After reading the Enabling the Social Company white paper, Nupur Sen sent me a bunch of follow-up questions about social networking and how companies are starting to use it. Perhaps our exchange will be useful to others exploring this burgeoning field, so I'm publishing it here.

NUPUR SEN: I get the impression that you're advocating that companies use social networking as a feature on their websites or create their own niche social networking communities. Would you say that is the new trend?

STEVE OUTING: Yes, definitely. With the incredible success of MySpace and Facebook, especially, many other web publishers are adding social networking and social media features, and in cases where it makes sense, creating their own social networks.

Really, this is just a continuation of a long, long trend. The Internet has always been aboud connecting people. Now we have better tools ("Web 2.0"), and we're in a period where more websites are starting to take advantage of those to support 2-way conversations -- between individuals, and between individuals and brands (media or otherwise).

NUPUR: What kind of revenue-generating potential might sites like MySpace and Facebook have, or will these have to reinvent themselves?

STEVE: I'm not too worried about those sites. Though there are dangers for them. Facebook is going great guns right now, but it could be overtaken by Google as it gets in the same space. MySpace is the 800-pound gorilla right now, but it has yet to open up to outside applications in the way Facebook has, so it could get overtaken by someone else eventually if it doesn't step up its technology (which to me seems really weak, though that apparently doesn't bother its many millions of mostly young users).

MySpace and Facebook I'm sure will constantly have to be changing and over time reinventing themselves, to keep up with new competition that comes along.

NUPUR: To what extent can companies make use of sites like Facebook to promote themselves?

STEVE: This is a huge area for most companies right now. Any company that develops a social networking strategy, even if it develops its own social network, needs to tie in with Facebook. It's not difficult to create a Facebook application that ties in to your core website. For just about any website, Facebook represents a great opportunity to get in front of Facebook's huge user base and attract new users. The way Facebook is set up, when someone uses your external Facebook application, that person's friends are all alerted to the app. If your friend has just installed something and you see that, you'll likely go check it out yourself. You're leveraging Facebook's power. Why wouldn't you do that?

NUPUR: Following from the question above, I notice your company has a Facebook profile, in what ways does that help you? What motivated you to create a page on Facebook?

STEVE: I think you're referring to the Facebook group we created for our "Enabling the Social Company" white paper. (We also have created a Facebook app called Run Time, which is a tracking tool for runners that not only tracks your own running activity, but also shows you friends' activity, so you can compare yourself to them. That is linked to our YourRunning.com website.)

On the white paper group, we knew that we wanted a discussion somewhere online for people who had read the paper. We could have done it on our corporate website, but then not that many people would become aware of it. So we realized that by hosting the discussion on Facebook, we could leverage its power (as I described above). As a member of the white paper group has things about us show up on his/her news feed on Facebook, other friends will be exposed to the group and we hope check it out.

So many people already use Facebook among the tech savvy crowd (and that's the biggest part of the market that our white paper will appeal to), we weren't too worried about hosting the discussion there. If you hear about the group and aren't a Facebook member yet, well, it's about time you joined.

NUPUR: Given that SNS users have the potential to provide free publicity for brand names, can sites like Facebook make use of this feature to charge companies a fee for the publicity they benefit from? On what basis might this happen?

STEVE: I'll never say never, but I doubt Facebook would take that approach. Facebook will (and should) set guidelines and prevent commercial interests from abusing its service; it must prevent Facebook from becoming a haven for spammers. Sure, it's not going to let Pepsi or Wal-mart splatter what amount to free ads on its service; they should pay for that. But there are many ways that people will use Facebook to create communities of interest around brands. I think our white paper Facebook group is an example of an appropriate use. Ditto for Run Time. Both those examples from my company give something of value to people, but they also help promote us.

NUPUR: You suggest that companies can use SNS to listen to their customers and provide better service.I'm wondering how possible this will be, especially for behemoths like Time Warner, for instance. After all, companies also let customers call in or e-mail them, and that doesn't always result in a response that is in any way related to the feedback provided by the consumer. Often times, companies don't acknowledge feedback, although a customer service rep will respond to complaints.

STEVE: This is the big sea change. The main point about the transition that's taking place is that people are already talking about your company, all over the Internet. Your company is getting trashed, and praised, on all sorts of online forums, on blogs, all manner of online venue. It's my contention that companies are smart to get in on the conversation, and stop being outsiders. By joining the conversation, they can respond when problems come up; they can correct false rumors; they can learn what consumers want from them in terms of product improvements and new products or features.

