Do User Numbers Disguise Problems at Social Networking Sites
Following on from the last post it got me thinking that these are interesting times for social networking sites to say the least. I for one am anxious to see how Facebook, MySpace and Twitter address the revenue-generating issue.
What’s interesting about the whole social networking topic is that all of the sites attract an incredibly large number of visitors. We’re talking consistent off the chart numbers. It’s an audience ripe for any form of revenue-generating scheme. But here’s their little secret. None of them are making any money directly from their service – it’s FREE. Yes, you read that right, despite the sheer volume of users to these sites, not one of them is profiting from this traffic. In fact, all of them are losing money. So it stands to reason that sooner or later, the issue of profitability has to be addressed.
Twitter alone has millions of people following tweets, but it doesn’t make a penny on any of them. Its predecessors, Facebook and MySpace, are stepping up to the plate to compete. Facebook is in the process of adding similar real time update features to its platforms and you can bet MySpace, under the direction of Rupert Murdoch’s News Corp., will begin actively looking for ways to generate revenue.
With ad revenues far below expectations, the social networking sites need to turn inward to see how they can make money from their own platforms. There’s no denying that Twitter, Facebook and MySpace provide value. The next step is to create a pricing structure based on this value.
In Twitter’s case, its creators have even greater options. They could either sell out to the big search engines or sell their infrastructure to other sites who want to build off their technology.
The popularity of these three social networking sites is testament to the creativity of their creators. They have taken the mainstream by storm. But one has to wonder how long it will be before others move into cyberspace with the next version of social networking. That’s why it’s critical for Twitter, Facebook and MySpace to start generating revenue. Any further delays could cause them to lose dedicated users and their niche in the social network arena.
With Twitter, Facebook and MySpace, their continued success comes down to two key questions: How much do you value social networks? And how much are you willing to pay for this value? Use the comment link to respond.
Matthew Toren
