Sunday, January 16, 2011

Social media is not a business model

Back in 2007  Rob Frankel posted an interesting analysis of the buzz environment that surrounded online social networking sites. In fact, Rob predicted the demise of social networking sites.

http://robfrankel.blogspot.com/2007/09/demise-of-social-networking.html

I agreed with Rob at the time in that current practices in marketing and advertising did not (and still do not) support the business models for many of these social networking sites.  The "build traffic now and worry about revenue later" mantra just won't cut it unless these sites can exist using an advertising-supported model.  Indeed, many social networking sites have vanished since 2007.  Friendster anyone?

So what if pure-play social networking sites are able to collect large numbers of users who interact in these online communities? Just because lots of people do it doesn’t mean there are profits to be found for the site owners--unless, as already stated, these sites can be ad-supported or user-supported which is hardly anything new.  In a nutshell, social media must in the long run be monetized by those who own the sites and the servers.

Most people who participate in social media simply are not willing to pay a fee to participate just yet.  Would you be willing to pay a monthly fee to be on Facebook?  Would you be willing to go to a "PPT" (Pay Per Tweet) model on Twitter?  Without substantial advertising revenue the name of the game in the long term will have to be building brand loyalists for these online sites. Loyalists who gladly contribute an ongoing revenue stream.  Right now social media users find paying fees undesirable and targeted advertising just a bit creepy.  In fact, targeted advertising is often seen as an invasion of privacy and when users sense that too much personal information is being shared with advertisers they quickly revolt.

Integrating social media elements into existing sites that already survive on revenue generated in other ways is a great way to bolster brands and further engage customers.  Adding Twitter, YouTube and Facebook to your marketing tool kit is just plain smart.

Just don't succumb to the notion that engaging in social media is in-and-of-itself a business model.

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