Are Social Networks making enough to sustain themselves??

So we are all part of some or the other Social Networking website like Facebook, Pownce, Twitter, Myspace, etc. But have you ever wondered how they are able to sustain themselves – I mean they are delivering world class content to your inbox. How do they pay for it??

The Internet since its inception, has been about information exchange, communication, collaboration and community and as such, was always about social networking. Social networking is all about ‘individuals’ and enterprise is an important aspect of social networking. The industry too is booming with big names inking bigger deals. In 2005, Rupert Murdoch’s News Corp. bought out MySpace for $580 million. Last year, Microsoft bought a 1.6 percent stake in Facebook for $240 million, a purchase that valued the three-and-half-year-old company at $15 billion.

Social Networking was initiated as an ‘open to all’ but over time has space has evolved and now focuses on specific member interests. On the business aspect, financial stability is still a major concern for most online businesses. Memberships and Subscription fees form a part of the revenue generation but unfortunately is only a small percent of the monies earned. Social networking sites generate revenues either via subscription, through advertising, or through a hybrid model (subscriptions & advertising). Though the success of a Social Networking site is measured by the number of registered members it has, this some how doesn’t directly translate into business revenue as most of them are free to use with registration fees involved. However, there is yet no certain yardstick to measure the financial sustainability of Social Networking sites.

Social Networking as an Industry is still evolving and is yet in its nascent stage and it may be too early to comment on the financial stability of this industry. When conventional business models are challenged and new applications for technology are found, we need to wait until results start causing strong ripples.

Inspite of this uncertainty, the industry is exploding and time and again the top players have to constantly revisit the basics to make their sites that much more interesting to retain the interest of their networkers. This will benefit two communities, the users and the developers, pushing both to excel in their respective areas of function. This, I foresee, will never end. Innovation will decide the future of the competition and the players who adapt easily to the need of the hour will grow in this industry, where growth knows no limit!

by: pepster