In my update on the 2008 Tribalization of Business study on business communities that we are doing with Deloitte and The Society for New Communications Research last week – I pointed out how some companies are totally misaligning their measurements of community effectiveness with their goals.

As you will see from the slides, many companies measure effectiveness by looking at page views and time spent on the site. Yet not one company listed ad revenue as a goal for the community – which is what page views and time spent on the site would be good for. Let’s assume that your goal is to have a support community – one in which people can help one another or get help from some your employees. If you could deliver the support in a way that never required people to come to your site, you would still achieve your goals. In fact, if you build your community so that people do not have to come to it, chances are that you will have more people participating in it. There are only so many destinations that a person will visit on a regular basis, and chances that your business community becomes one of them are fairly slim.

Another interesting wrong-headed metric-related finding from the study is that a majority of respondents found that “getting people to engage” was one of the biggest obstacles to making a community work. Now if you have a small community, chances are that you could get a fairly high engagement rate. The larger your community becomes, however, the more its profile will resemble that of large public communities – 1% of hardcore contributors, 10% of active users and 80-90% of lurkers. Now does that mean that the lurkers do not get value from your community? In the case of the customer support community, lurkers who do not contribute could still find the help they need and feel better about you than if they had not found it and also save you the cost of a call into the call center. So measuring community effectiveness by measuring engagement is just not a representative metric of community success.

Now the real issue with all this is that if you have a community development team who is being measured by those wrong-headed metrics, they will invariably develop bad behaviors in order to maximize these metrics. They could in fact develop community features that will stand in the way of success for your communities, or close down communities that are in fact doing really well.

If you missed it, there is a dynamic conversation on managing communities going on right now…Chris Brogan kicked it off and Nancy White wrote some interesting musings and also kept track of many of the other interesting links.

Based on research in the field of virtual communities, most business thinkers will agree that there are 4 fundamental pillars to successful communities – content, members, member profiles and transactions. If managed properly, these 4 dynamics can lead to economics of increasing returns that characterize most successful communities. The more members you have, the more content they will create. That in turn will increase the value to the community members and attract more members. If you capture information about your members and you make it easier for them to find stuff in the community based on their profile, the higher the value of the community to the members and the more members you will attract. It’s easy to understand the workings and to get the benefits of the dynamics of increasing returns that happen in successful virtual communities. Many of those were first described by business thinker and management consultant John Hagel in Net Gain more than a decade ago.

There are other aspects that drive and define communities, such as the social and technology infrastructures of communities as well as the business processes that they support. But none of those characteristics have the power to create the positive value creation loops that the original four can.

While most successful communities will have a mix of all of the ingredients – we can characterize communities by their dominant dynamic.

First there are content-based communities, where members interact with one another primarily in the context of content – either consumer generated or licensed/acquired. News sites or blogs are communities that would fall in this category.

Then there are communities that are primarily member-based. Member-driven communities can take on many different forms. Brand communities like the Harley or the Ducati communities are clearly member-centric communities, even though some companies mistakenly think that the brand is at the center of those communities, and not the members. Networking communities like LinkedIn and Facebook are clearly communities that have members at their core. Many developer communities in the tech world also fall within this category.

Lastly there are transaction-centric communities. eBay and Amazon.com come to mind when talking about those communities.

Of course, all of those communities have content, and all have members, and most have transactions – it’s just that they are more heavily tilted towards one of the community ingredients than another. And in some cases communities with the same end-goal can take on very different forms. Brand communities could also be set up as content-centric communities or as transaction-centric communities. Customer support communities or developer communities could also be started as content-centric communities – and perhaps evolve into transaction-centric communities.

The reason it’s important to understand the different types of communities is because of the requirements to get them started. You cannot start a member-centric or a transaction-based community without a critical mass of members or offerings – something most companies do not have. Without a critical mass of members or offerings, there will not be enough content generated (i.e., customer reviews, etc.) in order to make the interaction for the community members valuable. So if you have a total potential number of users ranging in the hundreds, you will never be able to set up a vibrant customer support community as Intuit. Microsoft or Apple can. That does not mean that you cannot leverage customer support communities, it means that you have to start them up as content-driven communities. Instead of relying on the community members to re-write your manuals and to create meaningful FAQs, you may have to hire a few people to kick-start the process on a for-hire basis.

