Tuesday, 3 November 2009

How to Generate Revenue with Social Media Platforms

The visitor numbers on social media platforms have been growing exponentially in the year 2009 and this growth will certainly continue in the next couple of years. However, even the bigger social networking platforms still struggle to find viable business models in order to generate revenue. The majority of the social media platforms such as Facebook or Twitter are (still) free to the users. Other networking websites such as Xing or LinkedIn charge their users for certain content and services.

Although Web 2.0 has changed the way how we use the web, it has not spawn new revenue models. The main focus of social media monetisation has been on the advertising revenue model, however current developments give evidence that payment for content will become an equally important revenue source as a “Social Media Survey” revealed which was carried out by Abrams Research among 200 social media leaders from across the USA and Canada (see illustration below, click on graphic to enlarge).

More than 45% of US social media leaders regard the “freemiumpayment model as the best way to turn social media platforms into business. The “freemium” model allows users to access basic content and services for free but premium services or specific content can only be obtained when paying a fee (e.g. subscription or pay per use). One fifth of the participants in the survey consider targeted advertising as the best way to make revenue through a social media platform, whereas traditional online advertising is seen as the least profitable revenue source. It is also comforting to know that only 4% think that selling user metadata is the way forward. Does Facebook agree?

Certainly, most of the social media platforms show hybrid models when it comes to revenue creation. What does this all mean for the users? Is it likely that Facebook, Twitter & Co will sooner or later charge users for using the platform or maybe accessing their fotos? According to eMarketer, users are willing to pay for social network content as long as they can create value to the customers. How much would you be willing to pay for your Facebook?

Related article: Eight Ingredients to Brew your eCommerce Business Model

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