FryThesis A1b

A FIVE FORCES ANALYSIS OF NICHE AND GENERIC NETWORKS IN THE
ONLINE SOCIAL NETWORKING INDUSTRY

A THESIS
Presented to
The Faculty of the Department of Economics
The Colorado College
In Partial Fulfillment of the Requirements for the Degree
Bachelor of Arts
By
James R. Fry
December 2008
A FIVE FORCES ANALYSIS OF NICHE AND GENERIC NETWORKS IN THE
ONLINE SOCIAL NETWORKING INDUSTRY
James R. Fry
December, 2008
Economics
Abstract
An online social network is a venue on the internet designed for interactions among
members of a community. Hundreds of millions of people across the world engage in
social networking to connect with each other making this relatively new practice a
significant part of our lives. This year online social network membership is expected to
include 50% of internet using adults and 84% of internet using teenagers.
This study compares several factors relating to the two sectors of the online social
networking industry, which are niche and generic websites. The analysis of these factors
is used to conduct a five forces analysis on the industry. The analysis attempts to
determine the competitive environment, the current state of the industry and where it
might be heading.
It was found that users of niche networks showed much higher levels of loyalty meaning
switching costs for niche users were higher than for generic users. Niche users also
showed much higher levels of engagement than generic users, which potentially will
generate higher levels of profits as social networking grows. The five forces analysis
concluded that the industry is an attractive one to enter if the entrant pursues a niche
strategy, can cope with strong supplier forces, and can effectively build a large as well as
highly engaged member base, thus generating very high traffic and profits.
Keywords: (five forces analysis, online communities, social networking)
ON MY HONOR, I HAVE NEITHER GIVEN NOR RECEIVED
UNAUTHORIZED AID ON THIS THESIS
Signature
ABSTRACT
HONOR CODE
1 INTRODUCTION
TABLE OF CONTENTS
1.1 History of Web 2.0 ....................................................................................... ..
11
111
1.2 Current Industry Growth................................................................................ 5
1.3 Niche vs. Generic Sites............ .................................................................. 8
2 LITERATURE REVIEW. .. . .......... ....... .......... ............ .................... ..................... 6
2.1 Social Network Analysis...... ....................................................................... 7
2.2 How Strangers Connect Online..................................................... 8
2.3 Reasons for Engaging................................................................ 10
2.4 Application of Five Forces ModeL................................................. 13
3 THEORETICAL FRAMEWORK...................................................... 15
3.1. The Five Forces Explained............................................................................. 17
3.2 Applying the ModeL...................................................................................... 19
3.3 Hypotheses................. ........................................................... 20
4 METHODOLOGY 21
4.1 Populations and Samples
4.2 Interview and Survey Design
4.3 Procedure
5 RESULTS
5.1 Sample One Data
5.2 Sample Two Data
6 DISCUSSION
6.1 Internet Advertising and User Engagement
6.2 CPM and CTR
6.3 User Engagement is Key
6.4 Implications for Hypotheses
6.5 Five Forces Analysis: Threat of Entry
21
23
24
24
28
29
37
37
38
39
24
45
6.5.1 Barriers to Entry
6.6 Intensity of Rivalry Among Existing Competitors
6.7 Threat of Substitutes
6.8 Bargaining Power of Buyers
6.9 Bargaining Power of Suppliers
6.9 Overall Analysis
7 CONCLUSION
APPENDIX A
APPENDIXB
APPENDIX C
APPENDIX D
SOURCES CONSULTED
46
49
50
51
52
55
57
58
59
62
63
64
LIST OF TABLES
5.1 Executives Responses to Interview Questions.............................. ... 29
6.1 Internet Advertising Basic Revenue Calculation................................ 39
LIST OF FIGURES
1.1 US ONLINE SOCIAL NETWORKING AD SPENDING ......................... 3
3.1 THE FIVE FORCES.. ......................................... ...................... ... 16
3.2 ONLINE SOCIAL NETWORKING INDUSTRY VALUE CHAIN........ .... 17
5.1 NICHE AND GENERIC USER SATISFACTION ................................ 30
5.2 PERCEIVED MEMBER CONCERN ................................................ 31
5.3 NICHE AND GENERIC USER HOURS P/WEEK ..... ....................... .... 31
5.4 NICHE AND GENERIC USE OF OTHER NETWORKS..... ................... 32
5.5 USER LOyALTy....................................................................... 33
5.6 USERS WHO WOULD JOIN A NEW NICHE NETWORK (%)........... ..... 33
5.7 PREFERED TIME ALLOCATION AFTER JOINING NEW NICHE ... ....... 34
5.8 CHANGE IN TOTAL TIME SPENT ON SOCIAL NETWORKING........... 35
5.9 CHANGE IN TIME SPENT ON NETWORKS AFTER JOINING A NEW 36
NICHE NETWORK (HOURS/WEEK) .................................................. .
6.1 US ONLINE ADVERTISING SPENDING......... ............................ .... 54
6.2 THE FIVE FORCES: ONLINE SOCIAL NETWORKING INDUSTRy...... 55
CHAPTER 1
INTRODUCTION
The internet is used by about 248 million people in North America and online
social networking plays a roll in the life of over 115 of Americans
l
.An online social
network is an electronic venue on the Internet for a community of people to interact with
each other. Common functions of a social networking site include "friending", "bloging",
private and public message sending, instant messaging, and sometimes more advanced
options such as music and video posting or even video conferencing
2
.The purpose of this
research is to analyze the competitive environment for profits within the online social
networking industry.
This research discovered that niche networks showed higher levels of user
engagement and loyalty, which makes sense due to the fact that niche networks target a
user's specific interests which have context in their everyday lives, driving them to use
the site with more frequency. The research also uncovered interesting insights from the
managers of online social networking companies that helped greatly in the industry
analysis chapter.
I "Online Social Networks, Virtual Communities, Enterprises, and Information Professionals-
Part 1. Past and Present." Information Today, Inc ..
http://www.infotoday.com/searcher/juI07/Reid Grey.shtml
2 "Kohut, Andrew. "Internet's Broader Role in Campaign 2008." People-Press. 11 Jan. 2008. Pew
Research Center. 23 Sept. 2008 <http://people-press.org/report!?pageid=I233>.
2
Online social networks fall into a category of web applications commonly
referred to as Web 2.0, or "the 2
nd
version of the internet" in which users not only
consume content, but produce and consume content produced by other users. These types
of websites like Wikipedia, MySpace, and Blogspot are described as being a form of
"online participatory culture,,3. However a similar yet more applicable term for this form
of web interaction that is used in this thesis is "user engagement".
Massively popular social networking sites like MySpace.com and Facebook.com
have realized extraordinary revenue gains (mostly from advertising revenue) in less than
five years. Facebook boasts 100 million active members and MySpace currently has 180
million members in total. Total US advertising spending allocated for online social
networks is estimated to reach $1.5 billion this year see figure x below. It was estimated
in June 2008 that MySpace gains about 230,000 users per day from all over the world
4
.
MySpace revenue is projected to top $500 million by the end of this year
5

3 Beer, David, and Roger Burrows. "Sociology and, of and in Web 2.0: Some Initial
Considerations." Socialogical Research Online 12, no. 5 (2007): 1-16.
www.socresonline.org.ukl12/5117.html
4 Sellers, Patricia (2006-09-04). "MySpace cowboys", Money, CNN.com.
5 Dignan, Larry. "Fox interactive turns annual profit." ZDnet. 8 Aug. 2007. 23 Sept. 2008
<http://blogs.zdnet.com/btll?p=5 899>.
FIGURE 1.1 - US ONLINE SOCIAL NETWORKING AD SPENDING
us Online Social Network SpendIng.
20062011 (mUUons and % change)

2010 S2AOO (19%)
2011 52.700 (13%)
Note: tndudes general SOcial neh'lOlt sites Where SOCial netWOfkmg is the
primary aCtiVity; sacial lIetWOlk offMngs from portals such a-s Google.
'mhoo! and MSN: niche socJ31 networks devoted to tI specIfic nobby or
Interest afIIJ mSf/(eter-spomored SOCial networks,' in till caseS. figures
Include Ortfifl(! advertising spendmg as well as Slte or ptofiJe-page
aevefopmem COStS, figlJres exdiJde tJser-generat(!d content Sites With
social nerworkmg features, eg YOUTube
Source: eMarkerfN, December 2007
Source: eMarketer. "Social Networking. /I 1- 7. www. eMarketer.com
Aside from the aggregate generic networks with member bases that rank in the
hundreds of millions, there exist smaller niche online social networks. As consumers
have become more comfortable with the idea of social networking and alienated or
annoyed by the larger networks, these smaller networks have risen in popularity6. User
specific networks for all types of people including musicians, students on the college
search, soldiers, and even carpenters have been created
7
.
Despite the global popularity of this industry there is very little scholarly research
on the topic. There exist bodies of literature on sociological theories defining social
networks and literature on how these networks exist on the Internet. Michael Porter, who
6 TechWatch. "Renegade Marketing's CEO Drew Neisser's Predictions for 2008."
www.techwatch.com/socialnetworking (accessed December 2, 2008).
7 "List of social networking websites." Wikipedia. 23 Sept. 2008. 23 Sept. 2008
<http://en.wikipedia.orglwikillist_oC social_ networkinL websites>.
3
4
specializes in business strategy, has written extensively on the competitive landscape of
various industries. There exists extensive literature on Porter's Five Competitive
Industry Forces and on how the Internet can affect an established industry. A handful of
case studies on small experimental online networks have been conducted. The following
research analyzes the competition for profits within the online social networking industry
using the theoretical framework of Michael Porter's Industry 5-Forces Competitive
Model.
