Last week I had an opportunity to catch up with IDC analyst, Rachel Happe. Rachel covers the Digital Business Economy for IDC and recently released a valuable analyst report sizing up the next five years of the social networking application market.
During our phone conversation, Rachel had a number of interesting tidbits to share -- one of which I originally promised not to -- was the fact that Marketing Sherpa's events are some of the best to attend because they are heavily end-user focused. As I was reading my notes, I thought about not sharing but I felt guilty because hoarding information is very anti-community. So, I hope Rachel doesn't mind.
Rachel has an interesting background. She hasn't been at that IDC long which I think is a good thing from a social media/applications perspective. That's no disrespect to IDC which is one of the finer analyst firms out there. However, they've traditionally been more technology-heavy in their coverage so getting some fresh blood to cover an emerging market can't hurt their cause.
One of the things I found most interesting about Rachel was her personal history. In addition to her coming from a technology background (which was not surprising,) she explained that she grew up in one of the original "community 1.0" environments. That's right, her parents were both ministers so Rachel spent many of her early days kneedeep in church activities. From a professional perspective, prior to joining IDC Rachel worked at PRTM - a consultancy that focuses on "helping companies find new and innovative ways to operate to achieve strategic advantage."
Also covered during our conversation which was originally going to be exclusively about her recent social networking application sizing report, Rachel and I covered a number of interesting topics which I've bulleted below:
- Rachel believes that people that share interests and passions are not motivated by money. I tend to agree with this one. It's a key point because as community and social networking continue to penetrate the enterprise, finding ways to encourage customer or employee participation is critically important.
- We had an interesting talk about brands and how "community" is revolutionizing brand building. Rachel pointed out that in reality, consumers have always had control over brands but in today's society, web 2.0 technologies have exponentially improved customers ability to provide feedback to the companies the interact with.
- The reason social media is powerful is that it combines search with the power of peers. This becomes particularly important as companies strive to document their best practices and make them publicly or privately accessible.
Specific to the report (which we did spend some time on), our main discussion centered around Rachel's social application market sizing. If you're interested, you can read a quick summary of the report on Tekrati. You can also buy the report from IDC (there is a ton of great content so I'd highly recommend it if you've got the budget.) Here are some high-level excerpts from our conversation about the report:
- Not surprisingly, Rachel is getting a little flack over some of her projections. Many people think it's too big (I told her I thought it was much too small). Specifically, Rachel states that the social networking application market was relatively small in 2006 coming in at $46.5 million. However, she predicts that by 2009, this market will grow nearly 10-fold to $428.3 million.
- In her report, Rachel identifies three social networking segments emerging: - self-service applications that attract similar groups to those using Yahoo! Groups - brand applications that focus on customer engagement - enterprise applications that provide create better ways for companies to collaborate with their customers, partners and employees
- The social networking application market will experience rapid growth over the next few years but will level off as many companies will have chosen a platform (or will have chosen to build one internally.)
- New vendors in the social networking application space will continue to emerge over the next couple of years. Many will focus on vertical applications.
- As the market grows, there will be considerable consolidation, particularly in the enterprise space.
So do you want the over or under on Rachel's prediction of a $428.3 million market by 2009? It seems like a lot of money until you consider the price Google and Rupert Murdoch paid for two of their recent consumer acquisitions -- Youtube ($1.65B in stock) and MySpace ($580M.) In fact, Facebook turned down a $1 billion offer from Yahoo! a year ago and is said to now be valued in the multiple billion dollar range.
Yes, these comparisons are a little unfair because along with the technologies came multi-million member communities attached. However, a lot of what attracted the millions of members in the first place were these companies' underlying social networking applications. What do you think?
Cross-posted on mzinga.com