celent - leveragingsocialnetworks1

Catherine Stagg-Macey and Craig Beattie

Leveraging Social Networks

An In-Depth View for Insurers

April 2010

Content

3 Executive Summary5 Introduction7 The Social Networking Buzz7 What Is Social Networking?7 Social Networks as a New Channel

10 A Fragmented Channel11 Dominant Social Networks Differ by Country11 Social Networks as Multiple Distinct Channels13 Benefits and Risks of Social Networking13 Why Are Organizations Interested in Social Networking?14 Unintended Consequences15 Organizational Risk17 Insurers and Social Networking17 Insurers in the United States: A Consistent

Multinetwork Approach19 Lessons from the United Kingdom21 iPhone Apps22 Insurer Social Networks22 Financial Services Aggregators as Social Networks24 Social Networking Trends25 Social Networkers in the Future27 Social Networks Start Seeking Revenue29 Embracing the Digital Change29 How to Adopt31 Technology Solutions33 Conclusions34 Leveraging Celent’s Expertise34 Support for Financial Institutions34 Support for Vendors35 Related Celent Research

Copyright 2010 © Oliver Wyman 3

Executive Summary

According to news reports, in March 2010 Facebook was the most vis-ited website in the US, having more visits than Google for the first time. This announcement heralds the arrival of social networks. Celent believes that social networks will grow in usage and become central to the Internet experience for most people. While the number of users of social networks continues to increase apace, an understanding of the types of social networkers will help insurers to better understand their target market. Rather than the current model of searching for content and pulling it, relevant content will be pushed to Internet users through recommendations from their friends and targeted advertising.

Many insurers are already testing the waters in the world of social net-works, and best practices are only beginning to emerge. In the United States, nine of the top ten nonlife insurers have at least one Twitter account, and eight of those have at least one Facebook page. These social media websites are both active and have an engaged customer community involved. By contrast, only seven of the top twenty life and nonlife insurers in the UK have a presence on Twitter, with fewer on Facebook. In the UK, the interaction is rare and adoption is just starting.

In the future we will see a growing population of social networkers who are used to seeing friends’ comments in search results for finan-cial services products and who expect to be able to engage with their chosen insurer through the channel of their choice. In addition social networkers will be comfortable with the concept of sharing informa-tion about their behavior and their location and also paying small amounts for key premium services. These key concepts will allow new innovative insurance products to come to market leveraging this data, new payment methods, and the on-demand requirements of the customers.

Perhaps the most surprising result is that spending effort now in seem-ingly frivolous activities on social networks can drive real business value. The huge popularity of comic mascots in social media has paid dividends to insurers who have invested in them and executed them well.

4 Copyright 2010 © Oliver Wyman

This report aims to provide an overview of social networks and their use by businesses and reviews current trends, influences, and the future of social networks. In the final chapter, the report provides a set of guidelines on how insurers should use social networks and social media.


Introduction

A social network is a group of individuals and organizations that are linked to each other in some meaningful way. Early social networks offered a way to get back in touch with people. There are many such websites now, and the most well-known are Twitter, LinkedIn, MySpace, and Facebook.

Many studies highlight how popular these sites have become. A study by Anderson Analytics on the demographics of social networkers and nonusers in July 2009 found that 110 million Americans had used a social networking website within the last month—60% of the online population. The study found the average user logs on five days a week, four times a day, for a total of about an hour a day.

This popularity raises interesting questions for insurers about how this channel can be leveraged. Today, insurers are heavy users of emails, paid keyword searches, and video ads as digital marketing channels. And there is broad consensus on the effectiveness of these channels. But that said, recent Celent research (Digital Marketing in Insurance, April 2010) shows that 85% of respondents said that spending in social net-works would increase in the next three years. This is a resounding thumbs up to a commercially nascent channel.

Many insurers are already testing the waters in the world of social net-works, and best practices are only beginning to emerge. In the United States nine of the top ten nonlife insurers have at least one Twitter account, and eight of those have at least one Facebook page. These social media websites are both active and have an engaged customer community involved. By contrast only seven of the top twenty life and nonlife insurers in the UK have a presence on Twitter, with fewer on Facebook. In the UK the interaction is rare and adoption is just starting.

What is an important and as yet unanswered question is why insurers should take social networks seriously; i.e., what is the business case, and if there is one, what might the execution of such a strategy look like?


This report aims to provide an overview of social networks and their use by businesses and reviews current trends, influences, and the future of social networks. In the final chapter, the report provides a set of guidelines on how insurers should use social networks and social media.


The Social Networking Buzz

What Is Social Networking?Early social networks offered a way to get back in touch with people. Examples include classmates.com in 1995, with sixdegrees.com in 1997 as a more general service. Today social networks are a way to measure public opinion, a way to find, engage with, and increase your customer base, and a growing source of innovation. There are many such web-sites now, and the most well known are Twitter, LinkedIn, MySpace, and Facebook. The creation of Facebook is the subject of both a book and a film that are under production at this writing.

