How could Facebook, Twitter, LinkedIn and MySpace ''monetize''?
Michael J. WolfIn the last week or so, there have been a number of events that bring up the big question: Will Web-based social networks ever become significant businesses? Or, put another way: Do these social networks--Twitter, Facebook, LinkedIn, MySpace--have the ability to "monetize" their audiences?
My answer: While today, these may not look like great businesses (which hasn't stopped investors' willingness to fund them), I'm convinced that the daily interactions of their vast memberships--and their users' willingness to share their interests, tastes, relationships and intentions, and the massive amounts of data around users' behavior--will eventually lead to substantial revenues and profits. But I don't think that those revenues will come just from the Web advertising standards of banners and contextual search links.
forbes:http://www.forbes.com/2009/02/19/facebook-myspace-twitter-linkedin-opinions-contributors_zuckerberg_internet.html?partner=yahoobuzz
Last Friday, Twitter announced that it had received a third round of $35 million in funding, led by Benchmark Capital and Institutional Venture Partners (IVP). Sure, Twitter is growing exponentially (over 900% in a year), but the company has had very little (if any) revenue. In an interview with Wired.com, IVP General Partner Todd Chaffee essentially says that he expects that Twitter is "turning into a very large media property." Twitter co-founder Biz Stone's announcement on Twitter's official blog admits that the next step is "to begin building revenue-generating products."
Also, the Associated Press recently carried a story that Facebook's true value fell way short of the $15 billion implied in the 2007 investment made by Microsoft (nasdaq: MSFT - news - people ). Facebook's own internal appraisal priced its privately held stock at about $3.7 in value. This revelation came from confidential information from a lawsuit settlement.
From the outside, it looks like most of Facebook's revenue appear to be coming from its two ad deals with Microsoft, its own local/national ads on users' pages and members paying for their virtual gifts such as Happy Birthday cakes, Champagne Bottles and Valentine's cookies. This week, controversy erupted over changes in Facebook's terms of service, which indicate that it would retain users' content and licenses after an account has been terminated. Users' concern, when the changes were pointed out by the blog Consumerist, is understandable. Each of us as Facebook members counts on the privacy of our friend lists, our personal info and our daily status updates.
Yesterday, Facebook did an about-face, and in its official blog, CEO Mark Zuckerberg said the social networking site will revert to its previous terms.
No matter what the outcome, Facebook is taking another step to find a way to monetize the information and communications between its 175 million members, of which Zuckerberg says in the blog: "If it were a country, it would be the sixth most populated country in the world.'
My answer: While today, these may not look like great businesses (which hasn't stopped investors' willingness to fund them), I'm convinced that the daily interactions of their vast memberships--and their users' willingness to share their interests, tastes, relationships and intentions, and the massive amounts of data around users' behavior--will eventually lead to substantial revenues and profits. But I don't think that those revenues will come just from the Web advertising standards of banners and contextual search links.
forbes:http://www.forbes.com/2009/02/19/facebook-myspace-twitter-linkedin-opinions-contributors_zuckerberg_internet.html?partner=yahoobuzz
Last Friday, Twitter announced that it had received a third round of $35 million in funding, led by Benchmark Capital and Institutional Venture Partners (IVP). Sure, Twitter is growing exponentially (over 900% in a year), but the company has had very little (if any) revenue. In an interview with Wired.com, IVP General Partner Todd Chaffee essentially says that he expects that Twitter is "turning into a very large media property." Twitter co-founder Biz Stone's announcement on Twitter's official blog admits that the next step is "to begin building revenue-generating products."
Also, the Associated Press recently carried a story that Facebook's true value fell way short of the $15 billion implied in the 2007 investment made by Microsoft (nasdaq: MSFT - news - people ). Facebook's own internal appraisal priced its privately held stock at about $3.7 in value. This revelation came from confidential information from a lawsuit settlement.
From the outside, it looks like most of Facebook's revenue appear to be coming from its two ad deals with Microsoft, its own local/national ads on users' pages and members paying for their virtual gifts such as Happy Birthday cakes, Champagne Bottles and Valentine's cookies. This week, controversy erupted over changes in Facebook's terms of service, which indicate that it would retain users' content and licenses after an account has been terminated. Users' concern, when the changes were pointed out by the blog Consumerist, is understandable. Each of us as Facebook members counts on the privacy of our friend lists, our personal info and our daily status updates.
Yesterday, Facebook did an about-face, and in its official blog, CEO Mark Zuckerberg said the social networking site will revert to its previous terms.
No matter what the outcome, Facebook is taking another step to find a way to monetize the information and communications between its 175 million members, of which Zuckerberg says in the blog: "If it were a country, it would be the sixth most populated country in the world.'
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