In an environment where a customer who does not receive any response from customer service -- or receives an unsatisfactory response -- can blast out a complaint and have it reverberate online, it's imperative that companies figure out how to get in on the conversation. Doesn't matter if it's a tiny business or a behemoth like Time Warner.

In terms of managing that, a key point is that social networking as applied to brands is about enabling your brand's enthusiasts to market on your behalf! If you're serving your brand enthusiasts well, they'll help you out and deal with some of the workload. It's not practical to do it all yourself. Figure out how to get your brand fans hooked in and let them help you out.

NUPUR: Does online "word-of-mouth" publicity -- positive or negative -- really act like a newspaper headline or does it just get relayed to people within one's social network, being in that case no different from offline word-of-mouth publicity?

STEVE: I think more the latter, that word-of-mouth publicity gets relayed to individuals' social networks. It's different than offline word-of-mouth because it utilizes the amplification power of the Internet.

Here's an example from one of my company's sites, YourClimbing.com. We run contests for best content submitted to the site. One of our users won a gift pack from Pixie Mate (teas). After receiving them, she posted a glowing and detailed review of all the various types of tea she received. Then a bunch of her online friends weighed in with comments, like "I'll have to try that!" and "Sounds really good!" Months after that, we still see occasional references to Pixie Mate in climbers' posts and comments to the site.

So it's word of mouth amplified via the power of the Internet.

I would contend that that is really powerful. If a friend hypes some product in an authentic manner (as in the example above), that's a MUCH more powerful influencer to try a product than any form of traditional marketing a company like Pixie Mate can do.

NUPUR: How might a company deal with negative publicity? I'm thinking of something like the GM viral marketing gimmick that bombed because environmentally conscious consumers took the opportunity to create an ad for the company to lambast the company and cars in general.

STEVE: The way you have to deal with negative publicity is to be honest and transparent, own up to mistakes, and be contrite if the situation calls for that. You don't get away with lying and denying the truth in an environment where the audience has ample opportunity and power to damage your reputation by uncovering your untruths.

With the GM thing, that's a campaign I would have advised against. They should have foreseen that coming. SUVs in an era of global warming concerns are too obvious a target. Probably the only way that program could have worked was to pre-screen all video ad submissions, and set ground rules that prohibited spoof or parody or politcal submissions.

NUPUR: Can connectivity through SNS really translate into revenue for the company?And how might this happen?

STEVE: This is a tough one to answer because we're so early into this. I think we need to find new metrics for measuring the impact of social networking applied to the brand. CPM is less of an effective measure than CPI -- cost per influence. Another way to say that is that when you get your customers or audience to engage with you, those connections and relationships are extremely high value. The consumers who actively engage with you not only are loyal to your brand, but they often end up marketing on your behalf.

Another way to look at the revenue potential is to understand that the conversation that takes place as a result of social networking features is content itself. If you do this successfully, you'll get good engagement by your most devoted users, and following the 90/10 rule of online participation (9 out of 10 peope will lurk), that conversation will be tracked by many people who don't bother to participate. So get a good conversation going via social networking features, and you end up with a significant amount of new traffic.

Also, if you do this right and succeed, you'll be facilitating lots of person-to-person communication -- just as on MySpace, a huge number of clicks are a result of people writing back and forth on user profile guestbooks. Those all result in pageviews, and thus ad views. This is potentially a significant way for a website to growth traffic by moving into a new area of content that's inexpensive (essentially free, provided by your users).

NUPUR: Aren't creators of niche SNS really tapping into an already-existing market rather than extending their market base?

STEVE: I think I just answered that above. To the extent that they're tapping into an existing market, they're meeting people's needs and desires to communicate with like-minded others, and increasing the amount of time they spend online with the company or brand.

NUPUR: In which case, isn't a niche SNS really just a way of strengthening customer loyalty rather than winning new consumers?

STEVE: Yes, it definitely is about strengthening customer loyalty. If you can get your customers in a conversation with you -- especially if it's a long-term one -- that's powerful. And those people will be influencers, telling their friends about your site or your brand.

In the case of my company's sports niche sites, we saw this over and over. People got engaged and loved the experience of sharing content and conversing with others who share their passion, then told their friends, who showed up and started participating.