The three most used and successful online social networks in the United States today
are MySpace, Facebook, and Bebo. The strategy of these networks has essentially been to
allow site membership to anyone with access to the internet and the desire to
communicate with others. There also exist smaller networks that cater to special interest
groups, these sites are called niche social networks and are a primary aspect of study in
this thesis. Members are offered the use of these sites for free, however are subjected to
viewing advertisements while the website charges companies a fee for this "ad space"
real estate on each webpage.
The industry of online social networking services is relatively new and there still
exists much potential for expansion. Currently, 37% of adult internet users engage in
social networking on a monthly basis and that percentage is expected to grow to 50% by
2011. Teens are even more engaged with 70% of the teen internet using population on
social networks 8. The industry is currently beginning to experience changes that will
8 eMarketer. "Social Networking." 1-7. www.eMarketer.com
5
affect the choices of many users as well as online social networking company managers.
Although these online networks are popular with millions of people around the world,
much information remains to be discovered on the topic. Will the rise in popUlarity of
social networking services and the demands of social networking users result in a shift in
industry profits from large generic networks to smaller more user specific niche networks
in the future? This important question remains to be answered and can be determined
through an analysis of the industry's competitive landscape.
The following Chapter reviews all relevant studies that have been conducted to
answer the question of why people spend so much time engaging in online social
networking activities and will look at the analytical model that this study will use which
is again discussed in Chapter 3. The methodology on how the study was conducted is
found in Chapter 4 and the data collected for the thesis is compiled in Chapter 5. The
bulk of the industry analysis as well as data interpretation is shown in Chapter 6 and
Chapter 7 offers a short conclusion. Chapter 2 starts by taking a step back from economic
theory and uses a sociological perspective as a way to develop a basic understanding of
online social networking.
CHAPTER 2
LITERA TURE REVIEW
It is important to first understand sociological and market factors as background
knowledge before analyzing the industry of online social networking websites. For this
thesis, a competitive analysis model known as the Five Forces Model was used to
establish a framework for analysis of this industry. The following will explain the topic in
detail.
People all around the world love online social networking, as seen by the
explosive growth and sheer numbers of site membership. It allows them to interact with
friends, family, and acquaintances, who live near and far. However, in order to
understand the competitive environment of online social networks as an industry it is
important to first understand the history behind them and why they have become so
popular among millions of consumers. In addition we must learn what are the main
drivers that compel users to engage on these sites, which can help us to interpret the
changes in their preferences between generic and niche sites. Besides learning about the
history of social networks and its consumers we must also examine Porter's Five Forces
Model and its use in analyzing the influence that the internet has on industry structures.
We then can identify the utility that this Five Forces Model has in analyzing the online
social networking industry.
6
7
The concept of social network analysis began developing in the mid- 1960's by
scholars Harrison White and Charles Tilly at the Harvard graduate Department of Social
Relations. The idea of social network analysis is to approach the study of community
with a mindset that acknowledges communities as relationships between people rather
than considering them as geographic entities.
The well-known sociologist Barry Wellman says "Communities are about social
relationships, whereas neighborhoods are about boundaries,,9. It is of crucial importance
that we understand this paradigm especially when analyzing communities in the modem
age when people can use long distance transportation, telephones, or the internet to
connect with people on the other side of the globe. This factor plays a role in the reason
why online social networks have become so ubiquitous. In defining community Wellman
concludes that people belong to a community depending on what things they provide
each other (whether it be emotional support, services, or goods) rather than on where they
liveIO. Interestingly, as social networking theorist Albert Baraba.si says, "The world is
shrinking because social links that would have died out a hundred years ago are kept
alive and can be easily activated". All this is because of technology and its ability to
connect us no matter where we are located geographically". This fact supports
Wellman's claims on the dwindling importance of local community interactions.
9 Wellman, Barry. Networks in the Global Village. Boulder: Westview Press, 1999. p347
10 Wellman, Barry. Networks in the Global Village. Boulder: Westview Press, 1999. p14
II Rosen, Christine. "Virtual Friendship and the New Narcissism." The New Atlantis: Journal of
Technology and Society 1, no. Summer 2007 (2007): 15-31.
8
In addition, Christine Rosen describes that within online communities we find that
community (or in this context group) membership is not through a neighborhood or
geographical reference point, but through personal interests and hobbies. Rosen states,
"Here [online], the old arbiters of community -geographic location, family, role ... have
little effect on relationships". This observation is supported by the presence of niche
online social networks like Ravalry.com (for knitters) and W A YN.com (for travelers) in
which a shared hobby or interest becomes the main requirement to join the site12. The
members of these interest based communities exchange valuable information, which
fosters a form of friendship among strangers.
In attempts to answer why it is that our society spends so much time engaging in
online social networking, sociologists have conducted studies that examine the nature of
the "friendships" created on online social networks as well as the other reasons that
individuals use these online services. In the article appropriately titled Virtual Friendship
and The New Narcissism, Rosen describes the desire of MySpace users to request another
member's friendship as an impulse to collect and display other users as trophies. This
impulse becomes "not an expression of the human need for companionship, but a
different need no less profound and pressing: the need for status,,13. This mildly pathetic
form of building status is related to the equally sad practice of "pimping" or embellishing
ones profile to make it more attractive and flashy. This is arguably a main reason for why
12 Rosen, Christine. "Virtual Friendship and the New Narcissism." The New Atlantis: Journal of
Technology and Society I, no. Summer 2007 (2007): 21.
Technology and Society I, no. Summer 2007 (2007): 20.
9
MySpace users interact on the website. As Rosen says, ultimately these sites provide us
with an outlet for "the timeless human desire for attention,,14.
On the other hand however, users of an equally well-known network called
Facebook use the site to "organize and manage" their network of offline friends and
connections. The functions and applications make this process of communication fun and
more importantly, easy. One student from Harvard (the campus from which Facebook
originated) said in an interview with The New Yorker, "it [Facebook] is a way of
maintaining a friendship without having to make any effort whatsoever". In some ways
these social networking tools become very useful for expanding and maintaining our
network of friends 15. It's just one more service technology like email or cell phones that
we can use to organize the social or professional parts of our lives. The bottom line
however, says Michael Birch (founder ofBebo.com the 3
rd
largest online social network)
is that social networking is downright "addictive". He says that "looking at other people's
pages becomes a slightly voyeuristic thrill" 16.
Generic sites like MySpace and Facebook have their own useful features that
consumers obviously enjoy. However a new type of niche social network has been
gaining recent popularity, which is a primary aspect of study in this thesis. Today there
Technology and Society 1, no. Summer 2007 (2007): 15.
Technology and Society 1, no. Summer 2007 (2007): 29
16 Delaney, Ian. "Be-boom or Bust - The Ingredients of a Social Network." eMarketer, July 12,
2006. www.eMarketer.com/bebo
10
are many of these niche sites that cater to diverse specific interest groups. There exist
groups for musicians, sports fans, business professionals, travelers, moms and even
vampires (gothic industrial culture). Several of these sites like Vampirefreaks.com and
Cafemom.com have large member bases, with 2 million and 1.2 million users
respectively17. There exist networks for all age groups including Club Penguin, a site that
allows children to interact with their chubby cute penguin avatars. There are also sites for
older individuals such as Eons.com, which is for baby boomers and has nearly a quarter
of a million members 18. As more niche sites have started to flourish marketers have
begun to realize the value not only of advertising on generic sites, but also the value of
advertising on niche networks. As more consumers spend more time surfing online social
networks rather than watching television, marketers have realized the need to act and,
interestingly, interact. Online social networks offer marketers an opportunity to actually
. . h 19
mteract WIt consumers .
The other key aspect to studying this industry is to look at the suppliers to the
industry. Advertising and marketing firms are the key customer group for online social
networks and the main form of revenue for online social networks comes from selling
advertising space and selling archived information about their user's preferences. Most
sites do not charge membership fees to their members. Corporations are excited about
17 "List of social networking websites." Wikipedia. 23 Sept. 2008. 23 Sept. 2008
<http://en.wikipedia.orglwikillist_of_ social_networking_ websites>.
18 E, Respondent. Interview by author. Colorado Springs, December 10,2008
19 DataMonitor. "Online Social Networking: A Potential Marketing Tool." 6.
www.datamonitor.com (accessed November 3, 2008).
11
social networking. A Procter & Gamble representative was quoted as saying that online
social networks are "going to be one giant living dynamic learning experience about
consumers,,20. The fact that OSN users are not concerned with privacy and obsessed with
telling everything about themselves it makes the websites great places for "data mining"
on consumer likes and dislikes which are in turn used to target advertising to users.
Facebook's specialized software automatically scans the users profile and discussions and
presents them with ads that might pertain to their interests
21
.
As mentioned OSN can are places where marketers can also interact with
consumers. In a 2007 study on building online communities based on certain products
gives insight into the possibilities of interaction among marketers and consumers. The
study concluded that individuals who engaged in sports and body building showed high
levels of online engagement when given the opportunity to interact on a social network
based on health supplements. The website was sponsored by a nutritional supplement
marketer and the users greatly enjoyed interacting with company representatives and
other consumers of the products
22
.
Technology and Society 1, no. Summer 2007 (2007): 18
21 Beer, David, and Roger Burrows. "Sociology and, of and in Web 2.0: Some Initial
www.socresonline.org.ukJI2/5117.html
22 Macaulay, Linda A., Kathy Keeling, Peter Mcgoldrick, George Dafoulas, Emmanouil
Kalaitzakis, and Debbie Keeling. "Co-evolving E-tail and On-line Communites:
Conceptual Framework." International Journal of Electronic Commerce 11, no. 4 (2007):
57-77.
