Monetising your community site through value chain mapping

February 2nd, 2010 by Alex

Community

Here at Keplar some of our recent advisory work has been for online community sites, helping them to improve their customer proposition while also growing their revenues. In the course of these projects we have started to develop a new technique for guiding the development of these sites which we call “value chain mapping” – a technique that works to improve the way community sites serve their community whilst simultaneously growing their revenue. This blog post aims to explain this technique – articulating the theory but also providing practical advice for owners of social networks. (None of the companies mentioned in this post are current or past clients of Keplar.)

Vertical social networks: a primer

For this post we focus on “vertical” social networks – these are simply 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 Bebo. 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.

Our approach for vertical social networks, then, is built around the idea that these sites need to expand to accommodate – and serve – as much of their respective ecosystems as possible. 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:

Childcare value chain

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 (source). 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. And let us know how it goes! We’d love to get a discussion going around this post with a view to building on this approach and helping social networks to deliver more.

Interested in monetising your community site better? Send us an email to find out how Keplar can help.

Leave a Reply