NUPUR: Related to the above, does a brand-sponsored SNS have the potential to convert a non-user? E.g.: Could a biking enthusiast who joins Specialized Riders Club, but is a die-hard fan of some other kind of bike, really be persuaded to buy Specialized bikes? Has this happened?

STEVE: I have some doubts about a social network like the Specialized Riders Club, but it could work if Specialized makes every buyer of one of its bikes a member and gives them incentive to participate -- a free jersey or other goodie; discounts on another Specialized bike; discounts on bike tours; etc. That model is mostly about making existing customer relationships deeper and turning your best customers into marketers.

What might be better is if Specialized, as an example, created a social network for cyclists that is open to all but is sponsored by Specialized. That would take some guts, because people would be talking about all brands of bikes. But I bet it would create some new Specialized customers. ... Actually, that's a bit broad. It might make more sense for Specialized to create a social network for a niche within the cycling world, such as road racing, or cyclocross -- an area where it sells a lot of bikes and has a majority presence.

(Actually, the best entities to operate a cycling or similar niche social network serving enthusiasts would be those that aren't tied to one brand. A social network operated by an association of bike dealers or a retailer like REI wouldn't face those issues. This also is less problematic in some other enthusiast activities, where a social network tied to one brand won't be restricted to buyers of its products.)

NUPUR: When a brand name gets its most enthusiastic fans to start/lead an SNS, should it be compensating these fans? It seems unethical not to reward/compensate them in some way, although I can see how it can also be unethical to rely on paid customers to promote its products.

STEVE: I think some sort of incentive program is imperative. I too am uncomfortable when a social network asks a lot of participants and doesn't give anything back. I like the idea of contests and drawings, to say thanks for people for participating; this is especially important when you're dealing with user created content. (It's less important when you're talking about people using social networking features to chat with their friends.)

On the Enthusiast Group's sites, we reward our "Members of the Month" with a prize. Ditto for the person who posts the best photo/video/blog of the week. And we do impromptu contests. It's not like paying them, but it makes users of our sites know that we value their submissions.

I think it makes sense to identify your best contributors over time, and perhaps give them a special rank, like featured blogger status. And those could be positions where the bloggers gets a small regular payment. Nothing wrong with that.

Another great thing is to award points for submissions and participation activities. Sort of like earning frequent flyer miles. And you get something when you accumulate enough points. A great and inexpensive technique is to award levels, such as reaching 1,000 points makes you a "Gold" member. This can have a powerful psychological effect in motivating people to participate more.

NUPUR: Do people really notice the brands that sponsor brand-sponsored sites and are they really persuaded to buy their products, or do they just join the community because of their interests, without having any attitudes toward the brand that sponsors the site? I was thinking of your example of Arrow supporting "We are Ellis Island."

STEVE: That's difficult to answer. But if people for whom the Ellis Island experience is an important part of their lives find that website has meaning for them, how could they not notice the Arrow brand?

It reminds me of IMBA, the International Mountain Bicycling Association. Subaru sponsors its Trail Care Crews, which are teams who travel around the country leading trail-building events. The crews travel in donated Subaru wagons with cool IMBA graphics on them; you can't miss them. Subaru gets a lot of mileage (pardon the pun) out of this program, which they've been doing for years. To those of us who know IMBA, Subaru is a huge presence; when I think IMBA, I think Subaru.

This is not a new model. Major corporations have been underwriting and sponsoring PBS shows for decades.

So this sort of corporate sponsorship and underwriting of a social network focused on a non-profit cause or other good cause is similar. I think it can have significant benefits to the sponsoring company.

NUPUR: I'm wondering if people really attribute their experiences with the people they find on online networks to the networks themselves, so that attitudes get transferred from the people they meet to the site they met them on.

STEVE: I can answer that from my personal experience:

1. I've found new people on Facebook (usually people in my profession), and yes, that I met them that way sticks in my mind.

2. I see this happening on my company's sports sites. On YourClimbing.com, for example, an informal group of climbers in Colorado Springs, Colorado, formed for physical climbing outings after they found each other on our site. They support each other online, set up climbing dates and parties, etc. To prove that our site sticks in their minds, they decided to have group t-shirts created, and asked for our permission to include the YourClimbing logo on the shirts.

Got a comment about this? I've disabled commenting here, and point you instead to a Facebook discussion area we've set up for the Enabling the Social Company white paper. You'll find it here.