This post was co-authored with Alan Vaughn.

As sociable beings in an interconnected world, our social networks have intuitive importance in our everyday lives. These networks influence the movies we watch, the music we buy, the parties we attend, and the friends we keep. Our associations – both on the web and in the real world – define us.

Facebook was the first widely successful means to document these associations. It distilled nebulous social relationships into structured data. Now, Facebook documents nearly every preference imaginable, from favorite brands to places to cooking and even workout routines. Although it began as a communication tool reserved for our closest friends, Facebook is no longer just a social network. Some, including Facebook itself, now call the network a “social graph”.

Mindful of Facebook’s growing scope, we wanted to understand how Facebook’s fan pages relate to one another, which we did by applying network theory to comScore’s Social Essentials data. We thought this would be useful to brand managers who face a daunting task in trying to understand a brand’s social media presence. By understanding how fan pages relate to one another on the web – the world’s most consumer-friendly communications medium – advertisers can better understand how audiences view themselves and their brands¹.

Our analysis defines fan pages as the individual nodes in the network, and mutual fans as the relationship that links two distinct fan pages. This setup is a unique variation on prior analyses, which focused on relationships between people and not fan pages. For example, imagine that Jon Smith was a fan of Red Bull and MTV. In our analysis, those brands would be linked because Jon served as a common fan between them. For simplicity, we included all fan pages covered in comScore’s Social Essentials product that met a minimum sample size threshold. This broad definition of a “brand” included entertainers like Lady Gaga and online games like Zynga Poker, which are brands in their own right.

Our brand-centric perspective gives brand managers a clear picture of how fans relate to them and other brands – including the competition. Our analysis revealed three key findings:

1. It’s a small world

We sampled the most highly connected pages, representing some 350 individual brands, to understand how many degrees of separation exist between them. By calculating closeness, a measure that indicates the extent to which a node can reach other nodes, we found that the average brand was just 1.8 degrees removed from all other brands, and that the greatest distance between any two brands was three degrees.

In a world where offline social networks are dense – Harvard psychologist Stanley Milgram’s famous “small world” experiments showed that people are just six degrees removed from one another – it’s no surprise that the online fan pages that summarize our social lives are even denser.

2. Size doesn’t matter

We analyzed the degree centrality of our network to find that the largest brand pages by fan count were not always the most highly connected. In fact, the brand most connected to other fan pages ranked just 9th by fan base overall.

A page’s degree is simply the number of other brands with which a brand has a direct connection. While the average fan page in our sample was connected to 50 other fan pages through common fans, Family Guy was connected to nearly 300 other fan pages. Facebook followed second, despite having about 16 million more fans than Family Guy. This data shows that brand popularity can take many meanings: a brand can either be popular among a large number of people, or it can be popular among a wide array of people. Which one matters more, though, depends on the marketer. Since degree reflects the number of relationships and not the strengths of those relationships, a high degree might suggest that a brand has mass appeal while a lower degree might indicate focused appeal.

Generally, the smallest fan pages by fan base also happened to be the least well connected. Yet, after controlling for fan base, we still found meaningful relationships between brands. We saw strong relationships between brand extensions: Jon Stewart’s Daily Show was closely tied to The Colbert Report, for instance. But we also found measurably strong relationships between smaller brands. Taco Bell, for instance, shared many fans with Dr. Pepper:

In a communication medium where brand managers have the least control over the message— think social vs. television—understanding precisely how consumers view a brand’s identity is invaluable for branding and tactical purposes. comScore’s Social Essentials data yields this insight by identifying the other brands that jostle for space inside a consumer’s mind. It also provides actionable takeaways about audience targeting – for instance, consider revaluating a brand’s television ad buy if its ads are airing on a TV show that has weak audience overlap in the digital realm. According to Social Essentials, it could be an inefficient purchase.

