How social networks make money
by Josh Bernoff
We're arguably 10 years into the social network phenomenon (Friendster was founded in 2002). By now we should know the main business models. But popular sites like Tumblr (no visible means of support) raise the question, are there really any other good ways to make money other than advertising?
Here are the significant models:
- Advertising. Facebook is already making multiple billions on ads on pages. Networks without ads on pages make money form ads on search (Twitter promoted tweets, for example).
- Brand pages. Twitter has started to roll these out. As I understand it, you don't have to pay for the Facebook brand page, you just pay for ads to drive people to it.
- Premium accounts. The freemium model is in place at sites like Flickr and DeviantArt. Charge members more for extra storage or to avoid ads.
There are others you hear about that haven't gotten big yet. Second Life created an economy around selling land. There are virtual goods. Merchandising the vast amounts of data that these networks collect is a possibility, although obviously it has privacy implications (Is there a market for behavioral data in the aggregate? Is it legal to sell targeting data at all?).
And I'm discounting the "get a lot of users and then sell to a bigger company" model. This just shifts the revenue question to the new owner. (YouTube's model is advertising now, even if that wasn't that big at the time it was sold.)
I'm interested in what you've seen -- what other models are out there, and how promising are they? When this finally matures, will it all be advertising based?