A social network is typically defined as a group of individuals and orga-nizations that are linked to each other in some meaningful way. A social network service is a system that enables a social network to interact, although the term social networks has become synonymous with social network services.

A study by Anderson Analytics on the demographics of social network-ers and nonusers in July 2009 found that 110 million Americans had used a social networking website within the last month—60% of the online population. The study found the average user logs on five days a week, four times a day, for a total of about an hour a day.

Most social networking sites offer their services for free. The business model centres around allowing third parties to pay for targeted adver-tising to customers of the social networking websites, and this is why they are so relevant to digital marketing and insurers.

Social Networks as a New ChannelOrganizations already rely on a wide variety of channels to reach their customers. Social networks are emerging as another channel by which communication and business can be undertaken. Social networks dif-fer from channels such as e-commerce, phone, email, and mail in a number of important ways, summarized in Table 1.


Automatic filters choose the content. In a similar way to search engines selecting relevant content, social networks use automatic fil-ters based on timeliness, engagement, and interest to filter out messages the customers have chosen to subscribe to. If a customer subscribes to an organization’s fan page on Facebook, they can also choose to mute updates if they are too numerous, or Facebook’s filter may filter out results based on whether these updates were of interest in the past. Twitter, by contrast, doesn’t filter results, but customers tend to only read recent or timely updates—prompting some compa-nies to repeat messages.

The subscription to an organization’s messages and subsequent communication is frequently public or visible to friends on the social network. For instance, the friends of a Facebooker can see if they are a fan of an organization. Anyone can go to Twitter and see the organiza-tions a person is following on Twitter. This public visibility goes both ways; social media websites frequently clearly show the number of fans, followers, or interested parties an organization has in real time. Engagement or lack thereof is usually public information.

Social search is affecting search engine results. These public connec-tions to organizations are now being leveraged by search engines. Google in particular has launched social search, which uses a cus-tomer’s social network online to make the search results more relevant. This means if a large number of your customer’s friends and

Table 1: Social Networks Differ from Conventional ChannelsDifference Comment

Automatic filtering Similar to email spam filters, but filters are based on interest and timeliness

Shared subscription information Information about who subscribes to what is shared or even public

Social interactions are affecting search results Public comments, subscriptions, and friends are all being used to personalize search results

Shared communication Communication between parties on social networks is rarely private. Complaints and praise are shared equally.

Multi-media is encouraged Unlike email, social media is a multimedia experience with video, images, audio, and text content all expected.

Appearing authentic and human is more important

Unlike other channels, interactions through social networks are expected to be more human, rather than with a corporate entity.

Joining is free, for now Most social networks allow individuals and organizations to appear and interact on the website for free.

Source: Celent


contacts are following an organization’s Twitter feed, then relevant information about that organization is more likely to appear in that customer’s search results. This has massive implications for search engine optimization, which forms a significant part of today’s market-ing budgets.

All communication in these channels should be assumed to be at least shared if not completely public. Tweets are frequently public, as are the replies that are given through Twitter. Comments from custom-ers on items posted on Facebook fan pages are public to all and are actively pushed to the customer’s network. This means that right now, and increasingly in the future when a customer searches for your prod-ucts or brand, they will see search results including their friends’ and colleagues’ comments. In effect, social media is automating word of mouth marketing.

Using a variety of content types is actively encouraged. Sharing of content in rich and various forms is actively encouraged in this chan-nel. This is incredibly important for leveraging video assets. While TV is an expensive route for advertising with little feedback as to who saw the advert and the response to it, it is entirely possible to host a video on social media websites and let your customers publicise and share it. Other channels to market don’t have this flexibility—it is still unusual and inadvisable to email video content to customers, for instance. Again, if a customer likes your video, then this will be reflected in their friends’ social search results.

Joining is free—for now. The good news is that an organization can make use of most of social media for free. As for any channel—for it to stay up to date and be useful to customers, a team of people must be assigned to maintain the channel. Increasingly, businesses are being asked to pay for premium access, which may include improved search capabilities or authenticated pages (these are discussed below). It is likely that the cost of joining social networks will increase over time.

Social networks expect an authentic and human interaction. There is a need for an organization to be involved through real people. This is a common trend across all social networks, and there are examples of public and shared angry responses to apparently automated responses. Interactions that are personal and appear human are typically the most successful.


A Fragmented Channel

In the early stages of the Internet, access was fragmented. America Online had a large market share, and only users of the service had access to AOL keywords. Other Internet service providers (ISPs) and portal sites provided similar unique and closed views of the Internet. In the last decade or so, the Internet has become more open, with ISPs offering access to a common, open set of information and commerce applications. The arrival of social networks and to some degree mobile applications has brought with it content only visible to members.

