Futuristic Play by Andrew Chen

5 things that make your social network monetize like crap

Are the social networks making tons of money?
People have been very excited about the advertising prospects of social networks lately. First you have announcements from MySpace about an 80% rise in CTR through profile targeting, as well as some claims of Facebook's going rate CPMs being $4. Furthermore, the recent gold rush in Facebook apps has led quite a few folks amassing large userbases with dreams of incredible monetization. It's quite easy, with all the profile information that social networks have, to automatically assume that this information is the same type that drives Google-like revenue and monetization.

So let's talk about this... Are social networks making money hand over fist? Why or why not?

To aid this discussion, I'll go through a couple of the critical challenges that affect social network monetization:

1. Engagement is inversely correlated with CTRs
2. Inventory isn't homogeneous, it's a pyramid
3. Don't confuse interest with intent
4. CPMs are driven by underlying value, not just targeting
5. Brands are a big wild-card

Understanding the CPM formula
Before we jump in, let's talk about how CPMs are generated. For the purpose of this discussion, I'm going to focus on direct response advertising, rather than branding (which we'll get into later).

Ultimately, CPM is a simple calculation that is determined by:

CPM = Clickthrough Rate * Price Per Click * 1000

For example:
1,000,000 impressions * 0.5% clickthrough * $0.25 PPC
= $1250 per 1 million impressions = $1.25 / 1000 impressions
= $1.25 CPM

This is from the publisher side - if you have a good CTR or PPC or Impressions, you make more money. Now from the advertiser side, you need to figure out what the underlying value is. After all, even if you get a ton of clicks, if you can't convert them on your side and have a good transactional value at the end, you won't want to pay a PPC.

CPM = Clickthrough Rate * (Value of Action * Conversion Rate) * 1000

Conversion rate means the percentage of people who do the desired "action" that drives value for you. That might mean the % of people who buy from your e-commerce store, or who fill out your mortgage lead form, or whatever. You could also substitute this for Lifetime Value for your social network, or LTV for your virtual goods-driven casual game, or whatever.

Now let's jump into how different dynamics on your site drive these different variables...

1. Engagement is inversely correlated with CTRs
You know how MySpace and Facebook just encourage you to click-click-click and log in every day and are just incredibly sticky? That's great engagement, and it helps with a lot of things, particularly growth and competing in strategic areas.

However, the drawback is that the more pageviews people have your site, the lower the clickthrough rate gets. Here's a great diagram:

You should read the rest of the article on MikeOnAds, it has some other great data on there. This issue of engagement negatively correlating with clickthrough rate is well-documented, and happens at every network.

So how bad are the clickthrough rates, exactly? I'd guess that across all the social networks, something from 0.01% to 0.05% is pretty standard. You might have some higher CTRs in some very specific areas, for example right after a user completes an action (composes an email, friends a person, etc) but in general, they will be quite low.

There's some evidence for Facebook's CTRs being about 0.04%, documented here:

2. Inventory isn't homogeneous, it's a pyramid
Sometimes you might hear the CPMs for one of these social networks is X dollars. And that's true, it's exactly the price that SOME people are paying for the inventory. But in general, that's not how publishers end up managing their inventory. Instead, if you take the impressions for a user across their session, you'll instead get something like this:

• The first US impression in a session has the most value ($10)
• Then impressions 2-5 have some level of brand value or high CTR value ($3-5)
• Then after that, you're hitting ad networks selling on category ($1)
• Then eventually, you hit remnant ad networks ($0.50)
• Finally, you hit pure CPA remnant networks ($0.10)

These are just example numbers. Now the problem is that while people often quote the premium numbers, the majority of the impressions happen in the low CPM remnant numbers. The premium ads happen on the homepage, major channel pages (like Music, Games, etc), but not in the most popular pages like forums, profile pages, etc.

I'd expect the top inventory (let's say 5-10%) end up generating 50% of the overall revenues.

So in your financial forecasting, don't expect to be able to multiply a big CPM against your ad inventory. Instead, you need to be nuanced about the different sections of your site, and how they sit relative to the ad inventory pyramid.

3. Don't confuse interest with intent
Now to the profile data - how much is this worth? You might expect that by looking at profile keywords like "skiing" or "travel" or topics like that, you could make a ton of money on social networking sites.

