Subscribe to PostsIs social networking a business model?
What are the arguments for and against social networking being classified as a business model?
There is certainly a lot of talk on the web about business models and whether social networking sites could be classified as having one. Firstly, tracking down a definition of a business model that I could understand - as a non-business person was challenging. I finally got some satisfaction with this definition. A business model is -
“A description of the operations of a business including the components of the business, the functions of the business, and the revenues and expenses that the business generates. ” http://www.investorwords.com/629/business_model.html
It seems that a business model is generally about how a business will generate revenue to sustain itself and satisfy anyone who has financial interests in it - monetization. Some models and the problems they may face with regard to social networking follow in the table below.
| Business model ideas | Problems they may face |
| Advertisements - social networks sell advertising space to companies and place the ads in sidebars or banners of pages for consumers to see and click on. |
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| Affiliation - befriending a product - social networking users are given the opportunity to befriend big brands. Other users may not know which products they use but they will get a fair idea from their affiliations.This could work particularly with celebrity affiliations much like it does with advertising in other types of media. |
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| Partnership - companies go into partnership with the popular social networks |
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| Micropayments - a theory that members of Social Networks will make small payments for items to make their experience better and express their individuality. |
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| User Payments - social networks charging fees for member participation.There are lots of social networks that people pay for outside the Web - so they will most likely be willing to pay for some within the Web. |
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| Alternative markets - real world markets for selling virtual goods. This already occurs in some online gaming and SecondLife with the cost of real estate in SL being thousands of dollars and charges made per year for maintenance and running costs. |
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| Brokering of trust - selling expertise is an age old way of generating revenue. Social networking may be a good avenue to bring parties together with the network taking a cut. |
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| Negotiation of Community - needs of people within communities change constantly - if social networking sites can work with those changes and provide for them - perhaps with spin off networks users need and be willing to pay for. |
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| Data mining - collecting information about social networking users and selling it to advertisers.This could also take the form of the social networks selling “polling rights” to market research companies. |
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Social networks are difficult to monetize because they are a new and distinct form of media. Even as part of the web, users of the sites look at and experience them differently. Most users of social networking sites don’t use the sites for making transactions they are just there - browsing, playing games, socialising, communicating, sharing their pictures, music and videos. They are too busy being social to focus on any activities that might be turned in to cash for the social network they are using. On the other hand, because they are new and evolving is it difficult to pin all social networks to a business model, or to business models that have been used in the past? Perhaps the key to social networks being sustained is their evolution with the needs of the communities using them and growing businesses through keeping a large volume of their members interested in what they are doing?
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