12
The Five Forces Model as designed by Michael Porter is used to analyze the
online social networking industry in this thesis. In simple terms, this model expands the
paradigm in which we view an industry by considering five influential forces. The first
four forces are external forces that act inwards towards the industry and the fifth force
considers rivalry within the industry itself. As Porter states "the extended rivalry that
results from all five forces defines an industry's structure and shapes the nature of
competitive interaction within an industry". To avoid redundancy I will call to the
reader's attention that this model and how it is used in this particular study is explained in
more detail below in the Theoretical Framework and Methodology chapters.
Porter's model is very well known among academics and business professionals
alike. It has been used to great length and can be applied to the analysis of many
industries. Despite its age it is still proven relevant time after time in our ever changing
modem times. In a competitive strategy article written this year, Porter reasserts the
power of this model and gives detailed examples that discuss how each force affects the
industry. Some of the most useful information presented in this publication however are
the hints given on industry analysis. For example Porter describes that point of
conducting an industry analysis is to understand the dynamics of industry competition
and the main reasons for profitability. It can also be used to determine if the industry is
attractive to enter or not. In addition, he describes that a good analysis sees the industry
as a system, predicting the changes in one of the competitive forces and how such
13
changes will in tum affect each individual force. This advice is useful and has been
applied in this thesis
23
.
The literature base on the use of the Five Forces Model in the internet industry is
sparse. This may be due to the inherent differences in the structure of the business. Most
published work related to Five Forces Models and the internet have been to observe the
effects that the internet as a technology has had on certain industries rather than to
analyze an online industry. In 2001 Porter revived the Five Forces in "Strategy and the
Internet" as a way to verify the importance of internet technology, but also to insist that
the internet was not something that would change industry to a point that strategy would
no longer playa role. On the contrary, he states that attention to strategy is more
important than ever in the age of the internet. Porter concludes that the internet can have
an overall negative effect on industries. First, the internet reduces the size of the
geographic market by bringing any buyer or supplier from any part of the world
cyberspace. This increased proximity makes things better and worse, Porter states "The
great paradox of the internet is that its very benefits -making information widely
available; reducing the difficulty of purchasing, marketing, and distribution; allowing
buyers and sellers to find and transact business with one another more easily - also make
it more difficult for companies to capture those benefits as profits,,24.
23 Porter, Michael E. 2008. The Five Competitive Forces that Shape Strategy. Harvard business
review 86, no. I (01) : 80-84.
24 Porter, Michael E. 2008. The Five Competitive Forces that Shape Strategy. Harvard business
review 86, no. I (01) : 80-84.
14
Another study by Siaw and Yu (2004) valuated the effects the internet has on the
competitive environment in the banking industry using Porter's model. The study found
that the internet greatly shifts the competitive landscape of the industry, offering both
opportunities and threats to managers. With the advent of internet banking, there is no
longer a need for a physical location or as many employees. As a result it has become
much easier for smaller companies to enter the market and/or have access to clients that
are geographically more dispersed. This lowers the barriers to entry, which is one of the
Five Forces under analysis. Because internet features level the playing field, the branding
strategy that banks have followed is less effective today. Since all banks essentially offer
the same service, consumers can do business on the internet for half the cost
25
. The
internet in this situation has created a substitute for physical banking. The dynamic of
product and substitutes are another force in this model.
Although the research on strategy implementation in the world of traditional
bricks and mortar and even e-business is well documented and the body of literature on
the success of websites is developed, it is clear to see that there are gaps in the research in
regards to online social networking websites, particularly in the realm of strategic and
competitive analysis. It is necessary to research the five forces within the social
networking industry to see where the industry might be heading and decide if it is an
attractive industry to enter.
25 Siaw, Irene, and Alec Yu. "An Analysis of the Impact of the Internet on Competition in the
Bank Industry, using Porter's Five Forces Model." International Journal of Management 21,
no. 4 (2004): 515 and 517.
CHAPTER 3
THEORETICAL FRAMEWORK
The purpose of this research is to determine the competitive environment for
profits within the online social networking industry. A "Five Forces" industry analysis
was conducted as an attempt to determine the factors that influence the level of
competition for profits in this particular market. The five forces model was designed by
Michael E. Porter in 1979. When first introduced in the Harvard Business Review that
year, the reception was tremendous and started a revolution on the topic of strategy
within the business community. The model is used to determine the competition for
profits within an industry. The following describes each of the five forces, then in the
Chapter (discussion), each force is analyzed by interpreting a collection of industry data.
The Five Forces of Competition
Each of the five competitive forces influence the dynamics of an industry.
Depending on the relative strength and weakness of each force we can determine the ease
with which various industry players can obtain profits. Four of the five forces that
influence the industry come from outside entities that "surround" the industry including
the buyers and suppliers. The fifth force comes from within the industry itself and has to
do with the rivalry between the industry players. This is represented in figure 3.1 as seen
below. Since some of the five forces come from within the industry value chain, thus it is
15
16
also useful to have a look at figure 3.2. The following presents and describes each of the
five forces individually.
FIGURE 3.1 - THE FIVE FORCES
The Five Forces That Shape Industry Competition
Bargaining
PoWer of
Suppll ....
Thnlllt
of New
Entrants
Threat of
Substitute
Products or
Service.
Bargaining
~ I o f
Buy ....
Source: Porter, Michael E. . Competitive Strategy: Techniques for Analyzing
Industries and Competitors. New York: The Free Press, 1980.
FIGURE 3.2 -ONLINE SOCIAL NETWORKING INDUSTRY VALUE CHAIN
I
Corporations
--
Pushing
Online
Advertising
I
I
r
Online
Advertising
Marketplace
Q
c.
j
C)

Online
Social
Networking
Industry
Force 1: Threat of New Entrants

z
_.
n
:r
(I)

Social
Networking
Members
17
Threat of new entrants to the industry is a crucial part of the model that studies the
safety of industry profits in the hands of the existing players. Usually, a highly profitable
industry attracts much attention, thus the number of already established and start-up
companies trying to enter increases. The factors that deter this entrance are of course the
barriers to entry. Porter describes six main barriers (listed in Appendix A) that can deter
smaller firms from entry or can be of minor importance to a larger company with more
resources. Porter insists that "it is the threat of the entry not whether entry actually
occurs, that holds down profitability,,26.
26 Porter, Michael E .. Competitive Strategy: Techniques for Analyzing Industries and
Competitors. New York: The Free Press, 1980.
18
Force 2: Intensity of Rivalry Among Existing Competitors
While the other four forces listed above are often overlooked, the rivalry among
competitors usually gets the most attention by strategists. Innovation, marketing, and
price are just examples of arenas in which firms can compete for industry profits. The
profits are diminished depending on the ferocity and basis of the competition between the
firms. The more rivalry, the lower the profits. Lack of product differentiation and price
sensitivity of buyers for example can result in price-based competition, which usually
results in diminishing revenues and thus profits to the benefit of the buyer.
Force 3: Threat of Substitutes
A substitute product from another industry can be a factor that threatens the
profitability or even existence of the industry. The market for express mail services were
affected by the popular use of email because of its ease of use and thus massively
diminished the profits of the now dubbed "snail mail" services industry.
Force 4: Bargaining Power of Buyers
Buyers of the industry's product are on the opposite side of suppliers in relation to
the industry. Buyers are in a position of power if there are a few strong buyer groups that
can demand higher quality (increasing costs of the industry) or that show price sensitivity
and thus influence drops in price (diminishing industry profits). Buyers also become
powerful when switching costs for a product or service are low and the options for
switching are numerous. Buyers however, are weak when the product is one of a kind or
hard to replicate. An example would be the players in the personal computer industry
who must buy operating systems from Microsoft due to its general Ubiquity. Buyers and
19
suppliers can also "integrate" backward or forward along the value chain to enter new
industries. This encroaches on the profits of the industry and relates in the "threat of new
entrants" force depending on how far forward or backward they intend to integrate.
Force 5: Bargaining Power of Suppliers
The bargaining power of suppliers is studied to determine how much leverage a
supplier has over the industry players in transactions. If the industry has a single
monopoly supplying a crucial input and the supplier has the ability to raise prices or shift
its costs to the participants then the power of suppliers is determined as strong. On the
other hand, if there exists a diverse array of suppliers and the industry players have a
choice between where they source their input materials. The cheese making industry is an
example because the basic input (milk) is widely available. Thus, in this situation,
industry players have more power to negotiate and we can determine the power of
suppliers to be a weak force.
Applying the Five Forces Model
As stated, an industry analysis using the five forces model on the online social
networking industry or a purely internet based industry has not been conducted to date.
Thus clarification is required to define which parties contribute to each of the five forces.
Due to the commonly used strategy of using advertising revenue to support the site
financially, online social networking services are usually free of charge to the consumer.
Meanwhile advertisers buy space on the web pages that display advertisements. By
viewing the online social network as a venue for these two groups to connect rather than
their individual contributions to the site, we can determine that the users are the "buyers"
(although the usage is free) and the advertisers are the suppliers in this digital
environment. The price the user pays to visit the site is the cost of being shown
advertisements.
From this model, four hypotheses for the analysis can be inferred. This thesis
attempts to find support in favor of the following hypotheses.
20
HI: Niche site users are more engaged and have a higher degree of loyalty to their niche
networks.
H2: Generic site users are likely to switch to a niche network if they were to find one that
interests them.
H3: The creation of niche networks will expand the industry and increase overall industry
revenue.
H4: Generic sites could lose market share as the industry expands.
H5: Advertisers prefer placing advertising on niche networks rather than generic
networks.
CHAPTER 4
METHODOLOGY
This study used the five forces model as a basis for an industry analysis that was
both qualitative and quantitative. Interviews with executives of five online social
networking companies were performed in order to gather data used to determine factors
that may influence or contribute to the strength or weakness of each of the five forces.
