Young and Free, power of social media

Young and Free, this young people's social network Web site launched first in Alberta in June 2007, has jump started 2,600 new checking accounts and $3.4 million in new deposits for Servus Credit Union, a cooperative financial services company that offers most services like a bank.

More encouraging data: an additional $17 million was lent to new account members, and $1.4 million is generating 15% yield from mutual fund. That is, using the Servus's 3-year bank loan rate 4.15%, there is an interest income of $705,500 and return from mutual funds of $210,000. The cost to run the Web site, including operating expenses and fees to the marketing company, is $630,000 for the last 19 months.

Return on investment: 45%.

Wonder why?

Imagine if all your friends have a pair of Nike sneakers, would you want a pair too? Very likely. This is what Young and Free does to its members. It takes an image of a social network, filled with fun activities. Members create blogs, share videos and exchange new ideas. Some members say: Young and Free is everything I want.

Once the members are there creating content and actively take part in the Web site, they are ready for a leader. This is where the spokesperson comes in. In each Young and Free Web site, respectively in Alberta, Texas and South Carolina, a month-long campaign started to search for an annual spokesperson, who is "the voice of Young and Free 2009." The winner is an overnight celebrity, a community star that every members like and trust.

His/Her job is to create five blogs a week to entertain the members. The content subtly incorporate the concept of Credit Union. What is it? How does it work? Why is it better than a bank? His/Her benefit is $36,000 annual pay, a free Mac Book, a HD video camera and a car with Young and Free logo.

Now the "peer power" comes into play. People want to hear advice from friends, especially the ones that they like and trust. The more members sign up to the Credit Union's checking account, the more people want to sign up.

The last but the key thing about Young and Free is, quoting its inventor, president of Currency Marketing, Tim McAlpine: "Everybody is talking about creating conversations online. When it comes to sell products, it is taboo. We have the product right in the Web site. I am selling the product, but very subtly."

Direct to the point, sell the product! And there they go, an old-school Credit Union is the new black. The name relates to youth, to fun, and to hip.

Only the members of Young and Free should be aware: The name of the Web site should really be Young and Not-Free.

Online Advertising: We Have The Basics Ready

The idea is brilliant: If the ads start to increase revenue, advertisers will be willing to pay more. Haven't advertising agencies figured that out years ago?

Maybe they did offline, but not online, yet. The frustrating thing for advertising agencies are: The market is there and it's huge. Twenty billion dollars are ready to be spent in online advertisement as of last year and over one billion Internet users (potential buyers) are there hanging out on social networks. But the creative advertising agents are stuck. They can see the cake is there, fresh and tempting, but they just don't have the "silver bullet" to break the glass and get it. But some people said they might have figured it out. It's called Behavioral Targeting.

“We don’t guess, we figure you out and know what you want and how much you want to pay,” said Sheldon Gilbert, 33, CEO and founder of Proclivity, a data tracking system that provides the clients with their customers' shopping interests, purchasing likelihoods and level of expenditure.

Behavioral targeting not only records the purchase information, it also traces every step of someone’s online activity. “The massive change is to track micro behavior, such as the blogs you read and the community Web sites you browse. We collect the data, and based on your behavior, we analyze you and know what you want before you actually make the purchase.”

“It’s the whole new level of targeting that makes Behavioral Targeting a potentially successful online business model,” Lars Perners, professor in consumer psychology at University of Southern California, L.A., said.

Gilbert said clients of Proclivity systems have seen an average of 26 percent increase in their revenue and 100 per cent increase in click rates. Datran Media said in its internal survey that its clients’ ads click rates doubled or tripled after adopting behavioral targeting.

Let's see how it works among three players in the game: technology providers, advertisers who have the money and Web sites who have the platform.

Technology providers like Proclivity make money through subscription. Advertiser's revenue increases given the data provided by Proclivity and Datran Media are credible. The Web sites are the losers. It seems like we have sugar, flour and butter to make a cake. Now we need is a good chef, someone who could put all the ingredients together and bake it at the right temperature for a right amount of time.

Kenneth Wilber, professor in online marketing of University of Southern California, said “it might be harder to build database as big as Facebook or Yahoo than people think,” Wilber said. He agrees Behavioral Targeting has a clear proposition. But it is a very young technology and advertisers have a long way to go before using it on a regular basis. “If I were an ad network, I won’t be thinking about how to increase my revenue now. I would think how to merge with social networks,” Wilber said.

If the model is moving towards success, we should expect to see a lot of merges in the sector soon. Technology companies merge with social networks to combine their massive database; technology companies should also think of themselves more than technology providers but ads networks, who are brokers who put ads on most of the Web sites.

“I think behavioral targeting will become a successful business model but it will take three to five years to really take off, longer than most people think,” Wilber said.

The science part is done. Now it's art to make it work.