The Power of Social Media

“The Power of Social Media”
MidemNet, 18th January 2008, 11am

Jeremy Phillips - Co-Founder and COO, StrategyEye

Jeremy Phillips www.strategyeye.com

Why Are We Here?

To look at the competitive landscape for social networks
– Different types of social networks
– Tools and services
– 2008 investments
– 2009 predictions

To look at why fans use social networks, and what value social
media brings to you

StrategyEye’s intelligence service tracks hot companies and all
corporate activity (VC, M&A, Partnerships) right across the Digital
Media value chain
– 16,000+ Digital Media companies, 400+ categories, 4,000+ sources


Social Media and the Digital Media Value Chain
The end to end value chain ...


... content production ...


... distribution ...


... and consumption


Social Networks are at the heart of the value chain


Different types of social networks ..

Broad-based Music-focussed Mobile-specific

Label Artist Retailer

(Also other types of search to find content: )


Different types of social networks ..

Broad-based Music-focussed Mobile-specific

Label Artist Retailer

We are focussing today on sites with a strong social media focus


Why do people use Social Networks?

Making new
friends
Meeting the
stars
Finding some
new music
“Being myself”
online Chatting with
Finding my friends
something to
watch

Sharing with my
friends
Playing games


Why do you want to use Social Networks

Building
Customer Making Money
Relationships


And there’s the rub

Giving Stuff
Away

Building Finding
Meeting the
stars
Customer Making Money something to
Relationships watch

Making new Playing games
friends
“Being myself”
online
Chatting with
my friends Finding some
Sharing with my
new music
friends


How much content should be free?

Mashup Mashup
Partial Partial Full Full
with without
Tracks Videos Videos Tracks
Permission Permission
Distribute for Free?

82% 81%
75% 75%

44%
38%

6%
Opportunity or Threat

100% 100% 93%
87%
to Revenues?

56%

38%

Source: StrategyEye-Midem Survey, Dec 08


Which marketing strategies are most effective?

Artist‐ Label‐
Viral Direct Direct
Branded Branded
Marketing Advertising Retail
Channels Channels

Source: StrategyEye-Midem Survey, Dec 08


The Social Media landscape
Social Networks, Tools & Services


Notable players – Broad Social Networks
MySpace
– Sep 08: MySpace Music in US, partnering with
major labels. 1bn tracks streamed in first week
– Trialled new ad solutions to increase revenues: self
service, video ad system

Bebo
– Aug 08: Produced web series “The Secret World of
Sam King” with Universal Music
– Hosts increasing number of professional content
videos such as ESPN

Facebook
Key Characteristics – Dec 08: Extended Facebook Connect data
portability tool to sites including Hulu and Digg
Increasingly broad demographic; new “broad
purpose – niche audience” networks emerging – Q4 08: Rumors - Facebook Music to rival MySpace
Music – stalled?
Ad-supported business models, from typical – Increasingly appealing to content owners - CBS
display ads to web series sponsorships distributing long-form content on the platform
Personal profile, IM and email features, micro-
blogging, photo uploading facilities, games and MyYearBook
social applications, as well as professional – Targets high school students
video and audio content
– Jul 08: 3rd biggest social network in US (Hitwise)
– Feb 08, Jul 08: Raised $4m + $13m funding
– No music-specific applications or channels yet


Notable players – Music-Focussed Social Networks

Imeem
– Playlist-sharing community for artists and fans,
also supports embedding of tracks on other social
sites and blogs
– Partnerships with major labels to stream music
online for free
– H1 2008: $15m investment by Warner Music

iLike
– Users can organize music, share music tastes,
and discover new artists through friends
– Popular widget streams music on Facebook,
MySpace, Bebo, hi5 and Orkut
Key Characteristics – Jul 08: Partnership with Rhapsody: streaming of
full length tracks 25 times for free
Music fan audience, looking to discover new – Oct 08: Partnership with TuneCore: indie bands
music and find friends with similar tastes earn royalties when played on sites including
Facebook and Bebo as well as iLike
Most music-focused social networks are ad-
supported; some generating revenues from
playout / subscription / ecommerce fees Last.fm
Features include music streaming, music news – Tracks which music a user listens to and
recommends related new music
and information, personal profiles, playlist
creation and sharing, music discovery and – Includes artist profiles, meeting other people with
similar music taste and discovering local gigs
recommendation tools, as well as ability to
– Jun 08: Music video streaming deal with Universal
interact with artists Music. Problems with majors – in June, ended deal
with Warner Music