Experian Hitwise reported that Facebook was the most visited website in the US for the week ending March 13 2010, having more visits than Google for the first time. This is important because to utilise the vast majority of content on Facebook, you must be a Facebook user. It is a closed network unless you go through the free sign-up process. Other popular social media sites are similarly closed. If an organization cre-ates a Facebook fan page, those who don’t use Facebook may be able to see it, but won’t be able to interact with it, and this is similarly the case for MySpace and the majority of other social media applications.

Twitter and Google Buzz, by default, allow public access to the bulk of the data, including who is connected to who. Public data on the Inter-net is searchable for all, although those who have signed up can receive regular updates and interact directly through the channel.

In short, the channel is not one channel but many. Some use Facebook, some Twitter, and others use no social networks at all. There is no one easy method to engage with customers via social networks.


Dominant Social Networks Differ by CountryThis report mostly discusses Twitter and Facebook as example social networks used by insurers. It is worth observing that the dominant social networks vary by country, as shown in Figure 1.

Clearly the social networks an insurer targets should be informed by both the target geography and the target demographics. It is clear that large organisations may need to target multiple social networks.

Social Networks as Multiple Distinct ChannelsIf a customer contacts an organization by email, then they typically expect a response in email unless they explicitly request an alterna-tive. So it is with social networks. Customers are increasingly talking about organizations using social media and sharing stories. Customers are also seeking to engage with organizations via social media and spe-cific social networks. If an organization wishes to respond to a comment from a customer, answer a query, or put some useful infor-mation out there, then it must be done through the social networks the customer is using.

In the same way an organization will evaluate the total cost of owner-ship to have an e-business website as a sales channel, so now organizations must evaluate the value of social networks as a channel. Not only that—each social network needs to be considered, since the

Figure 1: Dominant Social Network by Country (June 2009)

Source: Celent, Google Trends, Alexa

Facebook Odnoklassniki QQ Orkut Hi5 V Kontakte Nasza-klasa MaktoobZing Lide Hyves One Mixi Cyworld Friendster Wretch

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usage on the different networks is distinct. This has clear impact on any strategy and execution plan to monitor and update social network sites.

The phrase social networks hides a great deal of complexity. Social net-works describe a set of fragmented and discrete channels. Each social network service has a particular set of features and expected behav-iours. Different social networks are popular in different geographies and demographics. A social networking strategy must take each of these factors into account if it is to be successful.


Benefits and Risks of Social Networking

Why Are Organizations Interested in Social Networking?Social networks have yet to prove that they can break even, let alone make money. So why are organizations and insurers interested in social networks and social media?

Today there are three principle reasons for participating in social net-works: they are a cheap method of advertising; they are growing as a communication channel to customers; and they are increasing in influ-ence. It is Celent’s view that not only are social networks here to stay, but they will grow to define most people’s experience of the Internet in the future. Much more of the media that people are exposed to, includ-ing advertisements, will be tailored based on their social networks. Even comments and reviews will be prioritized so that friends’ reviews appear first.

The principle promise of social media and social networks today is free, automated word of mouth. Ten years ago, successful TV advertis-ing campaigns would be discussed at water coolers in offices and between parents when picking up children. Now TV adverts are posted on YouTube and Facebook for free—often by customers. The public can vote for them, share them, and share comments on the material. Popu-lar adverts are pushed to people by their friends and with their friends’ recommendation.

Advertising schemes using social networks have demonstrated much higher engagement. Nationwide is currently pursuing a campaign based around a character called “The World’s Greatest Spokesperson in the World,” which is looking to leverage social networks and social media to make up for a limited marketing budget. In the UK, the adver-tising campaign “compare the meerkat” has used extensive social media, and the increase in traffic for comparethemarket.com is dem-onstrated in Figure 2 on page 14.


Social networks have become the place to broadcast what people are doing and how they’re feeling. The acronym TMI or “too much infor-mation” is often used in reference to social networks. Social networks have become the place to vent one’s frustrations and to share stories of positive experiences. Only by actively engaging with the social net-works that customers use can an organization discover current sentiment and address concerns or complaints voiced through these channels.

Unintended ConsequencesHistorically information held within social networking websites was private. There is a trend of more of the information available on social networks becoming public. The default setting on Google’s Buzz and on Twitter is that anyone can see the customer’s followers and who fol-lows them—their network, in effect. It is quite plausible that a customer’s network could be used in the future to offer discounts or as part of a credit check if they are connected to known fraudsters. Own-ers of popular web logs or blogs already receive promotional items and incentives to write about new products. Insurers already look for pat-terns in customer behaviors, and individuals involved in claims to spot fraudulent activities. It is reasonable to assume these services will include data from social networks in the future.

