Comments for The Fork in the Road for Social Media

The Fork in the Road for Social Media

2008-05-29T02:37:42Z

Social networking is at a major fork in the road. Down one road is adding more features to a walled garden and opening up just enough, so that users seldom need to leave. Most sites are going down this yellow brick road and the prize is clearly a big one. But they may end up back in Kansas. Down the other road, lies a future of being the primary repository for your connections (aka the social graph), but with this data available via open APIs to anybody who needs it. That is a utility type model, and as with any utility, it can be hugely valuable at scale.

]]> Deciding which path to take is a real decision. A botched choice will likely end in failure, albeit via a long, slow decline.

The problem with the first road is that it relies upon a revenue model that is native to social media. What revenue model works for social media? The assumption is advertising, but CPM comes from traditional mass media and CPC is ideally suited to search. Where is the ad model that is native to social media? At the moment we are force-fitting CPM and CPC into social media for want of anything better.

Some might argue that there is no ad model for social media. We don't have an ad model for telephones, afterall, and that's a two-way communication medium like social media. Ominously, we didn't have an effective ad model for email, which is the earliest form of social media, until Google treated email as just more search fodder for CPC.

If social media is not funded by advertising, it must be funded by subscriptions or transactions. Neither is easy.

Social media is fundamentally different - it is few to few, not one to one like telephone or one to many like traditional media. There is also a fundamental problem for advertisers. We are focused on communicating with each other, not looking at content with some hopefully relatively relevant ads attached. Any advertising in that context is an annoying interruption, unless we learn to tune out the ads so effectively that it becomes useless to advertisers.

The lack of a native ad model is holding back any serious monetization of social networking. All we are seeing today is weak CPM and CPC rates. The overall numbers look OK because the audience is so large and the cost of audience acquisition is so low. But at some stage, social media has to move from the cool technology/promising opportunity phase to a fundamental new business type.

Lets look at a few attempts at a native revenue model for social media:

The one idea that clearly failed was getting people to sell to their friends in a glorified Amway scheme - that was called Beacon (some RWW coverage here and here).
In tightly controlled professional networking sites such as Sermo (for doctors only), the business model can best be described as "authorized lurking" - pharma companies are authorized to listen in to hear how they might improve their products. That seems a tad murky and I cannot see consumer companies paying to listen to dorm room chat, anyway.
Group buying has some possibilities. It at least fits the peer ethos, and it could be popular in a recession. To date, though, this is only a theory as far as I know. If I had to pick one sustainable revenue model, this would be the one. But the spark of innovation that turns this from a promising idea to a $100m plus revenue line is still missing.

What new models have I missed? This Google search for "revenue model for social media" has a number of people asking the question, which is a good start, but if the equivalent of CPC for search is lurking out there, it is very well hidden.

Here is my take on which road the big social networking sites could take:

MySpace could potentially get away with the walled garden approach for a pretty large mainstream market, using music as the fundamental draw and later leading into other arts and entertainment. This makes MySpace less age-dependent than Facebook. Everybody loves music, art and entertainment, from pre-schoolers on up to grandparents. News Corp. is a media company through and through, so this route is in their DNA.
Facebook will have to become a utility for the world or a niche walled garden for college kids. Their DNA is too young to predict which way they will go. Both are viable, but neither will justify a $15 billion valuation, so they won't make this decision until new management steps in following a crisis. They cannot become a walled garden for the world, because their core community - college kids - will move into the world of work where they have to communicate in the wider world of the Internet. Once they have left college, their only connection to each other is as alumni and that ends up being a relatively weak connection as we grow older (despite what every generation believes when they are at college).
LinkedIn has a shot at becoming a mainstream, but work-centric, walled garden since the working world is constrained enough and follows well-defined conventions. LinkedIn is the network I use regularly and I have written about it before many times. They have now reached the stage where if they offered webmail that was as good as Gmail (and obviously as open as any standard webmail), it could become the default hangout for biz types. "Suits" could gradually stop talking about "living in Outlook" and talk about "living in LinkedIn." Add in some simple RSS-based startpage-like functionality and LinkedIn would be the place to start and end the workday. Biz people will pay a reasonable subscription fee - say less than $100 a year - for a package like that without any advertising. That is a bit of a stretch from where LinkedIn is today, but fundamentally viable in my opinion.