Every page should be like Google, right? Wrong. (unfortunately)

The reason is that interest in a topic is different than having intent. Having "skiing" on your profile is completely different than searching for "ski tickets." The latter means you're ready to buy, whereas the former simply means that you sometimes buy. This is GREAT for brand advertising, but really doesn't help on the direct response CPM formula.

Having high intent typically drives a higher conversion rate (driving up the PPC) as well as driving up the CTR. Having interest but not intent should theoretically be better than nothing, but there might be other effects, like having more "looky-loos" click on your ad just out of interest, but not actually buy the product there.

4. CPMs are driven by underlying value, not just targeting
Furthermore, you really have to look at the underlying value of the transaction to figure out how the CPMs will turn out. After all, the underlying value drives the PPC, which then drives the overall CPM. In order words:

Mortgage leads trump contextually relevant ads because Mortgage leads can be worth 50X more than a non-transactional site.

This is how a mortgage lead generation site might work: Person enters their contact info, which then gets sold to 4 lenders, which then call the person to work out the loan. Each lead might be worth $10, but because it's sold to 4 different companies, it's worth $40 total.

Now a ski ticket might be more contextually relevant service. Or maybe a music subscription service. Or some other mass consumer good. But the increase in clickthrough rate COMPLETELY offsets the powerful value of the mortgage lead, all you will see is LowerMyBills psychedelic peacock ads.

Now targeting really does help advertisements, but the problem with display advertising which shows as you are using a site is that the effects are not going to be as strong as high-intent areas.

In this case, targeting might increase CTRs and conversion rates, but it's unlikely that it's so powerful it'll completely offset the value decrease. People are mostly interested in things that don't generate lots of money, and because of that, you have to compensate.

5. Brands are a big wild-card
Of course, the real wild-card is brand advertising, because it really follow the CPM formula. Brand advertising is really not priced based on any logical way that follows a formula like that. Instead, it's based on relationships, prestige, audience metrics, and other intangibles. So as the audiences for brand advertisers migrate from TV to the internet, you will see a tremendous amount of brand dollars move as well. These brand dollars will simply follow whatever's "hot" - thus, because the major portals seem to be growing pretty slowly and/or actually losing engagement, you'll see brand dollars chase the social networking sites.

However, unless your name is Tom or Mark, you're unlikely to get your hands on too many of these dollars. And the reason is that brand advertising is sort of a "winner take all" game, where only the largest sites can afford large sales teams that can develop the deep relationships required to sell to Madison Avenue brand ad agencies.

The current hurdle is that advertisers don't like UGC (er, CGM content) because it requires them to let go of their brand. So until that changes, through technological means or an attitudinal change, the brands are preferring buying video on mainstream media sites.

What's next?
Now, it's not all bad for social network ad monetization. The place in the CPM formula that's really driving revenue is that impressions are getting bigger and bigger. What these sites can't make up via advertising efficiency, they are making up through pure bulk. That's why you can build sites with 100s of million in revenue, and it's growing every day. The brand shift is also going in their favor.

More interestingly, I'm looking for native ad units to develop on the site which do work for advertisers. Months ago, I had written about "tag along widgets" which has quickly materialized as the Cost Per Install ecosystem on Facebook. Here's the excerpt from "What's a Facebook user worth, anyway?"

Another option would be for some sort of deeper integration to happen as hooks to another widget. For example, I could imagine a company (let's say Apple) creating their own widget. If you as Mr. Travel Widget, when installed, would try to convince the user to also install an Apple widget, I think that'd be an interesting model. Basically tag-along widgets which advertisers pay some amount for every user that is brought along.

As these native ad units mature, I'd expect some new revenue opportunities to be built from scratch. Let's see how it goes - it can't be worse than display ;-)

UPDATE: Fixed CPM formula.. note to self: never add changes at 6AM when your brain is asleep!

New Diner Dash: Entrenched casual game companies versus new casual MMOs

Update from New York
I'm still alive and kicking in NY - I'm hanging out with some folks from Union Square Ventures, IAC, Massive, BuddyLube, etc. I'm also spending time with some interesting bloggers and entrepreneurs - including Darren Herman from IGA (in-game advertising) as well as Linkshare, and Bronte Media, and some other advertising pepople.

First, an intro to Diner Dash
I had the pleasure of spending about an hour last week to get an early preview of the Diner Dash team - thanks to Gus, Kirem, and John for setting that up. They showed me the new release of Diner Dash that came out this week that incorporates a lot of interesting social features.