Figure 2: Impact of the “Meerkat” Advertising Scheme on Search Volumes for comparethemarket.com

Source: Celent, Google Trends

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Data held on social networks has been used in court cases in the US. In 2007 a Santa Barbara Superior Court Judge cited pictures posted on MySpace as showing that a defendant had no remorse for the incident of which she was convicted. There have been cases of people having their probation revoked based on videos, pictures, or text on social net-works describing them doing something in breach of their conditions. In short, seemingly innocent use of social networks is now being used by law enforcement agencies in building cases.

Another trend centres around the now wide availability of mobile devices with GPS facilities. More and more people are sharing their cur-rent location publicly. This allows for the serendipitous meeting in an unexpected location to become more automated; however, it is clear to anyone on the Internet who knows their ID when they are not at home. A mock website was put together to highlight the issue, called pleaserobme.com, which pulls real location information from Twitter and foursquare to inform would-be burglars of empty homes.

There is speculation in the UK that insurers will start looking at cus-tomer behavior and what they share when pricing their insurance. This is not without challenges, however, since it is difficult to get a con-firmed match between a customer’s account on a social networking site and the details they share with an insurer. An insurer must then ask for the customer’s account name in order to get the match, and this clearly may not be offered if it becomes known that the informa-tion could increase the premium.

Organizational Risk Organizations are now actively using social networking websites to engage with customers of their services. Previously, allowing custom-ers to share stories, pictures, and information was activity reserved for bands and celebrities. Now this powerful method of word of mouth marketing is increasingly being used to share information about orga-nizations and their services. Changes in how customers find information and how search engines such as Google deliver informa-tion will increase the importance of this channel.

Social networks bring a number of risks with them. Since it is fre-quently free to sign up and there is no vetting of the person behind this, it is difficult to tell if the account is legitimate. This is a problem for organizations wanting to communicate with customers and also for customers in identifying real accounts for organizations. In addition, interacting through social networks is a written form of communica-


tion and is therefore subject to legislation and regulation. This presents increasing challenges to organizations and particularly finan-cial services organizations.


Insurers and Social Networking

In the United States, nine of the top ten nonlife insurers have at least one Twitter account, and eight of those have at least one Facebook page. These social media websites are both active and have an engaged customer community involved. By contrast only seven of the top twenty life and nonlife insurers in the UK have a presence on Twitter, with fewer on Facebook. In the UK, the interaction is rare and adoption is just starting.

Insurers in the United States: A Consistent Multinetwork ApproachThe approach taken in the United States to Twitter, Facebook, and You-Tube is very similar across the key players. In each case content is posted to each social network consistently. Comments made publicly through Twitter and Facebook are responded to swiftly and through the channel by which they arrived, although it is not possible to see if addi-tional private communication was also made.

The most frequent updates to Twitter from insurers are replies to other Twitter users regarding queries or comments made about the brand. Twitter is also a popular route for sharing links to news articles and adverts for Insurers. Since Twitter messages are public, this also increases the likelihood that these links are found by search engines. Some insurers also take the opportunity to repeat other Twitter mes-sages that say positive things about their brand or products, referred to as re-tweeting on Twitter.

Facebook interactions are not limited to 140 characters like Twitter. All the top ten insurers had posted multiple forms of media, including links to their content, relevant pictures, and videos from their advertis-ing campaigns. In many cases there was Facebook-specific content, such as Facebook applications, items that could be shared on Facebook, and games to play.


The most popular US page reviewed (in terms of combined Facebook fans and Twitter followers) in this research belongs to a comedy char-acter at the heart of an advertising campaign, in this case in Nationwide’s “World’s Greatest Spokesperson in the World” campaign. The model uses amusing social media content on social networks along with other advertising media. Figure 3 on page 18 and Figure 5 on page 20 include the fans of the mascot. The character was launched in February 2010 with a television advertising campaign, although it is too early to tell if the social media exercise has been effective. The peak on Figure 4 on page 19 is associated with the television advertising. It’s worth noting the character’s name is so complex it is not regularly searched for; “greatest spokesperson” and “spokesperson” were the most common terms.

Figure 3: Twitter and Facebook Fans for US Insurers

Source: Celent

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Some insurers had made use of a YouTube channel with their adverts and some other informational videos hosted. Also some insurers had a presence on the photo sharing service, Flickr.

In all cases, updates were consistent between the different social media websites used. For instance, videos posted on YouTube could be found on Facebook, and articles linked from Twitter were also shared through Facebook.

Lessons from the United KingdomTwo alternative approaches in the UK have yielded up to 10 times the number of Twitter followers and 20 times the numbers of fans through Facebook, although one is a meerkat toy character and the other is related to the iPhone application Stuck (from Axa/Swiftcover). Figure 5 shows the Twitter followers and Facebook fans for these sites com-pared to Nationwide in the US.

