Social Networking, branded communities, and segmentation business model: Community Connect

You might not have heard of social networking company Community Connect. It's a small, rapidly growing outfit that has built three MySpace-like sites, MiGente.com, AsianAvenue.com, and BlackPlanet.com, that target Latinos, Asian-Americans, and African-Americans, respectively. The sites are successful, with a total of some 16 million registered users.

The number is a fraction of MySpace's 100 million registered users, but Community Connect Chief Operating Officer Court Cunningham says it is the third largest social networking company in the U.S. in terms of revenue (see BusinessWeek.com, 2/28/2006, "Niche Networking by the Numbers").

With a growing market and more competitors entering the fray, Community Connect is aiming to take the social networking world by storm, one niche market at a time. When it launches its gay and lesbian-targeted site, Glee.com, by the end of 2006, Sun says his company's target market will grow by 40 million to 50 million, which is what he estimates the U.S. gay and lesbian population to be.

"That's almost the population of France, so our strategy of going niche isn't going too niche, since there are still big markets to conquer," he says. Next up: another niche site geared toward evangelical Christians, scheduled to launch in January, 2007. That site doesn't have a name yet.

"Some other sites are consumed like news info, but the Community Connect sites are more suited for integration of promotions and micro-sites," says Albert Thompson, director of interactive services for UniWorld Group, which handles online advertising for AstraZeneca (AZN), Ford (F), Lincoln, Burger King (BKC), and HSBC Bank (HBC). "There's a huge difference between banners and getting involved. It's the natural law as it pertains to rules of engagement," he adds.

"This is the second wave of social networking," says Greg Sterling, founding principal of Sterling Market Intelligence, a consulting and research firm focused on online consumer and advertiser behavior. The first wave, Sterling says, was typified by Friendster, where people found the sites fascinating, but where there was no clear business model, though there was some flirtation with selling classifieds. The second wave coincided with the rise of MySpace (NWS), which was organized around interests in music while developing a huge user base—more of a portal with a range of different revenue streams.

Community Connect co-founder and Chief Executive Officer Ben Sun says social networking is still in its "primordial ooze phase" and that, as dating sites did in the last several years, the business will continue to undergo differentiation, and even the big players will veer away from serving the masses. "More and more competitors will work to super-serve the needs of the niche groups," says Sun (see BusinessWeek.com, 9/12/06, "Buying Sites with a Built-in Audience").

Sterling says sites that rely on user-generated content are becoming common and have been surprisingly hard to monetize (see BusinessWeek.com, 4/19/06, "Social Networking's Gold Rush"). That's why Community Connect's business model is well suited to changing market tastes. When the dot-com bust forced Community Connect to diversify its revenue stream away from just advertising, it chose personals, at least partially due to the success of dating sites like Match.com and others.

"Our BlackPlanet users said 'all the black community is here, give us tools to find other African-Americans who are serious about dating and relationships, and we'll pay for it,'" says Sun. Community Connect soon replicated the service for all three of its sites.

Today, 15% of Community Connect's revenues come from online personal subscriptions. Advertising comprises 50% of its revenue, and 35% comes from job postings. The success of the job posting component of Community Connect resulted in a partnership with Monster.com (MNST), one of the largest job listing sites on the Web.

Monster.com had been unable to help its thousands of corporate clients develop diversity recruitment programs, since isolating minority applications would violate equal opportunity law. By partnering with Community Connect, Monster was able to secure résumés for clients from a database of job-seekers, 95% of whom were minorities (see BusinessWeek.com, Fall '06, "Hand in Glove").