Surveys were distributed to users of the sample networks to obtain additional information
on buyer preferences. Aside from the interviews and surveys, quantitative data was
collected from industry publications to help statistically support the determination of each
force's strength or weakness.
Populations and Samples
This study used samples of two separate populations to collect data. According to
Porter (1980), determining the population and adequately defining as well as sizing the
industry, is a crucial part the model's analysis. The first population is online social
networking companies (the industry players), and the second population is the users of
the online social networks. In the populations of social networking companies and
members there are two sub-populations that are defined in this study as generic networks
and niche networks.
21
22
Essentially, there are two types of online social networks; generic and niche. The
generic sites are usually sites that connect people based on little pre-requisite interests
and usually by geographic area. On the other hand, niche networks have a more
homogenous user base that have a certain pre-determined interest or affiliation that serves
as the basis for the communication and networking relationships27.
Sample One
The population for the online social networking companies for this study was
defined as websites with member bases of at least 10 million members for generic sites
and at least 750,000 members for niche sites. Dozens of such sites exist. The population
was also defined as online social networks that had similar features that aid in unique
user interactions based on the standard features like messaging, friending, picture
uploading and blogging. This targeted the bulk of the major industry players. A random
sample of 14 generic and 14 niche sites was drawn from this population and used as
sample one, a full list of these websites is available in Appendix C.
Sample Two
The second sample was selected by randomly selecting users of four generic
networks and four niche networks from Sample One. A total of eight networks were
selected due to time constraints on data collection. The following are market leading
generic networks that were selected for this sample; Myspace.com, Facebook.com,
27 AdWeek. "Niche Social Networks Offer Target Practice." 3. www.adweek.com/social
23
Bebo.com, and MyYearbook.com. The niche networks selected were WA YN.com (for
travelers), Cafemom.com (for mothers), LinkedIn.com (for business professionals), and
Care2.com (for environmental activists). Hundreds of survey requests were sent to users
from each site and about 10 responses from each site were received resulting in 86
completed surveys. The responses were used for quantitative data analysis.
Interview and Survey Design
The format of interviews, survey questions, and sample groups were designed
based on Porter's techniques for analyzing industries. Below in Appendix A lists each of
the determinant factors used to define the strength of each of the five forces. Each survey
question aimed to help determine the individual strengths of the forces. For several
aspects of these factors the strength was easily inferred with basic data from published
articles. Most factors however, required clarification of ambiguities and thus were
incorporated into the interviews and surveys. For example, factors such as technological
barriers to entry were obvious due to common knowledge concerning the internet,
whereas switching costs for buyers was more ambiguous. It appears at first glance that
switching costs are zero, however it is possible that loyalty to the website and the number
of friends a user possesses increase switching costs. This question was one addressed
with the surveys.
Procedure
Contact information for the 28 online social networking companies was gathered
and a request for interview was issued to each one via email and! or phone to collect data
24
for Sample One. At the time of contact every company was solicited with the following
elevator pitch.
My name is James I am a senior economics major at The Colorado College in
Colorado Springs. I am conducting research for my senior thesis. I will be doing a Five
Forces Industry Analysis of the Online Social Networking Services Industry. I would like to
conduct a short interview with a member of the executive team. The interview can be
conducted via skype or telephone. The questions are attached to make the interview easier.
Thank you for your time.
Only two companies responded to the request, however useful interviews were
conducted with a knowledgeable executive representative from each company. After
explaining the purpose of the research and Porter's model, interviewees were asked a
series of questions designed to aid in determining the strength or weakness of each of the
five forces. The method for designing these questions is described below and in
Appendix A. As stated, Porter's model approaches industry analysis from multiple
perspectives from within the industry value chain. Appendix D illustrates the sources
from which analytical data can be gathered.
To collect data for sample two a personal profile with the name "James Fry" was
created on each of the selected generic and niche networks. Members were selected at
random from the list of "online now" users or by searching for common male and female
names like John or Mary. Users were sent either a message or a friend request containing
a short introduction message as seen in the example below.
I'm James Fry, I am an economics major at Colorado College. I am doing researchfor my
thesis, interested in knowing what you think about Care2.com. Be part of an important
analysis, by taking my quick survey. Thanks! www.survevmonkey.com
25
Interviews
The questions asked during interviews were designed to ask the company
executive about the various aspects of the market. The initial questions asked were about
the "threat of new entrants", which determined the difficulty that new companies faced in
obtaining finances, technology, and members. The second series of questions was to
collect data on loyalty and member input (identical questions are seen in the survey), a
question about economies of scale was also asked. The third series related to the
relationship that networks have with advertisers and asked about the number of ads and
ad companies served, but most importantly questions about negotiations with advertisers
were also asked. Finally, the interviewee was asked about the relations with their
competitors (other online social networks). These questions are significant because they
are used to gauge the perceptions that the industry players have regarding the forces that
affect their industry, which is part of building a five forces analysis.
Survey
The surveys for all networks (including generic and niche) were identical. After
the respondent clicked the link and was transferred to the survey he was presented with
the first page of the survey, which displayed the explanatory paragraph shown below.
Hi there, thanks for deciding to take my survey.
As you know, WA YN.com is an Online Social Network. A place where you can connect with
your community online.
My name is James Fry, / am a senior at The Colorado College. The results of this survey
will be used to collect data for my senior thesis on internet based communities. / don't ask
for your name thus, you don't have to worry. Your information is kept private.
Thanks again for your help.
26
The second page of the survey (see Appendix B) presented a series of general
uncomplicated questions. Question 1, 3, and 8 were designed to help gauge the potential
for the existence of switching costs among members. Question 1 asks the respondent to
explain their level of satisfaction with the selected network. Question 3 gauges to what
degree the member feels integrated in the community by asking how much they think the
management is concerned with the personal opinion of the members. The 8
th
question
asks the respondent to gauge their level of loyalty to the network. These three questions
all used a five point "likert scale".
Questions 2 and 5 were extra questions that were not used in the data
interpretation section. Question 4 which asks the number of hours per week the user
spends on the network was highly useful in the analysis of user engagement, the
importance of which is described below. Question 6 was a probing question that
attempted to discover flaws with generic network by asking to describe something they
disliked about the network. Question 7 required the user to list which networks they used
in order to determine if niche network users still engage on generic networks. Finally
question 9 simply asks if the respondent has any hobbies. If the answer to 9 was yes then
page three was presented and more questions were asked. If the respondent indicated that
they would join a niche network that shared their common interest (on page three) they
were directed to page four. Here the questions became more complex. Question 4.1 asked
if they would spend more time on their original old network, the new network (that they
agreed to join in 3.2), or both equally. Then in question 4.2 the subject was asked if their
total time using social networking would increase or remain unchanged from what they
answered in question 2.4. If the respondent answered "increase" for 4.2 then the last
question was presented.
27
These questions from pages 3 and 4 were very important in determining the
possible user engagement that would result from the proliferation of new niche networks.
These questions attempted to discover if the total industry revenue would be divided
among the players or if the market would be expanded.
CHAPTERS
RESULTS
The interviews conducted with sample one provided excellent information on the
perceptions of industry executives, but yielded little quantitative data thus, sample one
information will be briefly mentioned in this section with a full examination appearing in
the discussion (Chapter 6). However, an initial analysis of the data collected from sample
two provides insight into this experimental sample and the population of online social
networking users. Out of 86 surveys from eight different networks a myriad of data was
collected and used to help prove the hypotheses listed in Chapter 3. One data entry was
removed from the study because the respondent mentioned that he was an employee of
the network of study thus making him a strongly biased respondent. The following shows
the data tables and graphs generated from the responses to each question.
Sample One Data
From the sample of 28 online social networking companies only five different
representatives were available for an interview. One respondent gave several answers but
then decided not to continue the interview, yet gave some useful data. Other respondents
did not have ample time to complete the question set thus some questions were left out.
Due to these interview mishaps and the fact that the number of interviews was low, there
was not enough data to create a compelling quantitative analysis, thus most information
gathered via interviews will be interpreted in a qualitative manner. The results of these
28
29
questions are organized in table 5.1 below, the response to each question is shown.
However, the true value of information gathered can only be analyzed qualitatively and
will appear in the discussion section.
TABLE 5.1- OSN EXECUTIVES RESPONSES TO INTERVIEW QUESTIONS
Respondent A B C 0 E
Question
la. New Entrant: Ease of entry easy very difficult easy easy very easy
2. Ease of obtaining
2a. financing difficult very difficult difficult neutral very difficult
2b. tech easy easy neutral easy very easy
2c. members difficult difficult neutral easy difficult
3. Perceived member loyalty very N/A healthy N/A die hard
loyal loyalty
4a. Use multiple networks yes N/A yes yes yes
4b. Concern with 4a low N/A low low low
5. Member influence on medium N/A high N/A high
management
6. Negotiations: leverage with medium N/A low medium medium
advertisers
7. Level of industry healthy N/A healthy N/A relatively
competition tame
8. Ability: prevent stealing of N/A N/A average average N/A
market share
9. Substitutes yes N/A yes N/A yes
Sample Two Data
As stated, question 1 measured the perceived satisfaction that members had with
their respective networks. The graph below depicts difference in the responses between
the niche (dark color) and generic (light color) networks. Members of niche networks
said they were more satisfied in general than users of generic networks. Of all niche
users surveyed, 46% said they were "very satisfied" whereas only 26% of all generic
members gave the same response. For niche networks, 19% of users were "extremely
satisfied" while only 11 % of generic users showed this level of maximum satisfaction
and no niche indicated that they were "not satisfied".