Figure 4: Search Figures for Nationwide and Spokesperson in the US

Source: Celent, Google Trends

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Although UK insurers are not as active in using social networks ser-vices as their US counterparts, the insurance pricing aggregators are showing increasing interest. Of the insurers and insurance aggregators reviewed, the Facebook page with by far the greatest number of fans belongs to Aleksandr Orlov—a fictional meerkat character used by BISL Limited in the comparethemarket.com advertising campaign. Compa-rethemarket.com has an advertising campaign based around a mock similar website at http://comparethemeerkat.com/. Originally the name was selected to highlight the “market” element of the website, since “compare” is a common term now in UK aggregator websites. The meerkat character has appeared in television, print, and online media adverts.

A team of people are operating Twitter and Facebook accounts in Alek-sandr’s name, providing amusing commentary on world events and replies to people on the Internet. The amusing content has been shared widely and is spread quickly through social networks. Fans of Aleksandr are even generating their own meerkat content and sharing this online. While the content is not directly related to car insurance or comparethemarket.com, the pricing aggregator website has seen a sig-nificant increase in usage since the advertising campaign (see Figure 2 on page 14).

Figure 5: Engagement Figures for Alternative Approaches in UK

Source: Celent

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The implication is that a strong multiformat advertising campaign based around a central fun character or mascot making significant, fre-quent, and relevant use of social network services can dramatically increase brand awareness, provide a method to engage with a large number of customers, and increase business volumes.

iPhone AppsSwiftcover (AXA) in the UK is behind the iPhone application Stuck. The application allows iPhone users to share information about their loca-tion with friends and to see updates from other users. The application is itself a social network, although it also updates friends via email and can update Twitter.

While the application is of use to drivers in sharing traffic jams, at this writing there are no links to insurance or any mention of the Swift-cover brand. The reason it is mentioned here is that the application has more followers on Facebook and Twitter than any of the insurer-branded pages, and is second largest of those polled behind Aleksandr Orlov. Due to the lack of affiliation, Swiftcover hasn’t seen the increase in customer activity that comparethemarket.com has. Swiftcover must be careful how it repositions the application in future versions if it is to leverage the fan base.


Insurer Social Networks

A few insurers have made early attempts at building their own social networks. The social networks tend not to focus on insurance topics, although they do advertise their sponsor (with the exception of Stuck).

Good Hands Community. The website is principally focussed on community-based volunteer work but also includes sec-tions on driving and personal finance. Each page features an advert for Allstate in the United States.

The Responsibility Project. Not really a social networking site but worthy of mention here. The website is focused on dis-cussing what it means to behave responsibly. It is strongly affiliated with its owner, Liberty Mutual in the United States.

Stuck or Stucknow. As discussed above, Stuck is a social net-work based around an iPhone application and is operated by Swiftcover in the UK.

Keep Britain Biking. This site is owned by Devitt Insurance in the UK, part of RBS Insurance, which specializes in Motorcy-cle insurance.

Kontsurnous.fr. This is group insurance scheme where tribes of up to 15 people join together. For each policy in the scheme, the tribe earns points which can be redeemed as lower premiums or not having to pay the excess in the event of an accident.

Celent believes that insurers should seek to use existing, established social networks such as Facebook or LinkedIn where possible. The investment to create a new social network is significant and won’t attract usage unless it has a specific target audience. With the excep-tion of kontsurnous, the examples given demonstrate building social networks around topics not directly related to insurance.

Financial Services Aggregators as Social NetworksFinancial services-focused websites have existed for a number of years offering consumer advice on a variety of products including insurance. Moneysupermarket.com, for instance, was launched in 1999. Other


examples include mint.com, wesabe.com, and lovemoney.com. Some websites target specific audiences, such as saga.co.uk, which is aimed at people over 50—so-called silver surfers.

These websites offer the customers the ability to log in and share infor-mation, experiences, and reviews regarding financial institutions and insurers. These aggregators are in a strong position for creating social networks because they are positioned as advising the customers, and many already have a community of followers. This neutral position lends them more credibility and allows for continued interaction even if the customer changes their provider.


Social Networking Trends

Social networking is a growing channel and will be key to brand awareness. Successful social media campaigns can drive increased customer traffic to the brand, solidify relationships with existing cus-tomers, and increase new business. The trend of customers seeking advice from friends and others in their community will increase. The introduction of social search capabilities in popular search engines will make these recommendations and comments easier to find in the future. It will be crucial that public negative comments and reviews are responded to publicly, allowing search engines to reveal the whole con-versation and limiting the negative impact.

In the UK, pricing aggregators make the best use of social networks, with some aggregators supporting their own social network. The finan-cial services aggregator Mint in the US also demonstrates greater engagement than the insurers.

As the number of social networks grow, we will see social network aggregation websites grow and more open standards form, allowing content to be shared and move between social network services. At this point, the number of general purpose social network sites will likely decrease in number through acquisition or failure, although those that remain will maintain greater influence than social networks have today. Many specialist social networks with existing communities will continue.

