What Twitter sees in Niche

As I have written about before, social networks have all more or less had a very specific path from founding to growth to monetization. Twitter acquiring Niche is just the next logical step on that path.

By their very nature, social networks require as unfettered growth as possible because, unlike most other digital and physical products, an individual’s value of them require other people on the platform.

Think about a Pepsi, or the Wall Street Journal, or a book. You purchase these three items and you extract as much value out of them as you’d like. With a social network, the value only begins if others are on the platform with whom you can interact. This is often called the network effect.

So, in order to encourage this growth, social networks take a very laissez faire approach to what early adopters can do on the site, including businesses. Often times, they don’t even create a “business profile”, allowing brands to sign up for the same profiles as anyone else.  You may remember that Google + specifically banned businesses at the onset, but eventually relented and converted those company profiles created in the early days to company pages.

During these early days, while the social network is concerned with growth hacking (i.e. getting as many users are possible on the platform), brands are left to pull out every trick in the book to do their own growth hacking (i.e. getting as many users to like, follow, etc. their pages).

One of the tried and true methods is to partner with individual “influencers” who have through sheer dedication and force of personality – or luck of the algorithm – garnered a sizable following.

In earlier days – because this concept was so revolutionary – individuals, many of whom were exited about the idea of anyone valuing their opinion and influence, traded their influence for schwag or just the brand connection.

That was short-lived; the more business savvy of those individuals began assigning prices to their partnerships and “agencies” and intermediaries followed suit. Niche, which focuses on Vine and Instagram stars, was not the first agency such as this to spring up and won’t be the last.

This, however, is the first time I’ve encountered a social network purchasing one of these agencies. The reason is – the work on connecting influencers and brands is a time-consuming one, whereas social networks have long been content on creating an ad market and making it easy for brands to buy ads either through self-service or managed service intermediaries.

While something like an influencer talent agency is far removed from the core tech focus of a company like Twitter, Niche and others have been able to build up sizable revenues without having to contribute to Twitter’s bottom line. And it is starting to get to high stakes.

When Brand X works Niche to hire Influencer Y to post a Vine or Tweet about Brand X, Twitter and Vine do not get any of that money. Now they might.

The future of social networking monetization is hard to predict. Ad targeting continues to improve and become more sophisticated, but consumers’ ability to ignore the ads continues apace. However users are likely more interested in reading a sponsored Tweet from influential people they follow. 

While studies on the effectiveness of celebrity endorsements have always varied, many modern day “influencers” who appear as much as peers as celebrities. This could be a big business opportunity for the social network to own those relationships, even if it’s something they did not focus on in the past.

With Niche, Twitter can try to own all aspects of monetization on its social platforms. Additionally, Niche’s work with Facebook-owned Instagram is about to get a whole lot more interesting.

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