Notable players – Mobile Social Networks
Mocospace
– Network features include photo, video, chat, and
microblogging. Ad-supported downloadable
multimedia content section
– Partners with Universal Music and Def Jam to help
promote new albums
– Nov 08: Most popular mobile entertainment site
(Hitwise)

Twango
– Media sharing service: combines online storage
with social networking, allowing users to organize
and share photos, videos and personal media
– Conversion and synchronization of all iPod-
Key Characteristics compatible files
Mostly a tech-savvy audience that uses mobile – Jun 07: Acquired by Nokia
web extensively
Business models strongly ad-supported, MyStrands
although revenues can also come from sale of – Mobile music discovery service: offers personalized
mobile content and licencing of core technology radio stations and ability to find clubs and parties
with specific music
Varied features: messaging and presence
– Licenses core recommendation technology to other
services, location-based features (eg finding businesses
nearby friends), sharing and storing content and – Data portability feature with other social networks
mobile blogging (cf Facebook Connect)


Notable players – Label Sites
EMI
– Dec 08: Relaunched home page as social music
site, allowing fans to create profiles, stream whole
albums and watch music videos
– Includes music discovery, personalised playlist
creation, artist profile pages with playable songs
and videos
– Partnership with 7Digital to download non-EMI acts
that are searched for on the website. EMI offers
information on tracks outside its label

Warner Music
– No multimedia content on site but redirects to
artists’ websites (Sean Paul, Laura Izibor)
Key Characteristics – Jan 08: Partnership with Cisco Systems to power
artists’ websites with social networking features
Music fan audience, looking for direct
information on labels and artists
Universal Music
Marketing focussed, early moves towards direct
– Offers news, tour information, video content but no
revenue generation free streaming or social networking features
Increasingly including video content, free – Nov 08: Meebo messaging services integrated into
streaming, artists pages, instant-messaging Universal's official artist pages to offer real-time
chat among fans
features, and other social networking features

Sony BMG
– Basic artist information and some multimedia
content, no free streaming or social networking


Notable players – Artist Sites
Kyle Minogue
– Kylie Konnect social network for Kylie fans
– Users can meet friends, upload pictures, send
messages, participate in forums

Sean Paul
– Powered by Cisco System’s Eos social networking
platform (Warner deal)
– Includes IM feature (powered by Meebo), forums
and personal profiles

Key Characteristics
Fan audience, looking for exclusive content, gig Radiohead
dates, as well as interacting with the artist and – Limited message board on band’s website
meeting other fans – Interesting viral distribution strategy through
widgets: partnered with Clearspring to launch a
Most artist sites include an online store widget for latest album Inrainbows
featuring albums and merchandising, with – Widget contains a menu of video and music
external links to ticket resellers content, along with tour dates, news articles and a
link to purchase the album
Social networking features are still limited on
popular artist sites, offering basic IM features,
message boards, forums and profiles


Notable players – Retailer Sites
iTunes
– Launched in 2003
– Few social features: ability to ‘tell a friend’ about a
product and to share playlists on local networks
– iTunes 8 focuses on Genius recommendation
engine using collaborative filtering. Does not
provide access to other people

Amazon MP3
– Basic social features: consumer discussion board
for the site, customer reviews and ratings, product
Key Characteristics forums
Broad audience, as buying digital music
becomes increasingly mainstream
Pay-per-downloads as well as monthly Best Buy
subscriptions (Napster, iTunes)
– Oct 08: Acquired Napster. Typical music discovery
Typically feature product details, consumer features through playlists.
reviews, and product recommendation tools. – Napster focuses on playlist-based music discovery
Limited social networking features, keeping to and artist information, no chat or further interaction
retail basics rather than trying to build
consumer communities.