FIGURE 5.1 - NICHE AND GENERIC USER
SA TISF ACTION
extreme
very s;ltisfi ed
satisfi ed
.lliuost
not s.ltistled
Niche
... Gelleric
30
Results for question 3, which asked users their perceptions on how concerned
their network was with the input of members (found in figure 5.2). On average, many
more niche users felt that their network' s level of concern was higher than that of generic
users. In fact , the level to which generic users thought their network expressed "no
concern" or "slight concern" was higher than that of niche network users.
31
FIGURE 5.2 - PERCEIVED MEMBER CONCERN
top pri ority
vel)' COllcel'llE'd
cOllct' rtlE'd
... Gt'Ilt'ric
s light COli Ct' rtl
not COli ce I'll NI
0 .00% 1
Data from question 4, represented in figure 5.3, asked how many hours per week
the network was used showed that niche users are engaged on the websites for two hours
more per week on average than the users of generic sites. We can assume that the
engagement on LinkedIn.com is low because it is a network for business professionals
and that particular community values efficient use of time and brevity within
interpersonal interactions.
FIGURE 5.3 - NICHE vs GENERIC USER HOURS P/WEEK
em:' 2
Lillkt> dlll
ClfE' 1\1 () III
Vv'AYN
Nidw TOTAL
f\l yYearbok
Fact>book
MySpacE'
GE'IIE'ri c TOTAL

J\' r
o 5
Avt'I'agE's
.Ii Hours p/ wt'E'k
10 15
32
Although it was not a primary metric analyzed in this study, results from question
7 were used as supportive data. Users were asked which networks they use other than the
network with which they had received the survey solicitation. The responses showed that
niche network users participated on more "other networks" than generic users. (see
Figure 5.4).
FIGURE 5.4 - NICHE AND GENERIC USE OF OTHER NETWORKS
Niche Users
Other N khe Sites
"" Other Generic Sites
Gellerk USE'l'S
0% 20% 40% 60%) 80% 100%
Responses from question 8 again showed a strong correlation between niche users
and level of loyalty. Within niche networks users who stated they there "very loyal" and
"die hard fans" of their network were 11 % and 7.7% higher respectively than their
generic counter parts. Meanwhile the degrees to which generic users stated they were
"somewhat loyal" or "not loyal" were 8.5% and 7.1 % higher respectively than niche
users. There exists a higher degree of loyalty to niche networks among niche users.
FIGURE 5.5 - USER LOYALTY
Very Loyal
'"' Generic
Not 10Y;11
0.0% llHI% 20JI% 30.0% 40.0%
Question 3.2 asked if the user would join a new "niche" network that had their
listed main interest as the network theme. The following data represented in Figure 5.6
shows the percentages of respondents who answered yes to this question and thus
continued on to answer questions on pages 4 and 5.
FIGURE 5.6 - USERS WHO WOULD JOIN A NEW NICHE NETWORK (%)
Care 2
Linkedln
Catel\lolll
WAYN
Niche TOTAL
M,vYearbok
Farebook
MySp;lce '"'_ . __ .... "' _"'"""' - _" _ '!"'I ... . ....
Generic TOTAL
o 0.2 0.4
AveJ,;\ge%
",Ok
0 .6 0.8
33
This figure shows that on average 65.6% of niche users agreed to join the new network
whereas only 53.7% of generic users agreed to do the same.
34
Responses form question 4.1 which site they would use more often once they
joined the new niche network that was tailored to their interest. The users could choose to
spend more time on their original network (old), the new niche network (new), or on both
equally. As shown in figure 5.7, most users admitted that they would spend time on both
networks and that more users would spend more time on their original network than on
the new niche network. We also see however that 15% of generic users would spend
more time on the niche whereas only 2.5% of user who already have a niche would
continue to use their original niche site.
FIGURE 5.7 - PREFERED TIME ALLOCATION AFTER JOINING NEW NICHE
BOTH
New I
Niche
... Generic
OLD
O.OO(Yo 2 0 . 0 0 1 } ~ 40.00% 80.00%
Question 4.2 asked users if their total time spent on social networking changed if
they joined the new niche network. The majority of users responded that there would be
no change in their total hours spent on online social networking sites (see Figure 5.8).
35
However, 41 % of generic users and 36% of niche users said that their total time would
increase. Respondents who selected "increase" for this question were directed to page 5
while users indicating "no change" were finished with the survey.
FIGURE 5.8 - CHANGE IN TOTAL TIME SPENT ON SOCIAL NETWORKING
No Challge
Illcrease
/
..,
;
.. ,
;
0.00% 20.00% 40.0 0 (YCI ()o.o 0 0/(, 80.clO%
-Niche
... Generic
Question 5.1, the final question of the survey, asked the remaining respondents to
specify further the division of time between the two online social networks (the original
network and the new niche network) they spent in terms of hours per week. There were
only 17 respondents who reached this question. Below in figure 5.9 we notice that,
despite the fact that the total social networking time of generic users increased overall,
data showed that they would use their old network 30 minutes less on average after
joining a new niche network. Those same users showed on average that they would use
the new niche network for about three hours per week. Meanwhile niche users actually
showed an increase in the use of their original niche network of 1.25 hours per week on
average and an equal increase in the use of the new niche.
FIGURE 5.9 - CHANGE IN TIME SPENT ON NETWORKS AFTER JOINING A
NEW NICHE
Niche
N.,\v i r h ~
iii G.,n"l"ic
OLD
-1 o
36
As seen in the above data, a great deal of exciting data was collected via the
surveys and interviews. The following chapter discusses the significance of this data and
uses it to complete the five forces analysis of the online social networking industry.
CHAPTER 6
DISCUSSION
This section holds a discussion of the results and the full Five Forces analysis of
the online social networking industry. First, here are some things to keep in mind about
this study. This research study is not comprehensive in terms of total online social
networking user information, unfortunately time constraints only allowed for a small
sample of the online social networking users population to be surveyed. On the other
hand, the interviews from the social networking company executives although few were
highly valuable to this study and can be trusted as valid perspectives on this industry.
Before a detailed analysis of the data, however, I must clarify the importance of user
engagement and describe the primary revue model used in this industry.
Internet Advertising and User Engagement
In essence an online social network follows the same business model as a
newspaper, it provides content (often times for free) and its readers are exposed to
advertising which is paid for by companies promoting products. The larger the user base,
the larger the potential revenue can be. Online social networks offer users a free venue to
interact with content and just like a newspaper, slots for advertisements are sold to
generate revenue. When growing an online social network, attracting as many new
members is very important, but the more important key to making the most revenue is
37
38
getting members to come back to the site and use it as much as possible
28
. The simple
reason for this relates to the structure of the revenue model. When an internet user sees an
advertisement one time, it is called an impression. In the internet advertising industry a
key term is CPM, which stands for cost per mile and means the cost of 1000 unique
impressions. This is one common way that advertising revenue is counted. For example,
one respondent indicated that his CPM averages about $6.85, which is quite good. The
going rate for 1000 impressions is often determined (among other metrics) with another
commonly used measurement called CTR or "click through rate" which means the ratio
of how many times the ad is viewed divided by how many times viewers clicked on the
ad and followed through with a certain action (such as a purchase). The higher click
through rate a website has on its ads, the higher price they can command for CPM
29
. So,
this revenue structure makes the online social networking manager very concerned with
how many times the users are viewing the pages. As a result, creating a product that is
attractive, functional, and engaging becomes as important as attracting new members
3o
.
Table 6.1 below compares two example revenue calculations with differences in user
engagement, which is represented by "page-views".
28 0, Respondent. Interview by author. Colorado Springs, November 25, 2008
29 A, Respondent. Interview by author. Colorado Springs, October 27,2008.
30 C, Respondent. Interview by author. Colorado Springs, November 20, 2008
TABLE 6.1 - INTERNET ADVERTISING BASIC REVENUE CALCULATION
Company A Company B
Members 2,000,000 1,200,000
Pageviews/Member 19.00 38.00
Pageviews 38,000,000 45,600,000
Ads/Page 6 6
Impressions 228
i
OOO;000 273,600,000
"Miles" 228,000.' . 273,600
CPM $2.00 $2.00
Revenue $456,000 $547,200
Source: A, Respondent. Interview by author. Colorado Springs, October 27,
2008.
39
The above diagram shows the revenue for Company B as significantly higher than
that of Company A even though the member count is significantly lower, and the ads per
page and CPM values are held constant. This is because the level of user engagement
with the members of Company B is higher, possibly meaning Company B provides a
more enticing product. So, it goes without saying that user engagement is of great
importance. Any way that an online company can excite or even "addict" users can
potentially make for great revenue gains with this revenue modee I.
31 B, Respondent. Interview by author. Colorado Springs, November 11, 2008
40
Implications
For this thesis I have one overall goal, which is to conduct a five forces analysis
of the online social networking industry. To do this I have formulated several supporting
hypotheses relating to the two parts of this market, which are the generic and niche online
social networks. The main question of this study asks if a shift in industry profits from
large generic networks to smaller more user specific niche networks will occur due to the
continued rise in popularity of social media and the new high level of consumer interest
in niche networks. The following examining the various aspects of this question by
interpreting implications of the above data.
HI
The first supporting hypothesis assumes that niche users are more engaged and
have higher degrees of loyalty than generic users. The measure used in the sample two
surveys for user engagement was simply hours per week. Figure 5.3 shows that the
average hours per week for niche networks was 1 hour higher. Considering that the data
from Linkedln.com brought this average down greatly we can still say with relative
confidence that niche network users are more engaged than generic users. This most
likely has to do with the fact that niche networks share a common interest that plays a
large role in the user's life, which goes beyond simple online friendships. This
assumption is further supported by data from Figure 5.5, which shows that the values for
"loyal", "very loyal", and "die hard fan" are consistently higher for niche networks than
for generic networks. Since we know from Figure 5.4 that more niche users report using
mUltiple generic and niche networks we can infer that niche users are more engaged in
social networking in general than generic users. Unfortunately there is not enough data
from sample one to help reach a conclusion on this hypothesis. However, sample two
offers sufficient data to support this hypothesis. The second hypothesis assumes that
generic users would like niche networks if they knew about them.