Clearly, any venture that succeeds in building a mainstream walled garden will become hugely valuable. They will effectively become the Internet for millions, which might even justify a $15 billion type valuation. The problem is that it is a very, very hard road to navigate successfully.

The mass-market utility model could also be hugely valuable at scale. My simplest description of this would be "social graph + communication tools." The communication tools could be email, SMS, VOIP, poking, walls, vampires, whatever turns people on. The social graph is the spam controller and way to make connections. The obvious players here are the vendors with big email networks - Google, Yahoo!, and Microsoft (GYM). This is the background story to all the M&A "sturm und drang."

The one company that most needs to make this strategic decision - Facebook - is the one that is most constrained by that paper valuation of $15 billion. Neither route - niche walled garden for college kids or mass-market utility going up against GYM - will justify $15 billion. So they have to pretend that mass-market walled garden is viable, even though nobody believes that anymore. That is one nasty dilemma. Do you think Microsoft knew that they were giving Facebook that nasty dilemma when they agreed to a $15 billion valuation? Gates and Ballmer are smart enough, in my humble opinion.

The mass-market utility model will win out in the end for 3 reasons:

The social graph is so closely linked to communications, which has always been a utility model.
The ownership issues around the social graph are murky. A utility skates past that problem, saying "you own, we manage." AT&T does not own your Rolodex, or insert ads when you are calling Mom because they own your connection to Mom.
The social graph has to be monetized in creative ways and the best way to make that happen is make it available to all the entrepreneurs and established businesses, on clear and simple terms.

The mass-market utility model will work through an API. That sounds similar to what is already out there, but with one big difference. The current APIs are all about getting your apps INTO a walled garden, or two or three walled gardens. The utility API will be about accessing the social graph, getting the social graph OUT of the utility and into your application, for some pre-defined cost. What you do after that is entirely up to you.

Image via Leo Reynolds.

Comment from Alex Iskold on 2008-05-28

2008-05-29T03:19:50Z

Great post Bernard, and a topic that has been on my mind lately as well. I am gunning for a post on web monetization models next week.

I think that you are right - the problems are very complex and there is no clarity as to what model makes sense.

Even the new front-runner, the API, has interesting challenges. For starters it has not been really proven. Secondly what is the charge structure. And then will there be enough volume?

Seems to me that Twitter should be able to make a run now comparable to Amazon Web Services, but what about other popular social media? Unclear. Is there enough market for Facebook data?

Comment from Ross Howard on 2008-05-28

2008-05-29T03:34:37Z

Isn't content a viable native revenue model?

Microsoft has a large (~10 million) social network consuming content in Xbox Live.

Comment from Ryan on 2008-05-28

2008-05-29T03:53:50Z

Great post. Wow! A lot to think about; especially, "Do you think Microsoft knew that they were giving Facebook that nasty dilemma when they agreed to a $15 billion valuation? Gates and Ballmer are smart enough, in my"

@Ross great point, it's working well.

Ryan
lessons in brevity: http://www.mofata.com

Comment from Yan Pritzker on 2008-05-28

2008-05-29T04:32:16Z

Thank you for continuing to write thought provoking articles, good stuff! I think the lurking model which you treat kind of negatively ('lurk' in particular is not a positive word) has some potential. For example let's look at Twitter usage by companies like Southwest and Zappos.

They are not just lurking but reaching out to real customers, sometimes even performing a sort of brand building through instant twitter-based customer service, which was not previously possible through other means. They are not lurking in the negative sense, but engaging in a positive sense. I think there are many places to engage users on the social web right now that most mainstream companies don't even realize exist. When companies become smarter about social media there will be a large influx of corporate entities into social media sites (it's already happening in a big way).

Some of these will be spam-driven and/or lurky and others will genuinely engage users with interesting content or real humans. They will drive business to themselves in a way that is not easy to measure directly (CPC/CPA), but it will be the new 'branding' just like we have on TV...ads that are just there for us to remember the brand. So maybe these companies need to pay for the very ability to have accounts on these sites. On the other hand, some companies will opt to just have their employees saturate social sites rather than creating 'corporate' accounts. It's definitely a hard problem and I'm looking forward to more conversation on this topic.

