Social networking is a business, but it’s not profitable. As social media becomes more ubiquitous and the industry matures, will social networks ever make money?
The how much money do social media companies make is a question that many people ask. In the past, social media has been able to make a lot of money, but in recent years it hasn’t been as profitable.
With an asterisk, the headline reads, “Social Networking is Not a Business.” “*But it could be soon,” is written underneath the introduction. That’s the main article in the current issue of the MIT Technology Review (it’s free, but you’ll need to register to read it). The following is the lead:
Except for profit, Web 2.0–the ideal of a user-built, user-centered, and user-run Internet–has delivered on almost every promise. Will its most well-known example, social networking, ever be profitable?
I’ve seen Facebook used by college kids at work. Wow. Also, with high school students. Wow once again. It’s as though it’s a magnet. They changed how they handled what showed on the wall a few years ago, and the youngsters protested, prompting Facebook to perform a double take. I’ve seen Facebook become as essential as mobile phones on college campuses. The picture tagging alone is enough of a draw, yet it’s nothing compared to the rest.
This year, though, Facebook is expected to lose $150 million. Last year, MySpace revenue dropped $100 million shy of expectations.
Bryant Urstadt of the MIT Technology Review writes on some of the behind-the-scenes players in social networking, such as KickApps and Ning. There are a lot of users, and they’re all over the place. In a month, 35 million unique U.S. visitors visited Facebook, 72 million visited MySpace, and 22 million visited Bebo, according to the article. There are almost a quarter of a million sites on Ning.
“Water, water, everywhere, Nor a drop to drink,” says the castaway on a raft in the midst of the ocean. The major social networking sites have a large number of subscribers but little income. Yes, there is money; nevertheless, it is capital, not sales, that is being invested. Microsoft bought a 1.6 percent interest in Facebook for $240 million. Ning, which was created by billionaire Marc Andreessen, received $104 million in venture financing.
In its Web form, the article is a seven-page in-depth study. There’s a lot more to it than what I’ve said here. But towards the conclusion, there’s a summary that I enjoy.
Social networking is haunted by the ghosts of departed titans. So many once-famous Internet businesses are in trouble or have died. Take a look at CompuServe, AOL, Netscape, Napster, and even Yahoo. Lycos, a search engine sold to Terra Networks for $12.5 billion in 2000, was sold to a Korean company four years later for $95 million.
What CompuServe and many of the others had in common was that they were portals, or entry points to the Internet. Facebook aspires to be something similar: more than simply a helpful and entertaining social tool, it wants to be the first website people visit when they get online and the platform they use for all of their other online interactions.
As would-be portals, social-networking sites, on the other hand, are susceptible to one of the issues that brought those early Internet companies down. The portals were “walled gardens” where novice Internet users gathered for a while before becoming restless and venturing out into the broader, wilder Web. Facebook and MySpace are aware of this and are now attempting to strike a balance between openness and control.
They’re also afflicted with faddishness. Social networking as a cultural phenomena is studied by Danah Boyd, a PhD candidate at the University of California, Berkeley. She refers to internet hangouts as if they were well-known bars. “When all of your pals go,” she adds, “it’s supercool.” “After that, a slew of additional individuals show up. Even if the pub isn’t physically packed, it becomes socially busy when your ex is at the opposite end of the bar chatting to some weirdo who has brought his gang mates with him. When are you going to declare, ‘Enough–I’m outta here?’
Technology Review: Social Networking Is Not a Business* is the link, and it does need registration, but it is free.
Social media is a profitable industry, but it has been difficult to make money. The which social media is best for making money will help you figure out which platform to use.
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Frequently Asked Questions
Do social networks make money?
Yes, social networks make money.
Is social networking dying?
How much money do social networking sites make?
Social networking sites make a lot of money.
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