.

Search Monkey now, much more later this year. The overall process will unfold over time. Look for releases over this year and next.

UPDATE: Here’s the video of the presentation:

[tags]Yahoo, Open Strategy, Web20Expo[/tags]

In this podcast, we interview Murtaza Hussain, CEO of Peanut Labs. Our focus is on making money in social networks by understanding the opportunity to turn a community into an economy.

Before we dive into the interview, it’s worth explaining why this is an issue.

Facebook and MySpace have grown very large as social networking sites and white label services like Ning have also grown very popular. These sites have lots of users and lots of page views, but how to make social networking sites profitable is still an open question.

There has been a lot of activity trying to make advertising work on these sites, but despite the ability to segment and target effectively, CPM (the price paid per 1,000 impressions) and click through rates remain low. My experience has been that Google Adwords have been 100 times more effective in terms of click through rate as compared to the same ads on Facebook. (Note: I would be interested to hear other people’s experience on this issue. If you’ve tried both leave a comment.)

So how can social networking sites make money? I posted a theory a little while ago that argued that organizations need to get beyond impression based economics and move to community based economics. And what are the economics of communities? They are micro-economies where trade, commerce and personal interaction are all intermingled with each other. I pointed to an example of Second Life where this is really happening.

While I was at the Graphing Social conference a few weeks ago, I hear Murtaza speak on a panel about monetizing applications. He mentioned that he thought virtual currencies were an effective way to monetize social networks.

I wanted to know more. Andrew and I caught up with Murtaza late last week and interviewed him for Digital Podcast 45.

 

 Digital Podcast 45 [26:09m]: Play Now | Play in Popup | Download

Murtaza has a background in social networking. He co-founded XuQa.com, a leading online casual gaming community, which was built to 2M+ users and profitability. His experience with making money on XuQa led him to co-found Peanut Labs.

The core insight he got from XuQa was that they could turn the community into an economy by introducing a virtual currency into the community. In XuQa’s case, the currency is virtual Peanuts. The more Peanuts you have the more stature you have in the community. Peanuts can also be used to play games and buy virtual gifts. To monetize the currency, Murtaza turned to online survey’s. If users take a survey, they get paid in Peanuts. XuQa in turn gets paid in real money. The net result is an exchange rate that puts real value on XuQa’s Peanut currency.

Murtaza has taken the idea and founded Peanut Labs to act as market maker for matching market research needs with with Facebook applications and others who have created virtual currency that can be used to compensate users for taking surveys.

Here’s an example taken from a Peanut Labs PDF of how it works:

1. A Gen Y Facebook user visits a favorite application, (fluff) Friends, which allows users to add, “care for” and “feed” a virtual pet as part of their Facebook profile. Facebook users trade “Munny” – Facebook’s virtual currency – for gifts and “pet food.”
2. (fluff)Friends promotes Peanut Labs’ surveys as a fun network activity. Promotion respondents complete a pre-survey profile questionnaire as a prerequisite to taking surveys.
3. (fluff)Friends survey participants who meet qualification criteria received highly targeted survey invitations, which additionally include qualifying questions that further enhance targeting. Upon completing the survey, they are paid with Facebook “Munny,” which can be “spent” on (fluff)Friends or other Facebook applications, for more social network fun.
4. The research firm receives real-time respondent data, often within hours of survey launch.

This is how to turn a community into a virtual economy that can make real money. I wonder when Facebook and MySpace will figure it out.

If you have questions or thoughts about how you can turn your online presence into a virtual economy leave a comment.

Click here follow me on Twitter at http://twitter.com/alexnesbitt

[tags]Peanut Labs, Murtaza Hussain, social networking, community based economics, virtual currency, virtual economy[/tags]

Marc Andreessen posts at his blog that Ning has now passed 200,000 social networks using the Ning platform. Ning is a simple to use service that allows you to create a social network site for anything you want. You get user pages, photos, videos, discussions and the rest of the tools commonly used in social networking.

If you’re a podcaster and want a social network for your fan club it’s worth checking out. You can see a great example of Ning being used by Ask a Ninja to support it’s fan club. It’s a pretty easy to use service and provides a lot of functionality.

Marc provides some very interesting statistics about the growth of Ning. They now have over 200,000 social networks and will quickly surpass 300,000.