Comment from Jacky on 2008-05-28

2008-05-29T04:33:56Z

Our social network, http://www.trainhero.com, plans on the more features idea :)

Comment from Eric Rice on 2008-05-28

2008-05-29T04:43:05Z

Honestly, I think social networking is the standard by-product of something *else*, as the commenter above noted with Xbox Live. This could put social networking in the same class as web sites, where they are merely a -vehicle- to another service that generates revenue.

Amazon.com and others are good examples of this (as is Xbox Live) because there's another utility there. Having friends and sharing and whatnot is great, especially when it's rallying around a common interest (and hey, preferably one we're paying for 60 bucks a game, a good book, etc)

So maybe it's not a business at all, but a utility of a larger puzzle (since when do we get locked in anyway? AIM + GMAIL + FLICKR, guys, we ARE NOT going to be loyal to one service. Ever. Never. No amount of open facial/social/whatever will change this.

Opinion, anyway.

Comment from Tal Keinan on 2008-05-28

2008-05-29T05:13:40Z

Bernard,

Loved the post - I have been thinking about this for quite some time now. In particular, I strongly agree with "The utility API will be about accessing the social graph, getting the social graph OUT of the utility and into your application, for some pre-defined cost." In the future I can see a brokerage model being developed where one piece of content on one site is being monetized at another.

-Tal Keinan

Comment from John Underwood on 2008-05-28

2008-05-29T05:25:51Z

Both approaches present significant monetization challenges.

The utility model requires offering, and getting users to use, a fairly comprehensive set of valuable features. Plaxo had everyone's contact info for many many years, but never turned into to a lucrative utility business (and only modestly cashed out to Comcast).

As you rightfully point out, the walled-garden social network model has no meaningful business model yet. But I'm glad to see someone call for considering subscription and transaction models, as monetizing communication via advertising has generally failed to date -- no meaningful ad revenue on a per-user basis for IM, email (low CPMs for banner ads; low clickthroughs for Gmail ads) or today's social networks (woefully low CPMs).

Comment from Christopher Galtenberg on 2008-05-28

2008-05-29T05:41:48Z

Not a lot of imagination on the author's part -- Plenty of revenue models will work:

* Free for basic service, pay for better service (different looks/skins, more features/options, ...)

* Pay for the network to do automatically what you'd have to do by yourself for free (automatic search, automatic link)

* Pay for "inner circle" privileges and experiences (ie "carry the black American Express"), weigh-in on new features

* External entities pay for access to user's data (users grant rights, of course, and share in profit, likely)

* Pay for alternative interface products (iPhone, command line, web service, ...)

* Leverage your brand, product sales

No silver bullets, but a portfolio of these will generate money.

Comment from Elad Kehat on 2008-05-28

2008-05-29T06:02:14Z

One correction: you wrote that "we didn't have an effective ad model for email... until Google treated email as just more search fodder for CPC".
You better check what's the conversion rate of CPC on gmail. It's far from being a moneymaker like search, and suffers from the same problem that social media does - your attention is on the content and the communications and not on the ads. CPC works so well for search because ads are just part of the content that you're looking for.

Comment from Asif Rahman on 2008-05-29

2008-05-29T07:15:48Z

I'm not convinced going forward that the ad model will be rendered incompatible with social media. In my view, the CPC model still has a lot of room to be optimized. A lot of this optimization will come from analyzing the social graph and applying it in innovative ways to improve ad relevance. The advertiser's fundamental goal is to understand the people that make up her audience, and who better to ask than the friends of those people in question? Now it will have to be done in a less boneheaded way than Beacon, but it is my belief that a non-trivial increase in clickthrough rates is possible. Whoever figures out how to do it will have themselves a nice little revenue model to run with.

Asif
www.youlicit.com

Comment from Jean-Marc Liotier on 2008-05-29

2008-05-29T08:15:59Z

Why the obsession with finding a revenue model ? I of course understand it in an entrepreneurial perspective, but from the point of view of an user that is not the point. My Rolodex is a fully decentralized social networking infrastructure - and it does not have a revenue model. Why should my buddy list with presence management and life streaming publish-subscribe work any other way ? If it is decentralized I can have it hosted by someone who operates commercially, but I can also host it myself. Internet infrastructure has shown that this is a viable model. Freedom first, revenue model later !