Notable players – Music Blogs
Buzznet
– Popular music community built around blog
‘journals’, with news, videos, photos and member
profiles
– Users can create groups of interest, contribute to
posts and ‘buzz’ other content
– Apr 08: $25m funding including Universal
– 2008: Acquired several music sites: Qloud, Idolator,
Stereogum and Absolute Punk

MOG
– Blog-centric music community. “Mog” user pages
Key Characteristics built around songs and artists, with music
recommendation technology
Music fan audience wishing to actively
– Apr 08: $2.8m funding including Sony BMG and
contribute with posts and reviews Universal
Ad-supported business model: music blog – Integration with Rhapsody’s music service that
communities are free and generate revenues allows users to stream full songs and albums
from advertising through MOG itself
Include strong social networking elements such – Jun 08: deal with Gracenote to provide song lyrics
as matching with music tastes, ability to create – To launch a free ad-supported streaming service.
fan clubs and groups, UGC content upload and Deals in place with Sony and Universal to date
social tagging


Notable players – Music Virtual Worlds
vSide
– Music-focused virtual world targetting teens
– Public and private virtual clubs with avatar-based
IM chat while listening to music and dancing
– Partners with DoubleFusion to provide 3D in-world
advertising
– In-world and real currency micro-transaction
systems

IMVU
– Initially a “standard” virtual world, users create
avatars and custom rooms. 25m registered users
– Nov 08: Launch of IMVU Music: users can buy
songs, create playlists and listen to them with other
Key Characteristics avatars. Songs can also be transferred to iPod and
Young music fan audience other digital music players
– Deals in place with major labels, as well as IODA,
Several sources of revenues: in-world Redeye, CDBaby and other indie labels
advertising and sponsorship, micro-payments
and subscription fees (Music Mogul)
Music Mogul
Features include virtual chat rooms and
– Expected to launch Feb 2009
customized avatars, also music-focused
activities e.g. music streaming and online store, – To feature social networking functions, online
games and live performances that users can watch
music-related events, dancing areas in streaming video
– Allows musicians to stage fee-based album release
parties and sell real and virtual merchandise


Tools and Services – Social Network Engines

KickApps
– Nov 08: $13m fundraising
– KickApps Social Graph Engine clients include Indie
97.9 (Hearst)

Pluck (Demand Media)
– Dec 08: Pluck on Demand launched
– Clients include RollingStone.com

Telligent
Key Characteristics – Sep 08: $20m fundraising
High growth market attractive to VCs – Community Server clients include Universal Music
Individual widgets and bundled platforms
Some niche social networks converting to white
label model e.g. Wasabi, Ning, SocialGo Buddy Media
– Sep 08: BuddyBrain monitors ad campaigns on
social networks


Tools and Services – Artist Admin Tools

ArtistData
– Update multiple social networks and other sites
simultaneously

SoundCloud
– Manage your music library – rough cuts, pro
recordings, condensed files
– Sell selected outputs via widgets

Key Characteristics
Startups providing wide range of niche
utilities to artists and copyright holders
Scriggle-it
– Fan mailing list and campaign management utilities


Tools and Services – Mashup Tools

Synchro Arts
– Singtones service aligns user vocals musically with
professional content to make custom ringtones

Mimovi
– Mashup toolkit to mix professional and UGC audio
and video
– Syncs low quality UGC material with broadcast-
quality timecodes
Key Characteristics
Very attractive content for users, very
contentious for industry
High failure rate (e.g. Mixwit, Muxtape)
where professional content used without
permission
Emerging services working more closely
with the industry


Trends for 2009 – Content and Demographics

Current: Future:

Industry still engaging More long form content on
Professional cautiously networks
Content

Seen as a threat – regular Rights issue cleared??
Mashup closedowns Probably will take a while –
industry should not worry

Social networkers are Continuing older
Demographics getting older! demographic and
associated artist promotion


Trends for 2009 – Site Wars

Current: Future:

Dominated by broad major More niches – by
Broad vs Niche social network sites demographic, by music
type / artist

Early stages “Corporate” social networks
Label Sites have a history of failure

Valuable if the star is really Requires commitment and
Artist Sites there tech-savvy from artists –
not all have the right skillset

Has started – Facebook Ongoing. Possible rise of
Interoperability Connect, ArtistData further aggregators e.g.
Power.com


Trends for 2009 – New Frontiers

Current: Future:

Currently niche, proof of Enhanced location based
Mobile concept services. Likely acquisition
of niche players

Early stages, some Continuing development.
Virtual Worlds interesting niche players Increasingly immersive
emerging (3DTV, haptic controllers)


The Power of Social Media

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