The rate of affluent US Internet user participation in online social networks increased dramatically to 60% in January 2008, from 27% in January 2007, according to The Luxury Institute's latest WealthSurvey "The Wealthy and Web 2.0."
"While some in the luxury industry are still debating e-commerce, search and banner ads, the majority of their customers have leaped into the online dialogue," said Milton Pedraza, CEO of the Luxury Institute. "Luxury needs to catch up quickly."
The study noted that, on average, affluent US Internet users are members of about three onlne social networks and have 110 online connections through these sites.
Online communities are likely to continue fragmenting into selective and specialized entities of like-minded members. This should make it easier to reach target markets, although luxury firms must jump some critical hurdles to get it right.
"The wealthy have a great deal to lose," Mr. Pedraza said. "They will not tolerate behaviors exhibited recently by social networks that force opt-out techniques on member's private purchase information, and make it difficult to exit."
Nearly two-thirds of wealthy consumers say that giving out personal data without permission will cause them to disconnect; 63% have an interest in "do not track" lists.
“The Luxury Institute’s findings suggest that membership in social networks is one of the factors driving the growth in Internet usage among the affluent," said Paul Verna, senior analyst at eMarketer.
This demographic segment – defined as people with annual household income of $100,000 or above -- represents a large and growing percentage of the US Internet population. In 2007, an estimated 25% of US Internet users were affluent, up significantly from 16% in 2001. eMarketer projects that this percentage will increase to 27% in 2011.
Nielsen Online said last year that nearly 30% of Facebook’s users came from households with at least $100,000 in annual income. Comparatively, 22% of MySpace users were from similarly-affluent households.
While Nielsen’s numbers appear to contradict the Luxury Institute’s finding that MySpace commands a higher percentage of affluent Internet users than Facebook, there is no actual discrepancy when one considers that MySpace’s user base is considerably larger than Facebook’s. Hence, 30% of Facebook’s user base is actually a much smaller number than 22% of MySpace’s users.