Comment from JulesLt on 2008-05-29

2008-05-29T08:24:36Z

Christopher - I don't believe the author is being unimaginative, so much as that - so far - no one can prove any of those models really scales.

Without wishing to rubbish them, many of them also have problems - in a world of open APIs and data portability, how do you charge for different looks/skins/features, when it will be equally possible for anyone else to produce, say, an Adobe AIR based client that uses APIs from multiple sites to produce something far more interesting???

Consider Twitter - a recent web app with an API, that is possibly used more via it's API and third-party software than it's own front-end. That also says something about the value of separating data and presentation, which has always been a key concept on the web.

I do like the idea of having a single company holding my OpenID+social data and third party companies paying a transaction fee for access. In fact I think micropayment based API access is going to be the only thing that works, but the current bets are all on APIs being free and funding by the usual Underpants Gnomes methods.

Leveraging the brand - just doesn't work for a pure Web play, particularly a pure Web API play, which may have no consumer brand - interesting to note how a commercial web API like Amazon S3 has little consumer presence.

Gut feel . . . the obvious thing is that social media is a form of communication like email, so likely best monetised by the same people - your ISP or mobile phone company. I've long thought that mobile firms have been missing a trick there. The likes of Twitter then become second-tier providers of services to the first-tier that the consumer actually has a financial relationship with.

Comment from Bruno Ribeiro on 2008-05-29

2008-05-29T09:21:33Z

Very good post, but you forgot to mention Ning which is, in my view, the social network platform with greater chances of making profit out of CPC or CPM. Again, the Long Tail is more profitable on the current state of social media.

Comment from Faisal Riaz on 2008-05-29

2008-05-29T10:27:29Z

Social media networking is on peak in number of websites present and coming into the market. But users are hardly addictive of few ones like Orkut, facebook etc.

LinkedIn is amazing where age bracket is too large. A team ager to old people love to join

Comment from Scott Brinker on 2008-05-29

2008-05-29T10:58:34Z

Although there isn't an effective ad model for email other than CPC ads in Gmail, the email channel itself has been arguably one of the most effective for delivery of marketing to audiences.

Companies such as ExactTarget and SilverPop and the whole "email marketing" industry have found ways to monetize that quite nicely, albeit as a marketing service. An interesting parallel to consider when thinking of business models in social media, no?

Comment from bernard lunn on 2008-05-29

2008-05-29T11:42:26Z

Yan, you are right, my use of the "lurking" term was overly negative and there can be viable uses of that. If the site does a good job aggregating the data (without any personally identifiable data of course) that can be valuable to lots of companies. Selling it as market research data would be a solid revenue stream, but not anywhere close to justifying current nose bleed valuations.

Comment from bernard lunn on 2008-05-29

2008-05-29T11:57:56Z

# 16, Scott, thats an interesting point. That is sort of what LinkedIn does. For someone with a large network it is effectively free (at least I have never had to pay) but for somebody wanting to send mails to people they don't know, LinkedIn charges. In fact they charge so much that I suspect that traditional email marketing is more effective.

# 9, Christopher, nothing wrong with a portfolio of minor models. However those are all still theory and it is unclear which ones make sense in practice. Also all new types of business have tended to succeed by finding one really simple model with a great value proposition (eg 30 second slots for TV, cost per click auction model for search). There is somebody out there who has found that magic model for social networking, but clearly they are keeping it to themselves until they launch and become gazilionaires :-)

Comment from Peter Cooper on 2008-05-29

2008-05-29T12:49:18Z

A lot of people have focused on the social network / business / geek side of things here, so I'll stick to the "users." The thing is, users don't really care about any of this.

Most users don't appreciate the difference between a walled garden and a decentralized system. Even if those users were placed magically into a decentralized system right now, few would take advantage of it. Users (and I'm talking about the 99% majority) do not typically care whether their data can be accessed via an API or not. The only people who care are information geeks, developers, and competing social networks and Web applications.

It is no surprise, therefore, that the big, established players are hardly in a rush to decentralize or hand out data. It's not that they don't enjoy the geeky side of what it could all mean, but that they know almost no-one will ever end up using it and so a walled garden is far more profitable to them.