H2
41
The survey data in Figure 5.6 shows that if more than 50% of generic users found
a niche network that catered to their primary interest or hobby they would become a
network member. Data from Facebook (generic network) users showed the lowest
tendency to join a new network out of all the networks surveyed. Most likely this is due
to the fact that Facebook management is focused on delivering a high quality well
functioning product which is expressed in their generally more aesthetically pleasing web
design when compared to other generic networks
32
. Respondent E offered an interesting
perspective on this topic. Respondent E gave an example in which he compared a
newspaper and a magazine and named all the categories a newspaper holds such as
sports, classifieds, weather, and business. He said that "a newspaper is a mile long and an
inch deep while a magazine is the opposite, it's an inch wide and a mile deep". In this
analogy, the length is the category and the depth is the detail of the content. The
respondent continued to compare the generic social networks to newspapers because they
serve many categories of people and the niche sites are like magazines because it caters
to a specific interest. The importance of this analogy as Respondent E said that people
whatever is a mile long and inches deep as a directory to find the media that is inches
32 A, Respondent. Interview by author. Colorado Springs, October 27, 2008.
42
wide and miles deep. Essentially, the generic sites can be used for a while to find
interesting categories but once the niche sites are found (and if they are compelling) they
can become the center focus
33
. This perspective is supported by the comments by
Respondent A who said that MySpace is actually looking at becoming a type of web
portal for other online social networks. He says that this is because not all MySpace
members interact with each other, "they oftentimes interact on the basis of interest
groups, which can be up to half a million strong,,34. For the purpose of this study this data
gives us enough reason to support H2.
H3
The third assumption about this industry predicts that the presence of niche
networks in the industry will expand the total "industry pie" or the total available profits.
To test for this, the questions 4.1,4.2, and 5.1 were asked. Figure 5.7 on the bars labeled
"New"shows that generic users who stated they would join a new niche network would
spend more time on that new niche than the niche users presented with the same
opportunity. 30% of generic users and 2.5% of niche users said they would dedicate more
time to the new niche network. This could relate to the fact that niche users already
belong to a niche that they are loyal to. The data from this question only tells us that the
market has the potential to be divided among the niche and generic sectors. Question 4.2
however addresses the allocation of the division of time spent on the two networks.
33 E, Respondent. Interview by author. Colorado Springs, December 10, 2008
34 A, Respondent. Interview by author. Colorado Springs, October 27, 2008.
43
Figure 5.8 illustrates that the majority (56% of generic and 64% of niche) users
would not spend extra time on online social networking after joining the new niche. This
means that the majority of the market will not expand with the proliferation of niche
networks. This could mean that as niche networks appear and gain members, the industry
revenue pie could remain fixed and become more equally divided. On the other hand, a
significant portion of the users (44% of generic and 36% of niche) surveyed claimed that
their total time spent using online social networks would increase indicating that the total
revenue pie has potential to expand as more total hours overall are spent using the
industry services. However, these metrics only gauge demand side changes, which do not
dictate the amount of revenue available. In this model, the supply side (advertising
companies) provide revenue. Respondent D when asked about his concerns of other
companies stealing his market share noted that there are always two sides to this
equation. He says that stealing members is easy, "whoever offers a better product will
engage more users". However, he said, "breaking into the advertiser's budgets is very
difficult". The point here is that the advertising budgets are fixed pies determined
completely by corporations and marketers and a new network must offer a very high level
of engagement to attract advertisers
35
. If user engagement overall does expand in the
industry there may be a lag in time before the ad budgets are adapted and revenue is
added to the total pie. Due to the above discussion, we do not have enough evidence to
support H3.
35 0, Respondent. Interview by author. Colorado Springs, November 25, 2008
44
H4
The fourth supporting hypothesis simply assumes the possibility of generic sites
losing market share as the industry expands. As discussed in the above paragraph, Figure
5.7 shows that some generic users will have a tendency to spend a portion of their time on
a new niche network ifit interests and engages them. The data in Figure 5.9 also shows
that a portion (however small) of generic users would spend less time on their old generic
site when they found a niche that they liked. These observations were confirmed by
Respondent D who said "there will be a share oftime lost to niche sites". He continued to
say that "niches will take away from the total advertising revenue pie, however, in terms
of users, generic sites will still continue to gain new users as the industry user base
grows,,36. Because of this we can support H4.
H5
This hypothesis assumes that advertisers prefer advertising on niche networks.
This is a short and simple hypothesis that is easily proven but was a key part of the main
question of this thesis. Essentially, the advantage of a niche network is that it attracts a
specific group of people, whether it is by family role, occupation, or interest. Due to the
homogeneity ofthe community, advertisers know ahead of time which demographic
group they will be targeting without the risk of showing their targeted ad to potentially
uninterested users. During an interview, Respondent D confirmed that advertisers
obviously like niche networks when they want to effectively run a targeted ad campaign.
However he did add as a caveat that -'in order to attract the advertisers you need to have
36 0 , Respondent. Interview by author. Colorado Springs, November 25, 2008
45
very high traffic" on your site. Respondent C (a niche network executive), when asked
about his bargaining power with advertisers noted that his company's strength was the
demographic of the site. The given evidence allows us to support H5.
The above hypotheses were chosen before I embarked on the data collection
portion of the project. Thus, new information gathered during the interviews with sample
one rendered the above questions insufficient for conducting the full industry analysis. As
a result, several additional aspects of the industry environment will be discussed in
conjunction with the following five forces analysis. The following examines each of the
five competitive forces individually and then finally draws an overall conclusion.
Five Forces Analysis: Force 1 - Threat of New Entrants
When companies enter an industry they obviously want to gain market share and
make a profit. In doing so these new entrants can often bid down prices and reduce the
profitability of the overall industry37. There are several major barriers to entry covered
below and the "height" of these barriers determines the strength or weakness of the threat
this force possesses.
Barriers to Entry - Economies of Scale
During correspondence with Respondent B I soon learned an industry term used
in online social networking called .economies of users, which is the industry specific
46
version of economies of scale. When a network achieves economies of users it costs
marginally less and less to attract each new user in terms of marketing efforts. This is
usually achieved when a viral marketing strategy is implemented meaning the users begin
to fuel the growth of membership by spreading the news among friends. Respondent E
noted that an important aspect of viral marketing is encouraging users to excite their
friends about the social network. He said that "virality is a friendship engine; it
encourages users to find others like themselves,,38. Economies of users are difficult to
achieve because it requires a "critical mass" point where enough users are excited about
the website brand that the website grows organically and growth becomes user driven
39
.
Product Differentiation
The differentiation of products is a significant barrier to entry within this industry.
In essence, the generic network sector of the industry is almost as large as possible by the
large existing players who have started expanding (some very successfully) into
international markets
4o
. While the niche network sector still offers opportunities for entry
the entrant would need to find an unfilled niche that has a high potential user base.
Competing with another site that already has a significant stake in the niche can be
difficult for several reasons. Respondent A simply says that "there is room in the space
for one or two players, but not three". When using the newspaper analogy, Respondent E
explained that the niche has to have a large potential user base (a few million at least) to
40 eMarketer. "Social Networking." 1-7. www.eMarketer.com
47
be successful as a business. This is because if there is not a large enough base it will not
be possible to generate enough advertising dollars to make a significant profit
41
. This
same respondent, who operates a niche network with 755,000 users, commented that he
had seen many smaller sites trying to "poach" his members, but expressed little to no
concern over this issue.
Capital Requirements
Four of five respondents of sample one ranked the ability for entrants to obtain
financing as difficult (see Table 5.1). The only reason Respondent D ranked it as neutral
was because he (like the other respondents) had a dual answer. Respondents noted that at
the beginning it is easy to get seed financing because the costs of start up are low.
Designing a website and hiring people with the desired skill set are not costly. Even
gaining a member base of a few thousand people might not be difficult, however
Respondents C, D, and E said that raising substantial capital to run the website as a
successful company is more difficult. This is because, as Respondent C noted "it is hard
to generate enough revenues to get investors excited,,42. Not to mention, as respondent C
said, "Weare in tough economic times these days, financing is harder to corne by,,43.
Switching Costs
Anther barrier to entry to consider is the switching costs of buyers. In this
industry, there are almost always no costs to the buyers (social networking users). Since
there are no fees associated with the use of all social networks the cost of switching is not
42 C, Respondent. Interview by author. Colorado Springs, November 20, 2008
43 D, Respondent. Interview by author. Colorado Springs, November 25, 2008
48
monetary. However, the cost of leaving a network could be great depending on how
many friends a user has on their frequented network. The switching cost to a user is the
necessity to leave their friend group behind and either build a new network or bring their
network with them to the new site, which is unlikely to happen. This barrier is relatively
high.
Access to Distribution Channels
This barrier to entry has two aspects. The first being the distribution channels in
the traditional sense, which in this case is the internet. It goes without saying that these
distribution channels are wide open for the company as well as its users. The second
aspect however applies, however, is industry specific. As discussed above, since
advertising revenue is the main source of income, access is need to the "Revenue
Distribution Channel". As discussed above, it is very difficult for new networks to get
into the budgets of advertisers. This presents a very high barrier to entry.
These four barriers to entry are ranked as significant. There are several other
barriers to entry that were not covered because they are either small or do not exist.