¹ Jennifer Escalas & James Bettman. You Are What You Eat: The Influence of Reference Groups on Consumers’ Connections to Brands. Available at: http://faculty.fuqua.duke.edu/~jrb12/bio/Jim/53.pdf

It’s hardly a secret that daily deal startups - and their valuations - are growing exponentially. In the summer of 2010, Groupon was said to be worth $1.5 billion. Months later it reportedly declined a $6 billion buyout offer from Google. Having recently filed its IPO filing with the SEC, a public offering could value it as high as $20 billion — similar to both GM and Google at their offerings. The prospects of competitor LivingSocial are similarly bright: over the course of just a few funding rounds, its valuation roughly doubled to $3 billion while gaining the support of an important strategic investor, Amazon.com.

What is behind the intense interest in these companies? Part of the excitement surrounding Groupon and LivingSocial is that they are part of the new tech boom, led by companies such Facebook, Linkedin, Twitter, Zynga, and others reportedly on the road to going public. But some question whether these sites warrant this much investor interest, or if their valuations are fueled by the rosy assumptions and optimism of a bubble yet to burst.

A comScore analysis sought to better understand the daily deal market, its competitive environment, and how Groupon and LivingSocial are positioned within it. It found that the businesses—despite their strikingly similar concepts—reach different segments of the market and have somewhat different user profiles. We will chronicle these findings in a two-part series that will first examine their audience profiles and then investigate how they engage their customers, gain loyalty and encourage repeat usage.

Geographic and Demographic Differences between Groupon & LivingSocial
The daily deal industry is the new American West of the Internet. Stark differences in the geographic, demographic and advertising targets of Groupon and LivingSocial suggest that the sheer size and raw potential of the unclaimed market has meant that group buying businesses are engaged in a free-for-all land grab of markets and merchants. Guided by the logic that it’s easier to build a new market than to steal one away, these companies seem to benefit more from expansion rather than direct head-to-head competition.

We begin by taking a look at the geographic profile of their respective user bases. Each has a geographic strength. While LivingSocial is heavy in the East, Groupon pushes west towards the Midwest and Pacific regions. These splits may in part reflect where these two companies are headquartered, with Groupon in the Chicago and LivingSocial in Washington, D.C.

Groupon and LivingSocial also attract different types of customers. Groupon’s visitor base skews somewhat more towards younger users and females while LivingSocial’s is more normally distributed around middle-age users and proportioned roughly equally between genders.

A final important aspect of this daily deal gold rush is the willingness to spend heavily on advertising to acquire customers, with the idea that investing in customer acquisition now will generate significant returns later over the user’s lifetime. Both Groupon and LivingSocial share the mindset that advertising and customer acquisition is an investment rather than expense, but they execute on this paradigm differently. LivingSocial concentrates the lion’s share (73%) of its display ads on the top five U.S. properties – specifically in news and email sections –and scatters the remaining 27% around the web. Meanwhile, Groupon’s strategy is a mirror opposite. It delivers only 31% to the biggest publisher’s sites with the remaining 69% covering a range of other publishers.

Is There Room for Competitors in the Daily Deal Market?
The daily deal industry is busy, to be sure. There are hundreds of regional and internet-based competitors in the space, with one of the newest entrants being Glenn Beck’s Markdown.com. Anyone and everyone, it seems, is trying to grab a piece of the pie. But despite the deluge of new entrants, the market is not necessarily crowded – especially at the top. The tail is long and fragmented and Groupon and LivingSocial sit as gorillas among ants, accounting for over 90% of all visits among all group buying websites tracked by comScore. Among the top daily deal sites, we notice a significant drop-off after the top two players.

The comparatively modest email bases of niche and regional competitors suggest they are not yet mounting a serious competition to Groupon and LivingSocial. Moreover, their comparatively limited financial resources make it difficult to compete by outspending to acquire customers. There is still space in the rapidly expanding market for savvy competitors to break through and carve out a healthy position in the market, but many will likely be compelled to consolidate or turn to a differentiated, vertical-oriented strategy, such as Jetsetter’s cornering of the travel deal niche.

In part two of this post, we will examine the long term prospects for Groupon and LivingSocial based on customer growth and loyalty to help understand how this market might develop as it matures.