You could argue, of course, that the "walled garden" approach is similar to the way Compuserve and AOL worked in the mid 1990s and that the decentralized "Internet" ultimately prevailed. The reason for this, however, was that being able to do your own thing within Compuserve and AOL's walled gardens was extremely expensive (restrictively so). Being on Facebook, however, is free, and you can even roll out apps to FB users for free. This means there's no real motivation to escape the garden just yet for the average Joe.. and even if he could, it's like escaping our universe, the average Joe doesn't "get" exactly why he'd WANT to escape that garden.

Comment from Cory Hendrickson on 2008-05-29

2008-05-29T14:22:13Z

These are all good points and something a lot of us have been considering for some time. Sure, there's value in the social space. Problem is how difficult getting eyeballs and ad models to work in a space where intrusive ads leave a bad taste. I've been wondering if there's not a cross between contextual ads and search coming down the line that can help answer the questions and problems that arise through use of the social sites. Going bowling tonight? Where should we go? Here's a set of welcome intrusive suggestions that just might help you out.

Comment from Download on 2008-05-29

2008-05-29T14:29:56Z

these sites are stupid and are killing the internet. Myspace and facebook are just a place for spammers and hackers!

Comment from Ferodynamics on 2008-05-29

2008-05-29T14:41:50Z

I don't care how cool the API or feed is, it's all "walled" to some degree, whoever owns the domain controls the garden. Your data needs to be somewhere, hopefully you registered the domain holding all your data. If not you'll learn the hard way.

As for low CPC, my CPC is almost double what it was 2006-2007. And 2007-2008 I've seen more TV shows advertising on my blog, the money is moving online, ad rates are climbing, and expensive gas means more people shopping, doing business at home/online.

Some of us have been online for a decade, or two. But I bet you many of these advertisers only learned to "double-click" a mouse within the last few years ;-)

Comment from spinchange on 2008-05-29

2008-05-29T14:49:44Z

Great post, guys. I'm not a developer or web entrepreneur, but every time these proposed models get talked about and we discuss how to monetize social media, I'm come back to Chris Anderson's concept of 'free'...and I remember how fundamentally & economically challenging this is, for a social media entrepreneur. It's working for some, and others will figure it out, I'm sure...but I could never be a VC in this space.

Comment from bernard lunn on 2008-05-29

2008-05-29T15:12:16Z

Ferodynamics, loved the site (I am a music lover, so it appealed) and I think that MySpace has to lose its cool club status as it grows, so the premium is in niche. Good luck.

Comment from Scott Gardner on 2008-05-29

2008-05-29T18:00:53Z

Great article! While Beacon may have flopped, a strong revenue model could be to leverage the end user, giving them the opportunity to monetize their own personal connections/audience, belief strutures, opinions & values. The age-old concept of Word of Mouth Marketing could dovetail nicely. While very controversial & disruptive, the likes of Pay Per Post, Blogvertiser, PayU2Blog, etc may be on to something in their fundamental models. Transparency, disclosure, honesty and openness would be key to such a model's longevity (thus the reason for these co's controversy), but if these "walled gardens" gave users their own revenue vehicles (rev share), it could pay big dividends. Examples of this would be product, service & experience reviews, consumer testimonials, affiliate marketing, etc.
This type model would incorporate the human experience into contextual advertising leading to engagement marketing between like-minded peers/demographics.

Comment from pierreloic on 2008-05-29

2008-05-29T18:58:14Z

Thanks for this very interesting post.
I totally agree that a walled garden approach won't be viable but not for the reasons you mention. I believe that making a final stand on social networks revenue models is way premature. Once we get passed the cool factor of social networks, the focus will be on value creation: how do social networks contribute to economic growth? By how much? Once some key contributions have been identified (e.g. increased trust among users, product endorsements, knowledge pool, etc.) and quantified, revenue models will become self-evident and I don't anticipate them to be either ads or utility. The reason I believe the walled garden has no future is simply because it gets in the way of this discovery process of a value chain that goes way beyond social networks.
As an aside, even though the article is titled "social media", we're only talking about social networks here, right? On the broader issue of social media revenue models, I encourage you to read Mark Cuban's posted we commented on at http://traackr.com/blog/?p=27
Thanks again for the excellent post and discussion.

Comment from Linc on 2008-05-29

2008-05-29T19:06:57Z

Great post, Bernard.