Buyer's switching costs for example practically do not exist in this market. Users can
switch to any network whenever they want because most of them pay nothing to use the
services. Access to technology is easy because it is widely available and there are
essentially government restrictions or patents that apply in the market. Due to the above
analysis I determined that new entrants do not massively reduce or divide industry profits
and I classify the threat of entrants as a weak force.
49
Force 2 -Intensity of Rivalry Among Existing Competitors
Industry Growth
Slow industry growth will create a market share competition, which can increase
rivalry greatly. In a fast growing industry, however, the firms can make market share
gains and profits just by keeping up with the growth of the overall industry44. As already
seen in Figure 1.1 above, the online social networking industry is projected to continue
growing steadily in the next few years.
Lack of Differentiation or Switching Costs
If a product is perceived by its buyers as a commodity, the choice in using it is
dictated mainly by price and service
45
. In this industry however, price does not exists for
users, thus service becomes number one. Personal network, however, is also another
important factor. If the potential social networking user has a network of friends who use
a certain network, the new user will surely join that network.
Other than possessing as many members as possible to ensure that networks of friends
use the site, the networks can only compete on service. As discussed, web surfers will use
a network as long as it provides them with valuable content. So virtually there are no
switching costs. The goal then becomes constant modification and improvement to the
Competitors. New York: The Free Press, 1980. P 13
Competitors. New York: The Free Press, 1980. P14
50
website
46
. Respondent E said "you can sleep in this industry, just do a great job".
However, Porter says that "product differentiation can create layers of insulation against
competitive warfare because buyers have preferences and loyalties to particular sellers",
which has been already been discussed above and is shown in Figure 5.5. Niche sites
command a higher level of loyalty than generic sites. It is likely that generic sites, which
are less differentiated, face a higher degree of competition among each other than niche
sites do. This however could not be proven with this study due to lack of data.
Essentially, the executives from niche sites expressed little concern on the topic of
industry rivalry, but still acknowledged the importance of competing by constantly
improving their products. This is most likely because the industry is expanding quickly
and there is still enough revenue in the total pie for the players to take a piece and expand
their market share even though there exist few switching costs for buyers. As a result, we
can rank the rivalry between competitors to be a moderately weak force.
Force 3 - Threat of Substitutes
The threat of substitutes is a force that describes the ability of another seemingly
unrelated industry to take the market share of the industry under analysis. In our situation,
we identify substitutes by asking ourselves which products or services serve the same
function as online social networking websites. At the core, social networking is about
communication with others. So, any product that offers communication at the same or a
46 Delaney, Ian. "Be-boom or Bust - The Ingredients of a Social Network." eMarketer,
July 12,2006. www.eMarketer.comlbebo
51
lower cost could be a substitute. In the case of Respondent E, 99% of his potential
member base which is composed of older individuals still use email as their primary form
of communication. His current members are the "early adopters,,47. Another possible
substitute is another free communication tool that is now used internationally called
Skype, which uses the internet as a telephone connection instead of traditional phone
lines (cite skype.com). However, these substitutes are not as unique and interesting to use
as online social networking. Social networking is new, popular and multifaceted
communication with an element of entertainment and is unlikely to be eclipsed by any of
the mentioned substitutes. Thus, this force is ranked as weak.
Force 4 -Bargaining Power of Buyers
Buyer Concentration
Buyers with strong bargaining power have the ability to beat prices down and
demand higher quality services, diminishing the profits of an industry. If buyers are
concentrated or The social networking industry has a highly fragmented buyer group.
Buyers are counted on an individual basis and if the members have formed groups, their
relative power is still quite low. Also, the buyer uses the product for free and thus does
not have much say in the quality of services provided. Buyers are numerous in this
industry, there are millions of them. Not dealing with one buyer/member by blocking
them from using their site will not affect the network in anyway. Buyers have no way to
play industry firms against one another, so bargaining power already seems very low.
Switching Costs
52
Buyers in this industry have some power, they have the power to choose. The
switching costs are low enough that buyers can switch between networks at ease if they
are not attached to a specific friend group as discussed above. However, as said, there are
so many buyers in the market that losing one or two will not affect the firm immensely.
This force can be ranked as moderately weak.
Force 5 - Bargaining Power of Suppliers
If suppliers to an industry are strong, they can threaten to raise prices or reduce
the quality of the goods or services offered, which can squeeze profitability out ofthe
Concentrated Sellers
In this industry, social networking companies negotiate directly with companies
who want to provide advertisements on the sites. These large accounts fill the majority of
the ad space inventory, but often times the excess inventory is often sold on websites like
Triffiq.com which is an internet marketplace where buyers and sellers can offer, bid, and
buy advertising space. Currently there are 8 million dollars in RFP (request for proposals)
listed on traffiq.com
49
. Respondent B said that there are hundreds of American and
foreign companies that provide advertising to social networking sites. There are enough
non-concentrated suppliers that they do not achieve an edge. This does not make
suppliers strong.
Competitors. New York: The Free Press, 1980. PIS
49 "TRAFFIQ - The Premium Ad Marketplace." TRAFFIQ - The Premium Ad Marketplace.
http://www.traffiq.com (accessed December 19,2008).
53
Suppliers Competing with Substitute Products
As stated above, the online social networking industry uses advertising as a
primary source of income, thus advertisers are virtually the only suppliers to the industry.
Porter says that the power of large suppliers can be diminished if they have to contend
with substitute products for sale to the industrySo. There do not exist any obvious
substitutes that provide revenue to this industry and this makes the suppliers strong.
Importance of Industry as Customer to Suppliers
If the suppliers of an industry have a wide variety and the industry provides only a
small portion of revenue to the suppliers then chances are the supplier will exert its
powerS I . Figure 6.1 below illustrates, the total online advertising spending in the United
States. Overall spending this year is expected to reach $27.5 billion, which is very large
compared to the portion of this spending that goes towards online social networks (a mere
$1.5 billion this year). Although, as Respondent E noted, the social networking industry
is staring to become an important group for online advertisers, the data indicates that the
suppliers sit in a strong position.
FIGURE 6.1 - US ONLINE ADVERTISING SPENDING
us Online Advertising Spending. 2001-2011 (billions)
.1

532.S
2010 Sll.5
2011 $:120
Note: eMarketfJf benChmlJfts its us OI1hne tldll'efti$l1l8 spending
projections 8gaillSf [he Interactive AC1Vertising Bureau
(1AB)lPr1cew8CerhouseCoopers fPWCj d8ta. for which the last full)'edf
mfasured was 2006: online 8d data incJud61i CBfE!gories as defined by
IA8IPWC bfflChmMt-displlIY ads (such as banners), paid search Bds
(including context1J8l text finks), rich media {including video}. dltSSified ads,
spof7SOfShips. refemJls gtmer<ttionj .'tfld IHTlsillembedded 8ds onIyJ;
excludes mobile ad
Source: eMarketer. OCtober 2007
Source: eMarketer. "Social Networking." /-7. www.eMarketer.com
Importance of Supplier's Product to the Industry
54
As stated above, the advertisers product is crucial to the business of online social
networks. It is essentially the only form of revenue for the industry! This gives the
suppliers a great deal of potential power.
Suppliers have a great deal of bargaining power against online social networking
companies. Respondent E noted that suppliers are already trying to use this power by
55
always arguing the "value ofthe impressions"s2. Respondent A noted a similar level of
power being exerted by suppliers, using the single example of Facebook's dismal CTRs
to argue the value of impression based advertising. This respondent said that Facebook's
poor performance could be driving prices down for everyone and single handedly
"running the industry into the ground"s3. Overall I have concluded that the bargaining
power of suppliers is a strong force in this industry.
FIGURE 6.2 - THE FIVE FORCES: ONLINE SOCIAL NETWORKING INDUSTRY
/f'----"'\
.' \
'\ /
" ....._-,-//
Woak
Threat of Substitutes
Moderately WNk
Internal Competition
56
Figure 6.2 shown below synthesizes the conclusions and discussion regarding the
five forces presented above and represents the relative strength and weakness of each
force in terms of size. The larger the force, the stronger it is.
CHAPTER 7
CONCLUSION
The above data and discussion was used to conduct an analysis on the relatively
new and rapidly expanding online social networking industry. It appears that the industry
is an attractive one for potential companies looking to enter. It seems that an entry
strategy should focus first on selecting a proper niche that is not currently filled and has a
significant potential member base. Since the industry is expanding there is not much
internal competition for a new entrant to deal with. Also, the basis on which firms may
compete with each other is not as direct as in other industries so there are not many
barriers to entry that can be erected by current industry players. The most difficult aspect
of entering this industry would be "breaking into the budgets of advertisers". This can
only be done sustainably when the network generates very high traffic, which takes time
and constant effort until the site achieves viral growth. This presents a significant risk to a
start-up in this industry. Since this study surveyed a small portion of the total social
networking user population and only a handful of social network executives, which
included a partial interview from one generic site representative. Representative, there
still remains much research to be done on this new fast growth industry.
