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Business - Written by on Tuesday, April 20, 2010 4:05 - 4 Comments

Derek Pokora
Monetizing social networking platforms. Put your money where your data is?

You mean the “just-give-it-away-and-they-will-come-and-we’ll-be-rich automatron is as broken now as it was in 2001”?

Three social media giants, three giant media announcements: Ning, Twitter, Facebook. In only seven days, these three companies have announced major changes to their products and/or business models. Is it a sign of things to come? How will each of these companies answer the question of how to turn its growth into revenue?

A quick synopsis of each situation:

Twitter. According to comScore, Twitter.com had 22.3 million unique visitors in March, up from 524,000 a year ago (excluding those who use third party apps), but it has been criticized for its inability to monetize those users, until now. Twitter is finally launching an ad system called “Promoted Tweets” that will show up when Twitter users search for keywords that the advertisers have bought to link to their ads. Later, Twitter plans to show promoted posts in the stream of Twitter posts (a controversial move), based on how relevant they might be to a particular user. You can watch a video about it here.

Fred Wilson, a Twitter board member, dropped a bomb on Twitter’s third-party developers, telling them to stop “filling holes in the Twitter product,” and start creating “something entirely new on top of Twitter.” Twitter has since purchased Atebits, the company responsible for the Tweetie iPhone app, and is renaming it Twitter for iPhone. They will also releasing an official app for the Android Phone OS. It looks like Twitter is prepared to compete with, and potentially replace the companies who have built applications around its ecosystem. So much for playing nice.

Facebook. On the surface, Facebook’s move doesn’t seem like much, but the Facebookipedia concept of creating ‘community pages’ could be an incredibly stealthy move to target advertising to users without them even realizing it.  Community pages take the concept of a Facebook “fan page” and apply them to concepts, places, and ideas, rather than brands. When prompted by a dialog box that pops up on their profiles, to “like” community pages that tie into what’s already entered into their profiles, users can connect to the community pages for their hometowns and schools, and convert the “interests” entered in their profiles to link to pages. This increases the amount of metadata for each user and makes search much easier for everyone. It seems like a win/win proposition though. Users of Facebook can contribute to, and potentially benefit from the increased access to shared knowledge via wiki-like pages, and Facebook can gain from the amount of data on each of its users in order to have better targeted ads. Note the implementation of this change also coincides with Facebook’s decision to step up its privacy policy/settings.

Ning. Ning (“peace” in Chinese) is a platform that allows anyone to set up their own social network. After over five years as CEO, Gina Bianchini resigns, and is replaced by COO Jason Rosenthal. One month later, the company decides to phase out its free product, and lays off 40% of its workforce (from 167 to 98).  In an interview, Bianchini mentions that about 13% of Ning’s revenue stream is from paid, premium services, an amount that contributes to what some are estimating to be roughly $10 million in total annual revenue. This appears, however, to be an optimistic ball park figure, and is likely to be lower since not all users are necessarily be paying the maximum of $55/month for pro services.  As stated by Rosenthal in his staff memo, “we are going to change our strategy to devote 100% of our resources to building the winning product to capture this big opportunity” – the big opportunity being the premium service, not the model supported by advertising.

Ning’s approach sounds completely different from Bianchini’s interview, which occurred not too long before her departure, and the model diverges from both Facebook and Twitter.

Although I do love the Ning platform, the recent changes to Facebook that enables users to be more ‘community minded’ will cause the orphaned communities of the once ‘free’ Ning to jump ship to Facebook, where they will continue to ‘deal’ with the ads, and Facebook will benefit from Ning’s lost revenue. Other providers, such as Posterous and Tumblr, are welcoming new users with open arms. Posterous is committing to building a Ning blog importer, and BuddyPress has politely offered helpful resources to those looking to make the transition, including a user importer as well. Even with a 40% cut in staff, a revenue stream that accounts for 13% of Ning’s overall income doesn’t appear to be enough to support the company. It’s a risky move. Here’s hoping the next generation of their product will be astounding. As for Twitter and Facebook, the focus on metadata and data mining for advertising purposes could provide them with a large number of earnings. The only difference is that Twitter is being much more direct in its approach.

We’re at a crux for social networks. These platforms have enabled communication in new ways, increased transparency and knowledge sharing, facilitated new business and educational models, and have shifted the landscape of marketing and advertising. However, without the necessary revenues to support themselves, these platforms could disappear. Do we want another bubble? What do you think about the decisions made by these three companies? Do you agree with Rosenthal’s decision in changing Ning’s business model, and is this the reason for Bianchini’s departure from the company?



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Storytelling Social Media Marketing PR Technology & Business Curated Stories Apr. 21, 2010
Apr 21, 2010 16:42

[...] Monetizing social networking platforms. Put your money where your data is? Published: April 20, 2010 Source: Wikinomics You mean the “just-give-it-away-and-they-will-come-and-we’ll-be-rich automatron is as broken now as it was in 2001”? Three social media giants, three giant media announcements: Ning, Twitter, Facebook. In… [...]

Chris
Apr 22, 2010 9:08

Personally I think Ning may have made a real slipup in trying to sell their previously free product. They’ve created a financial barrier to entry in a market dominated by free products. It’ll limit the pool of people using their product, which will limit the level of innovation, which will limit the amount of people drawn to the site.

I forsee a gradual downward spiral for Ning, culminating in the emergance of one or two major competitors, using their original business model and doing it better.

Its a real shame really because I’ve been a strong advocate amongst colleagues for the use of Ning, but I probably wouldnt now as I think its utility will decline severely.

How to Build Your Social Network | Internet Marketing Income
May 14, 2010 15:03

[...] Wikinomics – Monetizing social networking platforms. Put your … [...]

Gabriella Adams
Jul 26, 2010 13:58

monetizing a website is really a great way to earn money in a passive way just like real estate.’,;

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