In yet another effort to court a younger demographic, Oscar producers picked 29-year-old Anne Hathaway and 33-year-old James Franco to host the famed awards show this year. It was an unusual choice not only because the two are not seasoned comedians—recent hosts have included Ellen DeGeneres, Chris Rock, and Jon Stewart—but also because they are almost 20 years younger than the average age of the telecast’s recent hosts, which has hovered around 50 for the past ten years. If the host selection alone failed to make the effort obvious, the pair’s tongue-in-cheek banter did: “Anne, I must say you look so beautiful and so hip," said Franco in his opening greeting. "Thank you, James," Hathaway quipped, "you look very appealing to a younger demographic as well."

A real demographic concern hides behind this self-effacing humor: the Academy Awards traditionally appeals more to an older film community rather than to younger viewers. But, the goal is now to make the Academy Awards more inviting for younger audiences. The ABC broadcast is the second most-watched TV event after the Super Bowl and drew an impressive 41.2 million viewers last year -- a five-year high. But although the event remains pricey, at $1.7 million a spot, the broadcast's median age in 2009 was 49.5. Last year's ratings among 18- to 34-year-olds actually decreased 3% despite the increase in total viewers.

Some have speculated that the nomination process contributes to the demographics divide. Anecdotally, this seems true. Take 2008, when the wildly successful summer blockbuster ‘The Dark Knight’ was pushed out of the race by films like ‘The Reader’ and ‘Frost/Nixon’. It is easy to imagine indignant twenty-somethings across the United States irked by the fact that Academy voters snubbed what they considered to be a “great” movie simply because it had the misfortune of being a summer release in favor of dramas that neither they nor their friends had ever seen.

In response to this criticism, the Academy decided in 2009 that it would expand the number of Best Picture nominations from five to ten. Academy president Sidney Ganis hinted at the reason for the switch saying, “I would not be telling you the truth if the words ‘Dark Knight’ did not come up.” Summer films have crept into the short list since the change: three in 2009 and four this year.

Will the Academy’s move to make summer blockbusters more competitive result in a younger demographic? comScore data suggests the effort may be having an impact.

comScore AdEffx provides a granular examination of the demographic differences between summer and winter “film intenders,” (defined according to the time of the year when they searched for movie show-times or movies at a local cinema). The data show that summer film intenders skew slightly younger than winter film intenders, with a higher percentage of visitors in the 18-24 year old and 25-34 year old segments:

In light of the age differences, it’s perhaps not surprising that summer film intenders also tend to have lower incomes than their winter peers. While summer intenders are slightly wealthier than the Internet average, winter intenders are even wealthier.

But a silver lining in this income differential actually benefits the silver screen. Despite their lower income skews, summer film intenders devote a larger share of their online transactions (3.8%) to entertainment and movie tickets than winter film intenders (2.5%). As income decreases, share of online transactions allocated to the movie ticket category increases, suggesting that less affluent summer moviegoers are willing to allocate a higher percentage of their discretionary spending to movie entertainment. So despite having lower incomes than their winter counterparts, summer intenders still drive relatively more spending in this particular category. It’s no surprise the movie industry is courting these consumers.

If a younger, summer movie-going demographic is what the Academy wants, then that is what the Academy got—at least online. In order to understand how demographic interest shifted in the past two years, we compared search behavior by age demographic for the month prior to the Oscars in 2011 vs. 2008 using a selection of Oscar-related search terms like “Oscar nominations” and “Best Picture.” The results showed that searchers interested in the 2011 Oscars skewed younger than in 2008.

More specifically, while the younger demographics — particularly 18-24 year olds and 25-34 year olds — showed below average searching interest in the Oscars in 2008, they showed above average interest in 2011. Not only that, but 18–24 year olds exhibited the highest relative interest by far.

So it appears that the Oscar producers were successful in achieving their objective of courting the younger demographics, at least as evidenced by these consumers’ online behavior. With younger audiences accounting for a substantial portion of box office dollars today, it is important to bring these movie-goers into the Oscar fold and support the long-term health of the motion picture industry.