57
58
Appendices: Appendix A
Factors in Determining the Strength of Each Forces
Threat of Entry Determined by the Six Barriers to Entry
o Economies of scale
o Capital! Investment requirements
o Customer switching costs
o Access to industry distribution channels
o Access to technology
o Brand loyalty
o The likelihood of retaliation from existing industry players
o Government regulations
Threat of Substitutes Determined by:
o Does a substitute offer better quality?
o Buyers' willingness to substitute
o The relative price performance of substitutes
o The buyers' costs of switching to substitutes
Bargaining Power of Suppliers Determined by:
o Concentration of suppliers. Many or few
o Is the brand of the supplier strong?
o Profitability of suppliers
o Suppliers threaten to integrate forward into the industry
o Buyers do not threaten to integrate backwards into supply
o Role of quality and service
o The industry is not a key customer group to the suppliers
o Supplier switching costs
Bargaining Power of Buyers Determined by:
o Concentration of buyers
o Are products standardized or differentiated
o Profitability of buyers
o Role of quality and service
o Threat of backward and forward integration of buyers into industry
o Buyer switching costs
Intensity of Rivalry Determined by:
o The structure of competition
o The structure of industry costs
o Degree of product differentiation
o Customer switching costs
o Exit barriers
Appendix B:
Page
1
* 1. Describe your level of satl5faction with WAYN.com
s;atlsfied
almost satls(lcid .. but not qUite
2. What fs your age?
* 3. How much do you feel that the WAYN.com management team Is concerned about your Individual Input abOut the site? rate.
not concc(ncd
sllghtty (onc-er ned
concenrncd
very concerned
* 4. How many hours per week do you use WAYN.com?
Please fiU In the blank
* 5. Please select whk:h features you like most about WAYN,com
Select a" that apply
t4essagl ng
Photos
VIdeos
Fni>ndtng
Blogglng
Photos
Advertrsements
Gifts
Other ({dl In the blank}
* 6. What Is somethlno you dislike about WAYN.com?'
59
Page 1
continued
7. 00 you use any other Online Social
Please select all that apply or fill in the blank
com
Sa-doo.con)
.con'
F-rit:ndste:( .(,.orn
OrkUt.com
lIabbo.com
* 8. Please rate your LOYALTY to WAYN.com
Not loyal
Very loya!
I'm a die hard fan
* 9. Do you have hobbles or interests?
60
Pertspot unkedln.com
SomeO.LOJl' Pli))(o.com
BI':H_kptanet lom
Eons com
.1SmalfWorld.ron'
Cvwor Id co..,\
No I only 'JSC- WAYN COfT<
61
Page
3
' 3.
1. Please list your favorite hobby or Interest.
2. It a new online social netwoJ1( designed especlallv to connect people who shared (your answer to the above question) as an Interest. would you join
that new site?

No
Prey Next
Page
4
4.
1. Assuming that you Joined that now stte. would you spend more time on .. . 1
WAYN .(om
New net wof'k
Both eQually
2. Read carefully ...
Remember that In question 3 you how many hours per week you spend on WAYN. com. Assumlno that you Joined the new network would your
TOTAl. time 5:pent on online .oclal networking Increase or remain unchanged from your answer In #31
R.em.a i o \Jncho1nqed ;)no be divided <J.Tl OI1Q t he two sHes
Prey Next
Page
5
, 5.
1. Now that your total time has Increased, describe the distribution ot time between site,.
(remember your onglnal time for #3)
AdJus:red hours. per wl'l:'k SPent
0(\ WAYN . ("Onl
Hour s per ,.,."el< spent. on
netwol k.
Prev Next
62
Appendix C
Generic Niche
I.MySpace.com 1. Blackplanet.com
2. Facebook.com 2. Buzznet.com
3. Bebo.com 3. Cafemom.com
4.Badoo.com 4. Care2.com
5. FriendsReunited.com 5. Cyworld.com
6. Friendster.com 6. Fubar.com
7.0rkut.com 7. Geni.com
8. Habbo.com 8. LinkedIn. com
9. Hi5.com 9. Plaxo.com
10. MyYearbook.com 10. Vampirefreaks.com
11. Netlog 11. WA YN.com
12. Perfspot 12. Last.fm
13. Sonico.com 13. Eons.com
14. Tagged.com 14. aSmallWorld
Appendix D
FIGURE 82. Sources of Field Data for Industry Analysis
Standard setting organizations
(e.g., underwriters laboratory)
Unions
Press, particularly editors of
trade press and local press
where competitors' facilities
or headquarters are located
Local organizations (i.e.,
Chamber of Commerce) where
facilities or headquarters
are located
Industry Observers
Interview Sources about Competitors
Inside the Company
Market research staff
Sales force
Service organizations
Former employees of competitors,
observers. or service organizations
Engineering staff
State government
Federal government
International organiz.ations
(e.g., OECD, United Nations)
Watchdog groups
(e.g., Consumer's Union,
Ralph Nader)
Financial community
(securities analysts)
Agencies involved in regulation,
industry promotion, financing,
and so on
Customers
Service Organizations
Trade associations
Investment banks
Consultants
Auditors
Commercial banks
Advertising agencies
63
SOURCES CONSULTED
Books
Porter, Michael E .. Competitive Strategy: Techniques for Analyzing Industries and
Scott, John. Social Network Analysis: A Handbook. London: Sage, 1991.
Wellman, Barry. Networks in the Global Village. Boulder: Westview Press, 1999.
Journal Articles
Beer, David, and Roger Burrows. "Sociology and, of and in Web 2.0: Some Initial
www.socresonline.org.uk/12/5/17.html
64
Garton, Laura, Caroline Haythornthwaite, and Barry Wellman. "Studying Online Social
Networks." Journal of Computer Mediated Communication 3, no. 1 (2006).
www3.interscience.wiley.comlcgi-binlfulltext.html
Kim, Eonsoo, Dae-il Nam, and 1. L. Stimpert. 2004. Testing the Applicability of Porter's
Generic Strategies in the Digital Age: a Study of Korean Cyber Malls. Journal of
Business Strategies 21, no. 1: 19-45.
Kohut, Andrew. "Internet's Broader Role in Campaign 2008." PeQple-Press. 11 Jan.
2008. Pew Research Center. 23 Sept. 2008 <http://people-
press.org/reportl?pageid= 123 3>.
Liu, Chang, and Kirk P. Arnett. "Exploring the Factors Associated with Crap Website
success in the Context of Electronic Commerce." Information and Management 38
(2000): 23-33.
MacAulay, Linda A., Kathy Keeling, Peter McGoldrick, George Dafoulas, Emmanouil
Kalaitzakis, and Debbie Keeling. 2007. Co-evolving E-tail and On-Line
Communities: Conceptual Framework. International Journal of Electronic
Commerce 11, no. 4: 53-77.
Pauwels, Koen, and Allen Weiss. "Moving from Free to Fee: How Online Firms Market
to Change Their Business Model Successfully." Journal of Marketing 72, no. May
(2008): 14-31.
Pines, Jesse M .. "The Economic Role of the Emergency Department in the Health Care
Continuum: Applying Michael Porter's Five Forces Model to Emergency
Medicine." Journal of Emergency Medicine 30, no. 4 (2006): 447-453.
Porter, Michael E. 2008. The Five Competitive Forces that Shape Strategy. Harvard
business review 86, no. 1 (01) : 78-93.
65
Porter, Michael E. 2001. Strategy and the Internet. Harvard business review 79, no. 3 (03)
: 62-78.
Porter, Michael E. 1996. What Is Strategy? Harvard business review 74, no. 6
(/11Nov/Dec96) : 61-78.
Rosen, Christine. "Virtual Friendship and the New Narcissism." The New Atlantis:
Journal of Technology and Society 1, no. Summer 2007 (2007): 15-31.
Siaw, Irene, and Alec Yu. "An Analysis of the Impact of the Internet on Competition in
the Bank Industry, using Porter's Five Forces Model." International Journal of
Management 21, no. 4 (2004): 514-523.
Periodicals
Bruno, Anthony. "Monetizing Membership." Billboard, November 24, 2007.
www.billboard.comlupfront/ digi tal entertainment
Delaney, Ian. "Be-boom or Bust - The Ingredients of a Social Network." eMarketer, July
12, 2006. www.eMarketer.comibebo
AdWeek. "Niche Social Networks Offer Target Practice." 3. www.adweek.comlsocial
DataMonitor. "Online Social Networking: A Potential Marketing Tool." 6.
www.datamonitor.com
eMarketer. "Social Networking." 1-7. www.eMarketer.com
Marketing. January 24, 2007"Digital: Virgin Radio in Social Network."
www.marketing.comlbs.idkl
TechWatch. "Renegade Marketing's CEO Drew Neisser's Predictions for 2008."
www.techwatch.comlsocialnetworking
TrendWatch. "A Virtual Meet and Greet." 9. www.trendwatch.comlmhs (accessed
October 15, 2008).
Wood and Wood Products. "New Web Site Details October Green' Wood Conference."
15. www.iswonline.com
Interviews:
A, Respondent. Interview by author. Colorado Springs, October 27,2008.
B, Respondent. Interview by author. Colorado Springs, November 11, 2008
C, Respondent. Interview by author. Colorado Springs, November 20, 2008
D, Respondent. Interview by author. Colorado Springs, November 25, 2008
E, Respondent. Interview by author. Colorado Springs, December 10, 2008
Miscellaneous Internet:
66
Dignan, Larry. "Fox interactive turns annual profit." ZDnet. 8 Aug. 2007. 23 Sept. 2008
<http://blogs.zdnet.com/btll?p=5899>.
Sellers, Patricia (2006-09-04). "MySpace cowboys", Money, CNN.com.
"List of social networking websites." Wikipedia. 23 Sept. 2008. 23 Sept. 2008
<http://en.wikipedia.org/wiki/list_ oC social_networking_ websites>.
Online Social Networks, Virtual Communities, Enterprises, and Information
Professionals - Part 1. Past and Present." Information Today, Inc ..
http://www.infotoday.com/searcher/juI07/Reid Grey.shtml
"TRAFFIQ - The Premium Ad Marketplace." TRAFFIQ - The Premium Ad
Marketplace. http://www.traffiq.com (accessed December 19,20

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A FIVE FORCES ANALYSIS OF NICHE AND GENERIC NETWORKS IN THE

ONLINE SOCIAL NETWORKING INDUSTRY

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