#25, Scott, is right. Beacon was a flop for a variety of reasons but giving end users the ability to monetize their expertise and knowledge-based recommendations can be very powerful. Seems like we see the beginnings of monetization of this type with Facebook apps such as RadicalBuy.

Comment from bernard lunn on 2008-05-29

2008-05-29T20:24:00Z

Yes, Social Networks would have been better title than SocialMedia. The best ideas I am seeing coming from this involve some "show me the money" for people within the network whether from group buying, affiliate marketing or whatever. While Amway maybe the wrong model (too messy to sell to friends), something that makes money for people will motivate them. The idea that site owner makes gazillions from the poor dumb consumers in the network sounds like Madison Avenue on steroids, just won't wash. It has to be more peer model, enabled by the network. Particularly in a consumer recession. Gotta get some cash to pay for those toys and beers!

Comment from gregory on 2008-05-29

2008-05-30T05:56:40Z

lot of revaluing is going to happen, and people will have to get less money ... remember musicians when they were bards and troubadors? no distribution deal? it will be like that, in many fields

you write because you write, not because you can get page views and make money. that was the wrong motivation anyway, and the result online content proves it

Comment from Marco on 2008-05-30

2008-05-30T09:13:11Z

We tend to forget that Social Networks are, or should be, places to stick around with people you know and you like to stay in touch with in real life too.

People want to meet personally, go out with friends.

I wonder why social media sites haven't experimented harder a revenue flow coming from event sponsorships (I don't mean conferences, but "Pork Ribs Night at Luigi's" for instance) or couponing which is a kind of ad revenues that sets back the focus on socializing.

Comment from Bud Gibson on 2008-05-30

2008-05-30T11:02:39Z

It seems to me that open social and friend connect are the steps down the utility model. I think the problem that walled gardens have is that they are trying to recreate the web inside a walled garden. AOL for this millenium.

Comment from Jamie on 2008-05-30

2008-05-30T15:24:44Z

Beacon will come back slowly but surely. I tend to think it is a brilliant idea and strangely like the idea of showing off the new sneakers I got on zappos to all of my friends without having to make a post about it. I am ok with them knowing I bought the WiiFit on Amazon also. Or do I have to twitter that? It is strange that we have come to live in a world where Google tracks most of our info and we are ok with it, but we freak out because someone pulls the curtain back and shows us what is really going on anyway.
My shameless plug for SeeMeNow as a FaceBook app is now you can show people what you are really doing...by streaming Live video and audio into your FaceBook profile. Try it? http://apps.facebook.com/seemenow

Comment from Dominic on 2008-05-30

2008-05-30T17:51:46Z

I think you touch on part of the idea. But there are some big unexplored opportunities for anyone that gathers millions of users: http://tinyurl.com/3vgf8r for a longer discussion.

Comment from Dave C on 2008-06-01

2008-06-02T02:42:55Z

Actually Yahoo! Mail has proven to be very effective at monetizing email with ads. Google, not so much. Gmail (like the vast majority of Google services) is still subsidized by the search ad profits.

Social networking now is a bit like internet search was back in the late 90s. Everyone was building share but no one really knew how to monetize it effectively. Overture came up with the model, Google took the idea and perfected it. I think it's just a matter of time before the social network equivalents of Overture and Google emerge.

Comment from Henry Blaufox, Senior Account Execeutive, Oxclove Workshop, Kingston NY USA on 2008-06-02

2008-06-02T15:25:42Z

Indications are that the walled garden will not be viable as the way to produce revenue.

However, our experience here at Oxclove Workshop leads us to advise publishers and specialized communities of interest can add value to their sites by including social networking tools on the sites. We have built these for some of our publishing clients, so that interested viewers can exchange information and self generated content of interest within the main sites. A publisher of particular subject matter invites users to submit content far richer than just blog type posts.

The goal is to forge a closer bond with users, build the community of interest, and enhance the user experience. This can be used to build audience for subscriptions or for advertsiing opportunities.

Comment from Lori Jones on 2008-06-02

2008-06-02T16:34:49Z

Who pays for the upkeep on social networks? In Korea and Japan it is the viewers. In America it is the investors, but we all know it can't be 'free' forever. Ad banners are the norm, but they are not effective. Using an ad format with viewer incentive would be the most efficient way to engage an audience. Offer premium services you can subscribe to, or 'pay' by engaging with a sponsors commercial. Check it out;

http://biz.yahoo.com/bw/080528/20080528005308.html?.v=1

Comment from Christopher Skinner on 2008-06-02

2008-06-02T16:39:26Z

Great article Bernard. Finally someone speaking business language inside of social networking.

