Mister Three Sixty

Non-denominational opinion on Marketing + Communications

The Power of Social Capital.

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What is Social Capital?

Social Capital is the value exchanged in online social spaces. The success of a social network is directly correlated to the amount of social capital it helps its members build.

It’s really quite simple: People earn social capital and they spend it. Brands also have social capital, sometimes they increase it, sometimes they decrease it. And sometimes both people and brands go into the red (the irritating over-tweeter you just unfriended, the Toyota product recalls you heard about).

 

What is Social Capital made of?

Social Capital doesn’t directly equate with money, though I believe it will become more clearly monetised in future. For now, I’d argue Social Capital is made up of a combination of:

(1) People’s time and attention. I have a limited amount of disposable time, I’ll spend it on things that interest or entertain me. As Yahoo’s Attention Economy concept showed, this has a commercial value.

(2) People’s connections. Take celebrities, they have Social Capital in part as a result of their large fan base. If you have a lot of connections, you have more Social Capital to spend.

(3) The Social Objects people create. This might seem a bit strange at first glance, but since social gatherings and conversations tend to coalesce around Social Objects (the things people talk about, use and share in social spaces), the creation of them has a value. 

(4) People’s goodwill and personal recommendation. What PR’s often call Trust. The NPS crowd are big on this too and have demonstrated that a positive disposition towards someone or something is predictive of revenue growth. This is perhaps most important, since you want the time, attention, connections and social objects to be positively, rather than negatively, viewed.

There may be more elements of Social Capital but I feel these are the main ones, anything glaringly missing?

 

In short:

Social Capital = (Time + Attention + Connections + Social Object Creation) x Goodwill

 

 

So What?

Assessing someone’s Social Capital is one way to estimate their value in the social web. Twittratr and Twinfluence are good examples of tools designed to allow people to do just this, in a limited way.

Social Capital might also be a good way for brands to work out just how much sway they hold on the social web. It would provide a benchmark for their performance over time and a way to compare themselves to competitors. I’d like to work out a correlation between Social Capital and Revenue Growth, I bet you’d find a strongly predictive link. Has anyone done this already?

 

But its not just about measurement…

Businesses are already earning and spending Social Capital. When Apple releases a new product, they immediately increase their stock of Social Capital as people devote time, attention, their opinions  and their connections to it. When Habitat began spamming Iranian election Hashtags on Twitter, they reduced their Social Capital as the Twitterati began to criticise them.

But it goes further than that, if businesses can understand just how they can help people build their Social Capital, I think they’ll end-up building Social Capital of their own. When OfficeMax created Elf Yourself, an amusing and viral personalised animation, they generated enormous Social Capital for themselves because they helped others be funny, amusing, smart and earn Social Capital from their own social networks.

 

What do you make of this? Is it interesting? Would you build on it? Would you pull it all down as a house of cards? Please let me know and I’ll revise and repost with comments included.

 

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Written by misterthreesixty

February 20, 2010 at 2:18 pm

Posted in Uncategorized

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