First off, though, if you haven't tried Diner Dash, please go to the site and check it out: Download Diner Dash. It's a fun game, but more importantly, it's an example of an extremely successful casual game that generates real non-advertising revenue (whoah!). They've had 1 million customers who have paid to play the full version of the game, which is very impressive. I also recall they said they've had close to 100 million downloads of the game overall, which is also incredible.

Casual games like this, being targeted at the 30+ women audience, often evade the attention of Bay Area geeks because it's not really targeted at them, and while a social networking site with 500k non-paying users that generates marginal ad revenue might get a lot of attention, a property like this is ignored. I think that's a mistake.

Casual games going social
The new features the team showed me go hand in hand with becoming more social overall. As you might expect, they are adding user profiles around the game, allowing people to pick and choose avatars, among other innovations. It's a good step in the right direction.

They are still keeping the downloadable aspect of their game, although their strategy has been to build a web property around the download. So although you need to run the game to play, you can still do things like build avatars, play around with your profile, etc. This combined strategy will be interesting relative to the soon-to-be onslaught of casual MMOs that are coming out which are 100% on the web via Flash.

Furthermore, their downloadable client strategy is also quite interesting - as many folks know, although the disadvantage of a client is decreased conversion rates, the advantage is that people rarely uninstall applications. It's often stickier, especially if you can justify getting the app to start up when the computer does. They are updating the game within the client automatically, so that people can go into the Diner Dash world and when new properties are launched, they appear as "NEW!" signs within the world map. That way, they can incorporate dynamic updates from the web while still keeping the download.

Entrenched casual games versus Flash casual MMOs
My main questions I have, after seeing the demo, is comparing their approach to those of the casual games that are coming out. If you are building one these days, you are likely to:

• Choose Flash for the technology platform
  
• Start by building an undirected "sandbox" experience
• Rely on chat, avatars, and messages for entertainment
• Use advertising and virtual goods as the business model

You can think of Club Penguin, Habbo Hotel, and the myriad of other properties as the first generation of these sites.

However, if you're coming from the traditional casual games market you are likely to have a different situation:

• Created as a downloadable game built in C++
• Often a very directed game experience
• Users play the game as a single player experience
• Usually pay $20 to have the download

Now, if you are moving from the downloadable games, you are really going bottoms-up: You have a great core game experience, and now you need to layer on social features. This is in contrast to the new casual MMOs, which are typically ALL social features to start with some basic activities, followed by a deepening of that experience.

Which way is the right approach? Only time will tell, but my guess is that long-term engagement will win out - and thus the game designers have a great chance to succeed - as long as they can overcome the user acquisition hurdles of using a downloadable game.

Thanks again to the Diner Dash team for the great discussion, and good luck!

CommunityNext almost sold out! Also, what can social network platforms learn from desktop platforms?

Mitch Kapor will be keynoting CommunityNext: Platforms
I'm pleased to announce that Mitch Kapor will be keynoting the CommunityNext: Platforms conference.

Mitch brings a unique perspective to the recent social networking platforms debate through his experience as the founder of Lotus. Through the Lotus 1-2-3 product, Mitch built a successful company on top of the Microsoft platform, creating the "killer app" that would revolutionize the PC industry of the 1980s. Of course, the Microsoft platform ultimately created their own competing application, Excel, which serves as a useful lesson for both the advantages and drawbacks of building on an existing platform.

I look forward to the lively discussion, and to see what the newest crop of entrepreneurs can learn from an experienced veteran on the platforms topic.

Other CommunityNext speakers
In addition to Mitch, we've compiled a fantastic list of panelists and speakers, including:

- Don McLagan, CEO of Compete
- Jonathan Mendez, CSO of OTTO / Offermatica
- Chris Moore, Partner at Redpoint Ventures
- Jesse Farmer, Co-Founder of Adonomics (formerly Appaholic)
- Joe Hurd, VP Business Development, Videoegg
- Keith Rabois, VP Strategy & Business Development, Slide
- Scott Rafer, CEO, Lookery
- Vineet Buch from Bluerun Ventures.
- Bret Taylor, EIR at Benchmark and former GPM of Google Maps
- Chris Conway, Senior Product Manager, Trulia
- David Troy, Creator of Twittervision
- Stephen Benedict, Director AIM Developer and Consumer Services
- John Dunning, Yahoo Messenger, Yahoo!
- Martin Green, VP Business, Meebo
- Alex Payne, Twitter
- Lindsay Blake, FORTUNE magazine
- Rob Hayes, First Round Capital
- Andrew Braccia, Accel Partners
- Naval Ravikant, HitForge
- Lars Leckie, Hummer Winblad
- Matt Marshall, VentureBeat