Comment from Michelle on 2008-06-02

2008-06-02T19:15:46Z

If I hear the word Walled Garden another time, I will shoot myself in the foot.............such a poorly written article.

Comment from Steven Emery on 2008-06-02

2008-06-02T21:23:54Z

i like a article that scrapes off the icing tells it like it is. great work. time to call in the referees. the playing field needs some guidance. Read my comments on the subject of social networking. the leader of strategic vertical multichannel niche social networking integration will win the eyeball game.
http://www.vator.tv/pitch/show/MyLocatorcom

Comment from Jeff Pallin on 2008-06-02

2008-06-02T23:16:47Z

Great topic, good discussion. Is it just possible that the use of social media is a means toward an end (revenue) rather than the source of the revenue itself? So using social networking sites to build awareness of your brand (the old fashioned advertising through mass media model) is a paid placement that gets the people in the network to become aware of your value proposition and whatever call-to-action you provide.

We build brand the old fashioned way - we advertise it!

Comment from Blake Cahill on 2008-06-02

2008-06-03T06:02:43Z

Bernard - Great post. I am on panel after panel with companies, brands, and marketers trying to help them navigate the medium. Companies/brands are more than ever paying attention to consumers that are participating in social media - walled gardens or open networks. I think as they begin and continue to invest into listening and engaging with these consumers more clarity may arise around the revenue/monetization models. You really make some great points.

Blake
Visible Technologies

Comment from Ian Hendry on 2008-06-03

2008-06-03T07:09:42Z

Great piece and you raise some good questions that are almost uncomfortabel to answer as CEO of a business based social network. Let me have a go though:

Regarding advertising, our own site has taken the route of site sponsors, of which we have no more than four. I have believed for some time that while Facebook and MySpace may have popularised social networking, the next wave of smaller, more focused sites appealing to a specific need or interest. These are much easier to collect site sponsors for, as the audience is brought together by some specific purpose to which you can match possible suppliers (advertisers). Of couirse, smaller sites have fewer users, but site sponsorship would have a brand logo on every page for example, as happens on ours. Also, the smaller audiences with a specific need or interest are often hard for advertisers to find, so I believe that they would be prepared to pey more to romp around where their target audience meets.

And in relation to other revenue models, I agree that subscription is a viable option if your site provides real value. I wouldn't pay to have access to my own friends list and share pictures, but I would pay if I could network with potential new customers and be able to access their user data and details of their needs, for example.

It is not all doom and gloom in Web 2.0, but I think it is very likely that the "neat ideas" will get filtered from the "good businesses" over the months as the recession and credit crunch bite.

Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz

Comment from Zack Sturwood on 2008-06-03

2008-06-03T12:05:34Z

Social networks have no future beuase they are based only on a thinly based need for people to connect, and they can do that anywhere, and in the very very near future this will be done anywhere and everywhere..so no one site wil dominate this activity.

We have to reward the community, and give them a REASON to be part of our community....and make sure the community sahres a realpassion, not just a need to conect, that's way too basic a human need....like JPGmag.com...they sahre a love for great photogrpahy, and the reward is a gorgeous and cool magazine they get publshed in....something they normally could never do!

Comment from Pierre Bellanger on 2008-06-08

2008-06-08T12:42:05Z

Two comments:
First on monetization:I have created and run the social network skyrock.com. Skyrock.com ranks 21th in the world in terms of page views (Comscore April 2008). We are profitable and expanding. Our way to monetize our audience is through “haute-couture” advertising. That means working with advertisers to create unique conversational marketing operations on our social network. It works for Procter & Gamble, Coca-Cola, Unilever, Nike, Puma, Adidas, Apple, Johnson & Johnson, Nokia, etc … We are profitable because we believe in listening to our advertisers and building with them operations that enhance user experience. The integrated social webagency is the solution.

Second on the utility idea, I agree. I wrote last year a text entitled : social network future of telecommunications, that goes in the same direction as yours: http://www.skyrock.fm/bellanger/?page=lereseausocial