The real value of online communities

I recently came across an academic piece that offers an interesting framework for gurus/experts/consultants/practitioners/geeks/students (delete as appropriate) to think about as an analytical and/or planning tool for online strategies.

I know there is no one size fits all approach – and clearly in this ever changing world we live in (anyone spot the music reference there?) flexibility and constant learning is key. That said, I see a lot of the headline arguments from this article holding true, and it has made me want to share it on this blog.

The article focuses on the Internet as a tool that is increasingly being used to foster sizeable virtual communities. The writers argue that these virtual communities can be grouped into four main categories:

Communities of transaction facilitating the buying and selling of products and services and delivering information related to those transactions (eg Amazon reviews).

Communities of interest where participants gather to discuss common interests, not necessarily related to a transaction, but related to a product, service or activity (eg Facebook fan pages).

Communities of fantasy where individuals create a persona for themselves and become immersed into a world that may or may not be strictly real-life (eg online gaming).

Communities of relationships based on the sharing of life experiences and developing real life relationships from them (eg online dating).

Now, it stands to reason that communities displaying all four elements are likely to be the largest and most vibrant. The authors use the example of a travel company using a travel forum (interest) to advertise a competition or game where the winners receive a discounted holiday (fantasy). The winners then consult other community members on how to best use their prize (transaction) and then look for others who they can share their experience with (relationships).

Once a critical mass of community members has been reached, there are four principle ways to create an economic return. These are based around usage or membership fees (self explanatory), content fees (such as premium services), advertising (self explanatory) and cross linkages with other parts of the business (essentially cross selling or affiliate programs).

These four methods all hinge on ensuring that the community is in place, and the participants are sufficiently engaged in your community (whatever that may be) so that they can then be targeted and ultimately monetized.

A key paragraph from the article states that “by creating strong on-line communities, businesses will be able to build customer loyalty to a degree that today's marketers can only dream of and, in turn, generate strong economic returns.”

Note the buzz words…critical mass, engagement, community, monetization, economic return. Sound familiar? Yep, social media & comms 101.

Now, here's my take on all of this:

I see a lot of chat questioning how to monetize online communities, and wonder whether the reason we find it so hard is because the communities we’re building aren’t being constructed and defined effectively? I think this framework offers an interesting starting point.

What intrigued me most about the article is that it was not written this year. Or last year. It was not written in the early-mid 2000’s when Facebook, Twitter and YouTube came about.

This article is from way before the advent of social media. Way before web 2.0.

This article was published in 1996. In the age of dial up net access and the crossover from Windows 3.1 to 95.

Far ahead of its time.

I found it eye opening and fascinating that these principles we talk about today as some sort of mysterious craft have been talked about for years, just under a different guise.

What do you think? Is this too theoretical, too academic? Or too simplistic? Or just plain incorrect? I’d be really keen to know your thoughts, as I’ve found it very useful.

Article reference:

Armstrong, A. & Hagel III, J. The Real Value of On-line Communities. Harvard Business Review, May June 1996, p 134-141