Registration link
The conference will be held on October 5-6 in Sunnyvale, CA

We're almost sold out, so here's the link:

REGISTER NOW

5 differences between a NY ad conference and a SF web 2.0 conference

Brief diversion... ;-)
Just a couple random observations from my first day at MIXX, which as a NYC advertising conference, is probably exactly the opposite from a SF web 2.0 conference. I used to come to these things all the time for Revenue Science, but recently I haven't been back for a full year or so.

Some things have changed, and some haven't.

Here's a brief rundown on the top 5 differences:

1. Jackets, slacks, and ties
2. Pens and paper
3. "CGM"
4. Women
5. Facebook?

Jackets, slacks, and ties
At the most superficial level, people look very different than your typical Silicon Valley conference. The number of folks that are wearing jeans here can be counted on one hand, and the youngest people are in their 30s. You would not be overdressed here wearing a full-on suit, with handkerchief and all. Just leave the ascot at home.

What you won't see here are rows of 24-year old Web 2.0 entrepreneurs wearing jeans and flip-flops. It's all business here, which might have to do more with advertising than NY, but either way the intersection is powerful.

Pens and paper
Another thing you won't see if lines of people with Apple Macbook Pros and digital cameras live-blogging and surfing the internet as the speakers go. Instead, people are just writing down notes via pen and paper. (Shocking, I know)

CGM
This one was sort of unexpected - people don't call things User Generated Content (aka UGC), they call it Consumer Generated Media (CGM). In fact, there's a bunch of people whose titles have CGM in them. Weird!

I think ultimately, it has to do with the fact that the tech entrepreneur crowd in SF is mostly focused on creation of new inventory - they need to convince USERS to come to their site and generate content, whereas for people who are typically on the advertising site, they see these people are CONSUMERS. Either way, it's an interesting and subtle distinction that shows the differences in perspective.

Women
There's a lot of women here, of all ages, all ethnicities, and all advertising job functions. 'nuf said.

Facebook
It actually took a full 3 hours for someone to finally mention Facebook. Instead, the hot topic was integrated media, aka how to handle buying media on both traditional and interactive channels. Also, video is really hot - everyone wants to figure out the right angle, and in particular they talk about how there isn't enough "good" inventory.

And of course, what they mean by "good" inventory is stuff that's not UGC. Er, CGM. They want well-polished content to place their media next to, where they can be sure that it won't harm the brand.

Anyway, it was a fun day - more to come later.

Out to NYC for Advertising Week

I'm off to NYC next week for a conference called MIXX - here's the agenda.

Speakers include brand ad agencies, marketing executives from F500, like:

• John Hayes, Chief Marketing Officer, American Express
• Carla Hendra, Co-CEO of Ogilvy North America
• Saul Hansell, Editor, New York Times
• David Rosenblatt, CEO, Doubleclick
• Seth Godin, Bestselling Author
• Charlie Rose, Journalist

I'm speaking on a small panel called "2 Legit 2 Widget" on the second day:

2 Legit 2 Widget? - The Next Generation of Applications for Targeting, Personalization, and Advertising
The pages and paths approach is giving way to a world where the delivery of relevance to drive engagement rules. No where is this more evident than in the rise of widgets and applications. Next generation widgets and applications are already being developed that use quantitative data to optimize and target the delivery of contextually relevant content across experiences. In Social Media, this creates a viral effect.

For publishers, the rise in engagement metrics enables a more detailed discovery of user behaviors resulting in deeper more valuable segments. For advertisers, this means better targeting. This workshop will focus on the applications, strategies, measurement and benefits that can be expected in this emerging medium that looks to be transforming the web as we know it.

MIXX is one of those conferences that Web 2.0 people rarely go to, since it's really a conference revolving around the New York City advertising scene. But for people who care about brand advertising, and want to hear how companies that are spending hundreds of millions in ad dollars approach the marketing world, it's an important experience.

If anyone wants to meet up, shoot me a note at voodoo [at] gmail [dot] com.

