There is a resistance to being owned by a corporation. When big brother becomes involved online community members suspect that they are being used. That they are being led to the advertising agency slaughter and do not trust the company with handling personal information, not spamming them or selling demographic information to a third party. Businesses are in the business of making a profit so why should starting a community be any different?

Successful online communities are very well managed. The management is organic and comes from the interaction of the membership. If the right members join and exhibit leadership and knowledge then membership numbers grow. The relationship between a communities management and its members is so important and close that breaking the relationship through attrition or purposeful changes could kill the communities spirit. It is this spirit "esprit de corp", that businesses are hoping to cash in on.

How to kill a community in one easy step

Buying an online community with the intention of making a profit or selling it will only kill its spirit. A thriving community that is purchased only leaves behind a membership that feels as though they have been betrayed. This is because someone in the group has to profit from the sale. But after the sale it is rare that the membership sees any improvement. Corporations tend to throw in a lot of bells and whistles and myriads of advertising in to the websites and not much of anything else. They also start to place more work load on the communities members by asking them to fill out questionaires and take part in polls. This would probably be okay to do if these tasks came organically from within the group but they tend to be geared towards the owning companies needs rather than the needs of the community.

Collecting Communties is a bad business plan

Many small businesses try and aquire a group of communities in hopes that they may compete with larger communities like Facebook, MySpace or Lunarstorm. They hope with luck be able to sell their collection with its collective membership to a single entity to another business like Google, Spray Media or Lycos. This where branding a community comes in and where both the selling company and the buying company lose if things are not done correctly. The seller has to be able to add value to a community and prove that the community will continue to grow and enhance any potential buyers business profile. They cannot possibly hope to do this without first proving themselves to be a top notch management group. Any company that aquires communities should have a knowledgable staff of community managers, promoters and web support personel. They would have to infuse new energy in the community and cater to the core group. This is a job that is better left to organic growth but with the right talent and experienced personel it is possible to externally. Web companies with this business model are few and the number of successful ones is even less. The reason being is acquisition is a very costly habit. There are no guarantees on a return on the investment. Purchasing ten communities with 100,000 members for a dollar per member is a million dollar investment that may give nothing in return. Serious venture capitalist would do well to stay away from these businesses.

At FreshNetworks we build and manage branded online communities, working with firms who want to launch a community and helping them to get the strategy right, set up the platform and then manage the community. I was surprised and shocked to read some of the comments on this report. We’ve seen quite a few communities that fail, but have seen and been involved with even more that are successful. This led me to try to consider what it is that makes a community work and how to reconcile my own experiences with the Deloitte report.

I tend to go with wall street journal, others and Deloitte report on this. Not being involved with failing communites is only saying that the company has been successful in avoiding disaster. It says nothing about the evidence or trend that most online communities fail. Community management businesses do not make their profit from the success or failure of their clients communities. They profit from services provided to their clients like any other group of service professionals. In this case it would be a better investment for a venture capitalist to invest in the community management company than in the company that owns the online communities.

Communities are not factories

The higher percentage of communities do not produce anything. This makes them poor investments for branding give them a very iffy ROI chances. They really only have potential advertising as a commmodity. This is because most communites are knowledged based. The only thing being traded is knowledge and time. This is very difficult for a business to enhance. If you take an imaginary community like "coke bottle collectors" as versus "cola lovers" it is easier to see where the potential for investment and a return on investment will be. The coca cola company could take the "coke bottles collectors" community and start building on it by offering new styles and vintages of coke bottles to their membership. They could get away with advertising, give aways, contests and just about anything else. They would be profiting from the groups participation in all sorts of things. But if coca cola purchased and invested in the "cola lovers" community the story would be different and would not have a happy ending. They would have a hard time infusing new excitement about their product in such a community. They would also see lackluster enthusiasm as the membership would see the buy out as an attempt to control their freedom of choice in the cola wars.

I have been involved in building websites and communities in general over the past two years. Using this experience together with an indepth knowledge of open source CMS software I will be conducting interviews and gathering data on companies and trend in social media. Online Community building is still a young industry and invariably becomes involved with social networking and the software behind the community, very interseting stories of success and failure. This is what Hiveminds Magazine will be bring you more of in the future.

Related:

How and why to build an online community

Happy Publishing!

Ten years of experience in web development. Carl is looking for in employment as a Senior PHP/mySQL Developer in Stockholm.
Carl McDade - Systems Developer