A large proportion of the public in all markets will start sharing sig-nificantly more data than they do today. Even in emerging markets, the availability of mobile technology will allow for mobile-based social networks to continue to grow and increase the use of location-based services in these areas. A key challenge for insurers will be persuading their customers to share this data and then using it effectively in pro-ducing new products and improved pricing. Rewarding customers for avoiding dangerous roads and driving sensibly will become increas-ingly possible.

The use of microtransactions or small, frequent payments will increase in social networks and be a common occurrence elsewhere. Products that can leverage paying for a service at small amounts at a


time will appeal to a broader cross-section of the population in both developed and emerging economies. Pay-as-you-drive initiatives and per-hour car insurance policies will become commonplace.

Insurance schemes based on popularity or the number of friends in the scheme will become more commonplace. Kontsurnous in France is ahead of its time, but insurers will increasingly experiment with social networks and group insurance policies. Current psychological research in how group behavior influences individual behavior will drive this, and insurers will look at how social networks can be used to make their customers safer drivers and better risks in general.

Finally, insurers will increasingly use public shared data to inform pricing decisions and aid in fraud detection. Customers with large net-works and a significant amount of influence may benefit from preferential rates and better service since their comments will benefit search engine results for the brand. Customers who associate with poor drivers, criminals, and friends involved with fraud may find that they pay a higher premium or are not offered insurance.

Social Networkers in the FutureSome typical uses of social networking have started to form, and the introduction of Google Buzz sparked many discussions on how people use different social networks. Celent believes people will fall into one of five basic categories, as shown in Figure 6.

Figure 6: Types of Social Networkers

Source: Celent

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Even in the future, there will remain disconnected individuals who are not connected to the Internet, although some data will appear on the Internet related to them, typically from oversharing friends.

The group labeled paranoid individuals refers to the very privacy-con-scious individuals who have elected to share very little data about themselves on the Internet and avoid social networks, but who do par-ticipate on the Internet. This group will use the Internet as most use it today, turning to search engines with specific queries.

Paranoid groups refer to private groups on the Internet who share some data among themselves but have very little public information available. Social clubs and family groups would fall into this category. While very sensitive information is shared, it is done so only within a tightly specified group. This group’s experience of the Internet will dif-fer, content will be pushed to the members of the group by other members, and they will be presented with friends’ reviews when searching for services and products. Paranoid groups may pay for some services, although this will be limited. Social games and low-cost fea-tures may appeal within this group.

Professional sharers refer to individuals who share a great deal of information publicly or within a broad audience for professional rea-sons—such as networking, managing clients, etc. These individuals will share some location information as it relates to business trips, but otherwise very little sensitive information will be shared. Similarly to the previous group, content will be pushed to professional sharers, although they will make more use of location-based services and using their contacts for answering questions through social networks. Pro-fessional sharers will pay for additional services and for features that improve their profile.

Finally, oversharers feel the benefit of sharing information greatly out-weighs the risk and share as much information as possible on social networks, much of the information shared publicly. This group pays frequent, small sums of money for premium subscriptions, additional features, and location-based services.

The challenge for insurers who wish to use data from social networks is twofold: what customer behavior on social networks should be rewarded, and what should be penalized? A topic actively discussed in the press at the time of writing is, “Should individuals who actively overshare their location pay more for house insurance?” If so, should this affect professionals who are likely to be affluent, good risks but who travel?


It is common practice for bloggers and journalists with a broad reader-ship to receive free samples in the hope that they write about the product. Should individuals with many connections receive better ser-vice? Would this favoritism help ensure the social search results in their wide network include their good will? In the future, people with a large network will have greater influence on spending, and Celent believes this will be taken into account when dealing with customer service issues.

Finally, insurers will need to include disconnected customers in their future strategies. Such customers may be dealt with as they are today in face-to-face or phone channels and with paper documents. It is key that this group of customers are considered in any future strategy.

Social Networks Start Seeking RevenueThere is some speculation about the future of social networks. Most social networks have followed the “URL” strategy—Ubiquity first, Reve-nue Later. The revenue model for websites such as Twitter and Facebook has not been proven, despite the significant investment these sites have gained and the lofty valuation figures.

The key source of income was seen to be targeted advertising. It has been observed that the click-through rates from adverts on social net-works are much lower than for Google’s adverts on their search pages. While many organizations are creating free Facebook pages for instance, many are wary of advertising given the poor performance. That said, the scale of customers on Facebook perhaps makes up for the poor performance in terms of click-through rates, and Celent believes that advertising will still be a key source of income for social networks. Social networks will supplement this income by asking orga-nizations to pay for new premium services.