Blog on vertical ad networks

I want to show some link-love to Jim Larrison of Adify: KnowVertical Blog. He's been writing some great stuff related to the fragmentation of ad networks.

Every internet startup goes through a couple phases in their advertising:

1. Throw up some Google AdSense!
2. Ad networks like Ad.com, BlueLithium, etc.
3. Hiring a rep firm
4. Creating your own in-house sales team
5. Becoming Rupert Murdoch

It's a big, big step between #2 and #3, because that's when you start making trips to brand ad agencies to sell them your wares. Adify is in a cool business that creates a new step, called "Join/start a vertical ad network" which belongs right around step #2, which allows you to potentially gather the ad impressions you need to talk to a big advertiser, without giving all your margin to the large ad networks. It's a cool business.

Advertising nerds take note! ;-)

Great article on different types of "Platforms"

Read this and get smarter: blog.pmarca.com: The three kinds of platforms you meet on the Internet.

The fastest summary:

• A Level 1 platform's apps run elsewhere, and call into the platform via a web services API to draw on data and services -- this is how Flickr does it.

• A Level 2 platform's apps run elsewhere, but inject functionality into the platform via a plug-in API -- this is how Facebook does it.  Most likely, a Level 2 platform's apps also call into the platform via a web services API to draw on data and services.

• A Level 3 platform's apps run inside the platform itself -- the platform provides the "runtime environment" within which the app's code runs.

And which companies are working on Level 3 platforms, other than Marc's Ning?

• Salesforce.com
• SecondLife
• Amazon (through AWS)
• Akamai

I think the really interesting part of a Level 2 and Level 3 really has to do with user acquisition - they allow you to absorb a huge torrent of traffic if your application is designed to hook into their API deeply enough to create viral loops of your own.

Yahoo's Mash: Analysis of viral marketing technique

The invite email
I was recently invited to Mash (thanks Randy!) and took a quick spin around the site. I'll leave it for others to explain the whole experience, but I wanted to focus on the viral marketing element of the site.

First off, here's the invitation e-mail:

From: Yahoo! Mash
To: Andrew Chen
Subject: Randy made a profile for you on Mash

Andrew Chen,
Randy started a profile for you on Mash!  It's good to be loved! ;)

Check it out!
http://mash.yahoo.com/profile.php?inv=[keyremoved]

Thanks,
The Mash Team

Note: Sent to [email removed]. This invite expires in 10 days.
Click below to block future messages from Yahoo! Mash:
http://mash.yahoo.com/reg/dnc.php

First off, I have to be impressed that they used the hook "Randy made a profile for you on Mash". I think it's a great hook, although I probably would use the full name Randy Stewart rather than Randy, since if the name were something more common (like John) I would have discounted the value of the invite.

Overall, every viral hook ends up being a very simple phrase between a Person A to a Person B. That might be "Check this out" or "Here's a holiday card" or "Take this quiz and see if you can beat me" - these simple phrases coming from your friends are fundamentally what compels people to check out links.

The reason why "Randy made a profile for you" is a good hook (assuming you know as well as I do how nice of a guy Randy is), comes from:

• An appeal to curiosity, since you're curious what Randy made
• An appeal to narcissism, since it's about you!
• An appeal to reciprocity, since Randy just did some hard work, and you should accept the gift either way
• An appeal to social proof, since if Randy's doing it, you should be too

They could make a couple of these appeals stronger, but ultimately it's a pretty good hook IMHO. For the folks that want to read more about a structured way of examining persuasion make sure you buy Persuasion by Cialdini.

Watered down addressbook importing
The next part is the most interesting: Now it's clear that someone at Yahoo was doing their homework, and knows that addressbook importing can be a very powerful part of every social network. However, rather than using it as a mechanism for two goals:

1. Drive more connections between friends
2. Invite new friends from off the site

.. instead, they just focus on #1. When you import your friends, you are really "finding all the others" on Mash, and while it's opt-out (everything's checked at first), it doesn't encourage you to invite people from off the site.

While this might build engagement in the long run, the problem is that it also kills the viral loop :( You really need to get new people coming in, and for those new people to bring in more new people, in order for the site organically.

That said, this is run by Yahoo so as long as they can keep the users going, perhaps sticking it on their homepage, integrating it into Mail, and other initiatives might be enough for getting the site to grow quickly.

What's Mash's viral loop?
So the question is, what is Mash's viral loop? Let's go back to my quick definition from before: To define the viral loop, you can think of it as...

