The popularity of social networking sites and online communities can be fleeting, which can scare traditional online content providers who fear losing users to services with more interactivity and user-generated content or the ‘next big thing.’ But Zip.ca, Canada’s top online DVD rental service, saw social networking as an opportunity.

“We’ve always had a community approach to business, because an online service lends so much more potential for interaction with customers than a traditional business,” says Rick Anderson, CEO. “We decided we’d be well advised to unleash the power of that interaction, allowing people to shape the DVD library and the way movies are presented on our site in terms of ratings and reviews.”

Building off the foundation of their DVD rental business, Anderson and his team developed a free online community that he describes as “kind of a hybrid of Netflix meets IMDB meets Friendster.” Members can create profiles, rate and review movies, write blogs, participate in forums and upload their own user-generated videos to a streaming video site.

The site was launched about a year ago and has attracted more than 400,000 community members -- 10 times the number of DVD rental subscribers. And it has opened up new advertising revenue streams and created new opportunities to use email and online marketing to convert free users to paid subscribers.

Anderson and Online Marketing Director Aaron Wolski outline the six strategies they used to develop an online community that complements their subscription service:

-> Strategy #1. Identify existing features that form the basis of an online community

Sites with subscription-based business models don’t have to start from scratch to build an online community. For starters, they already have content (in Zip.ca’s case, DVD information), collect member information and rely on user names and passwords to engage with the site.

But as Anderson’s team looked closely at their DVD rental business, they realized they already offered several interactive features that are hallmarks of online community sites. Features included:

- Customer feedback
The company was founded on a practice of soliciting and acting on customer feedback to build its DVD library. In 2004, they implemented a single-request policy that allowed any subscriber to ask for a DVD title to be added to the library.

This process helped the company grow its catalog from 14,000 titles to more than 72,000 today. So when they began exploring additional community features, they decided to expand customer feedback options to include an online forum called the Zip.ca suggestion box, where any member could make suggestions or criticize aspects of the service.

“It was kind of scary at the beginning, but it’s a real positive add-on to our interaction with our members. It helps us focus our development resources around parts that people say need attention,” says Anderson.

- Content lists
Enabling members to organize their favorite content into lists and groups was integral to Zip.ca’s DVD rental business. Subscribers were already updating and organizing their movie rental queues, called the ZipList, in order of preference.

- Content ratings
Letting members sound off on content is another key element of online communities. Zip.ca already offered its star rating system, which allowed members to rate the DVDs they had watched.

- User-generated content
Zip.ca had this feature built into its DVD rental business in the form of user-generated movie reviews. Since adding the feature more than a year ago, subscribers have posted more than 60,000 reviews.

-> Strategy #2. Add social networking features

Anderson’s team broadened the interactive capabilities of their service by developing new social networking features. Then, they wrapped the package in a new, free community site called Zip.tv.

Zip.tv was open to anyone who wanted to discuss current films or DVD releases – not just Zip.ca DVD rental subscribers. Social networking features included:

- Member profiles
Profiles include a user biography, avatar, list of favorite scenes or quotes from movies, list of favorite websites, and membership status in other online communities.

- Friend lists
Lists allow members to forge ties with other members who share their tastes in films.

- Reviews and review ratings
Like Zip.ca DVD subscribers, members of the free Zip.tv community are allowed to write movie reviews. But the Zip.tv site also lets other members rate each others reviews.

- User blogs
Blogs allow members to write about their film interests.

- Zip Rewards
The system encourages interaction by awarding points for members who rate movies or other people’s reviews. Additional points were available to Zip.ca DVD rental subscribers based on their tenure as a subscriber. Those points could be redeemed for awards, such as extra rentals and gift memberships

The free membership site is also used as a subscriber renewal and retention tool: DVD rental subscribers can suspend their paid subscriptions without losing their libraries of reviews and ZipLists.

“We’ve experienced people coming back for their third period of rental membership,” says Anderson. “They took a couple months off, but then they came back.”

-> Strategy #3. Incorporate online video

The team also developed Zip.tv to host a new, online video initiative called “Live.” Like YouTube, Zip Live allows members to upload their own video content. But the team also signed content agreements with six commercial video producers, including:

o Roo Online Video Network, offering news, entertainment and sports content
o AP video news highlights
o National Hockey League, offering game highlights from around the league

Like the online community, Zip.tv’s streaming video is supported by advertising. “We see free/ad supported as the prevalent commercial model for online video watching for next few years. Pay per view is still a small phenomenon on the Internet,” says Anderson.

-> Strategy #4. Divide management team into product groups

Originally, the online community and streaming video sites were part of one operation, along with the DVD rental business.

Anderson and his team decided to split their management structure into three smaller product groups:
o DVD rental program
o Online community
o Live video

The new structure helps the company grow each aspect of the business along parallel tracks, with each product team responsible for setting their own development and integration priorities.

Although the teams are relatively independent, they still must keep their strategies in line with Zip.ca’s broader business goals and market focus. For example, the live video team considered offering music downloads in addition to music videos, but the company decided that this content was too far outside their market niche of film/video discussion.

-> Strategy #5. Adapt email newsletters

With the new, free membership and additional online content, Anderson’s team revamped its email newsletter strategy to better address member interests.

The team divided the content for its weekly newsletter according to two types of film buffs: DVD renters and free members who might be more focused on current theatrical releases. They also created an NHL Newsletter for members viewing hockey highlights online.

They also adjusted the delivery schedule for those newsletters as follows:
- Monday nights: Weekly newsletter focused on new DVD releases, which come out on Tuesdays.
- Thursday nights: Weekly newsletter focused on theatrical releases for the coming weekend.
- Daily, weekly or monthly hockey newsletter focused on the results of the most recent NHL games.

-> Strategy #6. Track new metrics to monitor growth

The team uses digital scoreboards visible throughout the office to provide constant updates on important subscriber and member metrics. Like a stock-market ticker, the scoreboards show daily, weekly and monthly tallies for key metrics, along with percent increases or decreases.

Those key metrics include:
o New rental members
o New members with community profiles
o Members writing reviews
o New ratings
o New blog posts
o New forum posts

In addition to tracking those metrics, Wolski monitors the impact of marketing promotions delivered online and through email newsletters that attempt to convert free members to paid subscribers. Although his team is still testing marketing tactics to find the best formula for increasing conversions, they are seeing small monthly increases in new subscribers thanks to online and email marketing.

“The DVD rental business is for Canada only, but the online community is global. So percentage-wise, we’re not going to convert on a huge basis,” says Wolski.

That’s why Wolski and Anderson say the online community has to stand on its own as a business, and not only be seen as a marketing channel for potential subscriber conversions.

“We’ve come to understand that social networking side of it -- creating a place for movie lovers to congregate and discuss movies, TV, and online videos,” says Anderson. “It is an independent, sustainable business, and it will grow its own ad-based revenue.”

Useful links related to this article

Creative samples from Zip’s social networking system:
http://www.marketingsherpa.com/cs/zip/study.html

Zip.tv
http://www.zip.tv

Zip.ca
http://www.zip.ca