While the economics of increasing returns may be somewhat diminished with a smaller number of members and some hired guns, they are still very much present. Most likely they will handily beat the economics of diminishing returns that most business practitioners face when trying to interact with customers and prospects in the old-fashioned interrupt-driven way.

Some of these thoughts have been triggered by the many conversations I have had the pleasure to have as part of the Community Effectiveness Study that we are conducting with Deloitte and the Society of New Communications Research. Some of the preliminary results of this study will be discussed at the Society for New Communications Research Forum in two weeks and more detailed results will be unveiled at the Community 2.0 Conference in May.

As a senior research fellow with the Society for New Communications Research I can extend a special discount to some of my friends who want to attend the forum. Email me if you want to attend at a special rate (francois [at] emergencemarketing [dot] com). Note that there are also 1/2 day flex passes available for those who can’t attend the full event.

In interviewing a person in charge of communities at a Fortune 100 company as part of our community effectiveness study that we are doing with Deloitte and the Society for New Communications Research, I learned about a real neat side effect of business communities – the ability to sell products in the long tail.

Large companies typically cannot afford to pay attention to relatively small business opportunities. If your company has billions of dollars in revenue, and a goal of growing that revenue by 5% a year, and you identified a $50M new market opportunity, chances are that you will not be able to justify a business plan to tackle this new opportunity. Some of the more innovative companies have found ways to monetize those opportunities by selling or licensing the IP or partnering with companies for whom a $50M market makes sense.

With large business communities surrounding your company, you could potentially do it yourself, and in a profitable way. Say that you developed a software application that only has a tiny market potential relative to your company’s size. You could make that application available in your community, and rely on the community to deliver support, refine the documentation, etc. So in effect you developed a channel to enable your company to serve the long tail in a cost effective manner and in a way that is not defocussing. In the long run, leveraging business communities to serve the long tail could also increase your share of customer wallet as well as increase your customer switching costs for the bigger applications – all benefits that deliver dollars to the bottom line.

The Online Publisher Association announced that it added Community as a category to its Internet Activity Index (IAI). So they will now measure how much time consumers spend online with Content, Communications, Commerce, Search and Community.

The OPA defines community as:

“Web sites and applications that combine user-generated content with communications in order to foster relationships between individual members and groups of members. Many Community sites are content driven, and they were previously accounted for in the Content category. However Community’s content is largely user-generated, and when merged with communication, creates a specific category of online activity.”

The IAI numbers for January show that consumers spent 42.7% of their online time interacting with content, 28.7% with communications, 16.1% with commerce, 7.5% with community and 5.0% with search.

AdAge picked up on the story, declaring “When It Comes to Time Spent Online, Content Trumps Community.”

But wait a minute here, adding community as a category at the same level as content, communications, search and commerce, is like comparing apples and oranges. Or better yet, comparing apples and oranges with air or water. Communities are combinations of content, commerce, communications and search. And communities affect the usage pattern of all the above categories and vice versa. So if I am spending time on Amazon.com, am I spending time with commerce, content, search or community? Obviously the end result is commerce if I buy something, but it could also be searching without buying or interacting with content (both user generated reviews and published content) without commerce. The fact that Amazon is a community which leverages my personal profile very well (another component of communities) is determining my interactions and time consumption on that site. The same can be said for many other sites that combine content with community. If I am spending time on the WSJ Health blog, I am spending time with content or community? If as a car buff I spend time on Carspace.com, I am spending time with commerce, content or community? Would I spend as much time conducting commerce, searching for stuff or interacting with the content on those sites if there were no community component to them?

Probably not…

Besides the fact something does not sit right with the categories, many conclusions drawn from the new numbers by AdAge and the IPA are equally flawed. Jim Nail at the Cymphony’s Influence 2.0 blog captures those flaws in detail in his post today (well worth the read). A couple of highlights include:

• The fact that page views per person in content dropped 225 pages suggests that a number of content sites were just moved to community.
• Content sites show 480 pages per month per user vs. 380 pages for community sites. So from an ad perspective, the reach may be just the same.
• Another factor not reflected in the new numbers is influence. If a third of people below 30 don’t make buying decisions before checking with their social networks, the impact of communities on the commerce is obviously not reflected in those numbers.

We should of course remember the agendas that both organizations are representing – those of advertisers and publishers.