Social networking will increasingly borrow inspiration and revenue models from online gaming. Free online games have for some time relied on microtransaction models, where players can play for free or choose to pay small fees for virtual in-game items. In some cases these items provide an advantage in the game, and in other cases they are simply cosmetic, such as changing the color of the player’s hair in-game. Such models are already working well in Zynga Game’s Farm-ville, which is popular on Facebook. The social network hi5.com, which is popular in Central America and Eastern Europe, allows customers to spend hi5 coins on changing the color of their profile background. Coins can be bought or earned through revenue-generating behaviors such as using the hi5 search toolbar, and the click-throughs generate revenue for the social network.


The proliferation of mobile applications supporting social networks will continue to grow, and consumer electronics will start to embed social networking technology. Sony already sells a television that is capable of showing your Facebook updates, for instance. Some con-sumer electronics items will be able to automatically share their state with social networks such as Twitter and Facebook.

In short, Celent believes that social networks will grow in usage and become central to the Internet experience for most people. While the number of users of social networks continue to increase apace, an understanding of the types of social networkers will help insurers to better understand their target market. Rather than the current model of searching for content and pulling it, relevant content will be pushed to Internet users through recommendations from their friends and tar-geted advertising.


Embracing the Digital Change

The use of social networks is a global phenomenon and is already affecting insurers. Use of social networks is a new phenomenon, although customers are increasingly crowd-sourcing opinions from friends through social networks. Customers will increasingly use social networks in pricing decisions and to engage with organizations for ser-vices. An insurer that fails to engage in social networks has little influence on this content and misses the opportunity to engage with customers.

How to AdoptThere are a series of steps insurers may go through in adopting social networks. Each step builds on the previous one and requires increasing commitment from the insurer. See Figure 7. Sharing existing articles and content through social networks requires minimal input and can usually be accommodated with current headcount.

Figure 7: Stages of Social Network Adoption

Source: Celent

Sharing Repeati ng Engaging Promotion Mascot

Customers re-share

Increase website traffic

Searc hable online content

Reduce assistance calls

Content from other sources appears authentic

Requires team

Should not be seen to endorse linked content

Defend brand

Answer customer complaints

Builds an on-line FAQ

Increases customer engagement

Requires team

Regulation

Audit

Privacy -difficult in public forum.

Promotes brand

Rewards word of mouth

Network specific voucher codes

Sign up friends

Analytics can be difficult

Strongest engagement

Builds brand awareness

Further increase web traffic

Promotes engagement

Consistent multimedia needed

Unclear if effect remains without consistent input.

Social Network

Control over network

Full visibility of data

Significant costs to set up and promote

Needs an adjacent theme

Why would your customers join an additional social network?

Sharing Repeati ng Engaging Promotion Mascot

Customers re-share

Increase website traffic

Searc hable online content

Reduce assistance calls

Content from other sources appears authentic

Requires team

Should not be seen to endorse linked content

Defend brand

Answer customer complaints

Builds an on-line FAQ

Increases customer engagement

Requires team

Regulation

Audit

Privacy -difficult in public forum.

Promotes brand

Rewards word of mouth

Network specific voucher codes

Sign up friends

Analytics can be difficult

Strongest engagement

Builds brand awareness

Further increase web traffic

Promotes engagement

Consistent multimedia needed

Unclear if effect remains without consistent input.

Social Network

Control over network

Full visibility of data

Significant costs to set up and promote

Needs an adjacent theme

Why would your customers join an additional social network?


Sharing user-generated content such as Twitter messages commend-ing customer service experiences is perhaps more effective. Such messages appear more authentic and can be verified by prospective customers. This, however, requires a team to seek such content and to share it.

Engaging with customers through social networks, by contrast, requires a team of individuals and technology support to aid regulatory compliance and audit requirements. This approach has the side bene-fit of creating an online FAQ where customers searching the web for solutions may find the insurer’s responses on Twitter or other social networks, so it does not incur the cost of an incoming phone call or a call to the wrong department.

Promoting the social network page is slightly different. Organizations in other verticals have used promotions and competitions on the social networks. The drive is to increase the influence of the organization, so repeating promotional messages or bringing in friends to be fans of the organization are typical goals. Those who complete the required activ-ity receive at least a message from the organization and possibly a voucher or prize. Other organizations have used discount voucher codes to tempt people to become fans of their social network pages. This approach has the advantage of being able to track the effective-ness of publicizing promotions for free through social media.

The word mascots here describes the use of fun characters in social media. This type of content is well suited to social media and is readily shared. This activity can pay significant dividends in brand awareness, as seen in Figure 2 on page 14. In the UK, an obvious mascot opportu-nity is the Churchill Dog from Churchill insurance. The Churchill Dog has a limited presence on Facebook and a respectable number of fans despite the lack of updates and lack of engagement. Similarly in the US, the Geico Gecko and Caveman characters already have a significant unofficial social media following that could be tapped to the brands’ advantage. These are perhaps the best examples of untapped potential in the scope of this report. With respect to the Nationwide campaign, it’s worth noting that simpler names such as meerkat are easier to search for than a phrase such as ‘The World’s Greatest Spokesperson in the World.”