The steps a user goes through between entering the site to inviting the next set of new users

So in the case of Mash, you are looking at:

1. Getting an invite that Randy set up a profile for me
2. Going through addressbook importer screen
3. Agreeing to accept/reject Randy's changes
4. Setting up my profile, etc.
5. Putting a friend's e-mail into the invite form
6. Then my friend gets an e-mail (with notice that I set it up for him)

Now, in general, I think this is a very reasonable loop, except for the fact that with watered-down addressbook importing, and dependence on a user to set up other peoples' profiles, the "branching factor" on the viral loop is not that great.

I mean, how many friends' profiles are you going set up? You'd have to recall their name/e-mail, then type it in, then set up their profile. You might do this with 3 or 4 or 5 users, but beyond that?

The strength in a "spray and pray" e-mail method is that although the conversion rates are low (<5-10%), you are typically importing hundreds of contacts in one shot. Compare that to Mash's method, which might have a better conversion rate, but it's doubtful that it'd be more than 2-3X better, IMHO, due to peoples' fatigue in social networks, etc.

Anyway, from this work, I know the guys at Yahoo are thinking hard. There's lots of innovative ideas within Mash, just from first glance. This honestly surprises me, so I'm confident the same folks who came up with those ideas will be able to make something interesting happen.

Fun article on Club Penguin

Link: An "adult" joins Club Penguin.

Couple fun excerpts, first, on the incredible power of customizable avatars:

The first thing you notice is that everyone is really dressed up. When you click on another penguin, their "Player Card" appears. This shows all of the pins, hats, props, and accessories that the penguin has acquired by completing various missions and shopping at various stores. The net result is that a lot of penguins end up looking like Elton John. (As Emily Yoffe points out, you must have a paid subscription to Club Penguin to properly outfit your penguin.) 

... then, how having an avatar body (rather than a profile picture, for example) gives you more types of customization, for example dance moves:

You might do a little dancing to the booming rock soundtrack (penguins can acquire special dance moves) and then go your separate ways. After all, there are constant parties to attend.

... and finally, the continuing emergence of machinima, where I've been a ridiculous number of YouTube videos that combine in-game footage with music, and then it's called a "music video":

Club Penguin regulars seem to enjoy their outlaw status, posting videos on YouTube of how they got the boot. Better yet are the tribute videos to banned penguins. This one uses the Puffy Combs ode to Biggie Smalls, "I'll Be Missing You," as a soundtrack.

In fact, here's a cute one:

Social network convergence and private/public networks

Jeremy Liew just blogged about a great topic: Viral marketing, randomness and the difficulty of controlling growth in social media.

Stop and read the post before you read the rest of mine.

Anyway, I wrote him a quick e-mail after, with slight edits below:

The gist is that viral marketing often leads you astray, heading into countries like Brazil or Turkey or India, where you don't plan to be.

Part of what seems to make these sites like Orkut start to "converge" in certain languages, demographics, and localities has to do with the fact that they all offer various types of "open browsing" like the type that MySpace has. This makes the entire social network a "public space" that ultimately makes newbies auto-select themselves into or OUT OF that tribe, based on language, content, etc.

So when a huge group of Brazilians invades Orkut, even people in mountain view feel it, when they get a bunch of invites, and all the comments for stuff happen in Portuguese.

One of the things I've been fascinated with in regards to "private" social networks like LinkedIn and Facebook, where it's much harder to browse globally, is that the network right around you is less likely to be affected by changes elsewhere in the network, and a huge influx of Brazilians or Canadians might not impact the experience much.

This sorta implies that a closed network is likely to grow more slowly, yet have some strong ability to be resilient to demographic changes elsewhere on the site - except for all those old people in your region joining FB ;-)

So for the people who are interested in not having their networks completely converge, you should make it REALLY REALLY hard for people from one region to see people from a different region. That means not having public displays of things like:

• Featured users
• Featured pictures
• Featured content
• Featured comments
• etc

... as they are all things that make people self-select either in or out of your social network. They are all "public space," which results in convergent results. Instead, you want to segment and target all of your content to wherever the user is coming from.

As a corollary to this, you end up needing to collect some personal information about the user's network before showing them any content on the site. In Facebook's case, they were smart enough to use the ".edu" namespace to automatically carve out college students into their own segmented areas, where they found other similar people easily.