Social networks making cash

Posted over 2 years ago by Caspar
20/05/2008

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Its the biggest question around social networks. Are they actually worth the coin?

USA Today wades into the debate with this article. Having read the article which reviews all the social networks and how they are making money, the key areas the article points to are:

1) Advertising. Clearly. Advertisers follow people and that means large concentrations of people in one place are an attractive proposition for those with ad budgets. The big question for me on the efficacy of this is whether that ad spend converts in value for the advertisers;

2) Premium Services - sell additional services such as ringtones and other subscription based services;

3) Sell - sell it to someone else who thinks they can make more money with it.

So the bottom line is these are media platforms, with the most powerful revenue streams coming from advertising - the more focused and contextual it is, the more likely you will get better revenues. If you can differentiate your offerings enough and persude subscription based services, so much the better, then but not many people are able to do this. [I note this week that Friends Reunited are now moving to a free model rather than a paying model].

It remains a battle for mindshare, but some networks need to start proving the coin behind the model to keep the buzz sustained for the longer term.