Setting up a social network is another order of magnitude again in terms of investment and presents the question, “Why would our cus-tomers join our network?” It is Celent’s view that insurers should leverage existing social networks where possible, only choosing to cre-ate a new one where there is a specific application that can’t be achieved elsewhere or there is already a strong target community. For


instance, Kontsurnous.fr would likely be significantly more successful if it were better integrated to existing social networks rather than rely-ing on customers entering in friends’ details.

Regardless of the level of adoption, there are certain governance rules which should be implemented for organizations interacting with customers:

The customer must be identified and verified as with any other channel.

Move sensitive answers to another channel such as phone, email, or secure message.

Use a tool to communicate through social networks that can log interactions.

Actively search for fake social network pages. In the same way fake websites operate, these may be operating fraudu-lently in order to defraud potential customers.

Technology SolutionsThis report will not cover technology solutions for social networks in detail, although this section will point to some example applications and provide a view on the kind of functionality an organization should be looking for when adopting tools. These are not recommendations, and any organization should execute its usual software selection pro-cesses before progressing.

There are many free Twitter and Facebook tools. Most now feature sup-porting multiple accounts and scheduled posting. Hootsuite has some analytics capability beyond the common Twitter Search functions.

Enterprise-ready tools for managing and analyzing social network interactions typically have full workflow and audit capabilities. They also typically have stronger real time analytics capabilities, although dedicated analytics solutions may be required for in-depth analysis. For social media analytics looking at return on investment of activities, a short list of tools is included.

Table 2: Social Networking Aggregators and AnalyticsProduct Aggregation Workflow Analytics

TweetDeck Facebook, Twitter, MySpace, and LinkedIn

None Twitter search

Seesmic Twitter None Twitter search

Source: Celent


Insurers looking to create their own social network may want to con-sider the vendors in Table 3.

Hootsuite Facebook, Twitter, LinkedIn, MySpace, ping.fm, and Four-square

Multiple users, scheduled posts

Link analytics through ow.ly integration, search facilities

Service Cloud 2 from Salesforce

At least Twitter and Facebook

Integrated to CRM functions

Social Marketing Suite from ContextOptional

Facebook Multiple users, scheduled posts

Fan growth, user activity

Social Relationship Management from Virtue

Twitter and Facebook Multiple users, scheduled posts

Link analytics

Media play analytics

SocialTalk from Syn-capse

At least Twitter, Facebook, MySpace, and Orkut

Yes Yes

Google Analytics N/A N/A Full analytics suite, linked to Google Adwords

Omniture N/A N/A Web Analytics and ROI management tool

Tweetmeme Twitter N/A Analytics on popular Twitter message by theme

Postrank Analytics Twitter, Facebook, FriendFeed, and many others

N/A Analytics on popular messages by theme

ow.ly N/A N/A URL shortener with link analytics

bit.ly N/A N/A URL shortener with link analytics

Table 3: Full Social Networking SolutionsProduct Name Company Comments

SBS Jive Software

KickApps Platform KickApps

Telligent Community Telligent Systems

BuddyPress buddypress.org Based on the popular WordPress blogging tool

Ning.com Ning, Inc. Cobranded networks

Source: Celent

Table 2: Social Networking Aggregators and AnalyticsProduct Aggregation Workflow Analytics

Source: Celent


Conclusions

Social networking activity on the Internet and other devices is a rapidly growing phenomenon and is here to stay. The top US Insurers have an established social media strategy that is increasing their engagement with customers and allowing them to interact with customers in their chosen channel. Some UK insurers have some social network presence but typically don’t display the same strategic activity as US insurers.

Social networks are themselves changing and are increasingly under pressure to prove their potential revenue streams. The low click-through rate of advertising on social networks has put some companies off, but with the ever-growing customer numbers, it is clear this will be a necessity in the future. The deals struck between search providers and key social networks have already brought changes in the Internet search results retrieved from the major search providers such as Bing and Google, something that will complicate search engine opti-mization, and which the marketing team must keep watch on.

In the future we will see a growing population of social networkers who are used to seeing friends’ comments in search results for finan-cial services products and who expect to be able to engage with their chosen insurer through the channel of their choice. In addition, social networkers will be comfortable with the concept of sharing informa-tion about their behavior, their location, and also paying small amounts for key premium services. These key concepts will allow new innovative insurance products to come to market leveraging this data, new payment methods, and the on-demand requirements of the customers.

Perhaps the most surprising result is that spending effort now in seem-ingly frivolous activities on social networks can drive real business value. The huge popularity of comic mascots in social media has paid dividends to insurers who have invested in them and executed them well. As Aleksandr Orlov, the meerkat mascot and founder of compare-themeerkat.com, would say, “Simples.”


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Related Celent Research

Reaping the Benefits of Web 2.0: European Insurers' Strategies that WorkJune 2009

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