Monetizing social networks

IEEE Spectrum recently published an interesting article about monetizing social networks (titled The revolution will not be monetized). It makes a good reading with a provocative conclusion: advertising will not be able to generate sufficient revenue to keep the ball rolling in the long term. So, where will money come from?

I’ve wrote already once about monetizing web content and services, where I came to the same conclusion: advertising only makes sense if you know exactly what your target is planning to do: otherwise it’s little more than an annoyance that will scare customers away. But, is that true for Facebook as well?

Whenever I log into Facebook, I see the status updates from my friends, including “friends” such as airline companies, hotels, my local mobile provider etc. What I’m being served is actually advertisement from companies I’m likely to use, a piece of information I gave away about myself as soon as I ‘Like’-d them. I confess: I rarely click on any banner, but I DID click on some of the links posted by my merchant ‘friends’. Does anyone monetize that? Of course: the companies themselves, but no one else.

There’s another case that went largely unnoticed. During last year’s volcanic ash crisis, most airline companies’ website were down or only served up an ugly looking text file with laconic updates. Meanwhile, those clever enough to have a Facebook account kept their customers up to date by the minute, leveraging on Facebook’s massive computing power: effectively, these airline companies turned Facebook into a free Infrastructure as a Service (or Platform as a Service, if you consider status updates a service) provider, winning high notes from their customers. Communication was also more personal, the companies’ Facebook operators replying to individual comments as well. In fact, afterwards, instead of calling their help-line, I contacted my favorite airline company through Facebook – and they solved my issue quickly.

So here’s my suggestion for Facebook & co: start monetizing on your company customers. You are giving away a huge opportunity for making money by letting them advertise themselves, interact with their customers, use your infrastructure essentially for free. To some extent, this is what LinkedIn is doing already: charging company members for recruiting services and job postings. Extending the model beyond that is the natural next step for me and it’s monetizing on the greatest asset social networks have: large number of users who themselves chose – and disclosed – what they are interested in, coupled with a large number of companies willing and eager to reach out to those hundreds of millions of potential customers.

It’s a bit like the 21st century TV: you tune in to what is interesting for you, advertisers push out their content and Facebook (the TV program) aggregates it for you. Welcome to the new world of interactive media.

3 Responses to “Monetizing social networks”

  1. Olin Neumann says:

    I wanted to let you know you wrote a great article.

  2. alper says:

    Hi Andras,

    I listened your presentation at SICS’s event at Kista this week. Could you please mail me your presentation slides, it was a great work.


  3. Elric says:

    You’re the one with the brnias here. I’m watching for your posts.