• Over 70% of the networks on Ning are active, as defined by “used in the last 30 days”. This is a considerably higher percentage than we would have thought when we created the service, given that we make it so easy to create a network that you can do it in two minutes, for free — I would have assumed there would be more throwaways. It turns out that people really like using social networks!
• As that “70% active” statistic indicates, the long tail is most definitely alive and well on Ning — activity on the system as a whole is spread out broadly across the base of active networks. This continues even as the largest networks on Ning are getting much larger than ever before.
• There are now more — actually, a lot more — social networks on Ning than there are on the rest of the Internet in total, including all of the other services that let you create your own social network combined (i.e., all of our honorable competitors combined). (Note: I highlighted this part)
• Our growth rate continues to accelerate as the overall penetration of social networking across the Internet expands. As more and more people all over the world use social networking — including the big one-size-fits-all social networking services that many people use first — people become more interested in creating and using their own social networks for many topics that they care about. This is a very large market, and it’s growing very fast.
• Finally, fewer than 1% of our current networks fall into the adult category — a number that’s frankly surprisingly low, but one with which we’re just fine.

I think this is great. I like Ning a lot and hope it is hugely successful.

I had two main reactions to the post. My first reaction was to challenge the boast that Ning’s 200,000 social networks is more than the rest of the Internet in total. I think he’s got that way wrong. Social networks have been around for a long time on the Internet in the form of forums. And there are way, way more than 200,000 forums on the Internet.

But my second reaction was to ask what’s missing from this data that matters. What’s missing is information about whether Ning is here to stay or not. Networks, users and page views are all good, but money is what matters.

I want to know if Ning is cash flow positive. Have they figured out a way to make their social networking business profitable? I want to know because if I recommend to a podcaster or company that they should use Ning as their social networking platform, I want to be sure that Ning will not go away someday.

If Ning stopped, I may be able to get the data out of Ning, but then what do I do. The data is set up to be used in Ning’s infrastructure. I don’t see where I would go to get the same kind of service and the business interruption would be very costly. Anyone who is setting up a Ning social network and not considering this risk is being foolish.

So I have to ask Mr. Andreessen and Ning, how can we be sure Ning is here to stay? Open up the books and show us a nice secure balance sheet and a cash positive business, or at least something that convinces people that Ning is here to stay.

If you know more about Ning, leave us a comment.

Click here follow me on Twitter at http://twitter.com/alexnesbitt

[tags]Ning, Marc Andreessen, Social Networking[/tags]

Eric Eldon (VentureBeat), Jeff Clavier (Softtech VC), Jason Beckerman (Teach The People, Dank Apps), Lee Lorenzen (Altura Ventures) spoke about investing in social network applications.

Why the space valuable? Size and growth of audiences is driving value. The opening of the API’s at MySpace and OpenSocial is driving huge opportunities.

Application developers ask VCs why should they take the money when they are making good money with their applications. The answer according to the panel is that they can help build the company into something with substantial scale.(my note: this is a standard VC pitch, so make them prove they’ve done it if you are taking their money for this reason. A much better reason is their connections and how they can help you raise more money in later rounds.)

Each sector may provide one or two leading applications, but can any individual segment get to scale. Maybe there is a play in consolidating leading applications across sectors.

What are the big opportunities for a small Facebook developer? Build something good, get good reviews and use that to drive adoption. Growth may be slower, but users wills be more valuable.

Focus on building your business. Build a model that pays for your servers, then your salaries, then makes a profit. If you need inspiration, go to Borders. Look at the magazine racks and find a niche that you can serve.

As for valuations, make its a discussion.  In the end, make sure you feel good about taking the investment.

[tags]gspwest08, graphing social, Facebook application funding[/tags]

Jim Scheinman (Charles River Ventures), Seth Goldstein (SocialMedia.com), Scott Rafer (Lookery), Troy Young (VideoEgg), Murtaza Hussain (Peanut Labs, Inc) spoke at GSP West about monetizing applications on social networks.

Global advertising spend on the internet continues to grow rapidly. There are a whole variety of ways to monetize via advertising and transactions.

Application monetization networks like SocialMedia and VideoEgg have emerged to aggregate applications into advertising networks. To turn this into a big business, we need to get the brands to start spending more seriously to reach these audiences.

Marketers need to think about very new things when marketing in applications and games, such as where/when their ad gets shown within the application flow. Once the user is more engaged there is more likelyhood of getting the user to do things with advertising.

Murtaza observed that CPM can pay some bills, but real action is in virtual currency used that can be bartered for services and goods, both physical and virtual. Troy says that people can drive high media value they can make the money needed to drive revenues.

Seth observed that the best that Google has been able to do for Adsense is an effective CPM of $0.50, and that we need to do better than that to be successful.

What’s the new measure – revenue per active user according to Murtaza.  The ad network guys on the panel still focus on effective CPM.

(My note: This panel was very skewed to advertising.  There was very limited discussion of monetizing options beyond advertising.  Virtual transactions, lead gen all have much more potetial as CPM is not going to go up in my opinion.  Large publishers such as Yahoo have huge amounts of unsold inventory and it’s not going to get better as the world of content continues to expand faster than the amount of user’s discretionary time.  My bet is with Murtaza.)

[tags]gspwest2008, graphing social, application monetization[/tags]