The fact is that there are more ways that social networking sites can use to generate revenue than only advertising. The graphic on page 4, in this report, shows the method by which social networking sites generate revenue. According to this graphic and details in the site being referenced show the methods that generate revenue: ads, web apps, paying customers, mobile apps and affiliates.
It’s also interesting to note that 77% of revenues are from Ads, 7 % from diverse revenue channels and 10% are looking at other methods of generating revenues. Some sites are using multiple methods, for example Google generates revenue from ads, paying customers and web apps. It’s also very apparent that marketing agencies have discovered social networking as an excellent revenue stream. Marketing agencies and social media sites are planning to spend more on advertising, i.e. 71% plan to spend more on using social networking sites for advertising medium in 2012 and 77% plan to use the same for 2013. In addition, 89% of marketing agencies realize experimentation in this arena are a permanent solution and in year 2013 as the year that the marketing and social networking combination will make a major breakthrough (Dugan, 2012).
Marketing pundits are still trying to find a way to insert advertising into the web experience without giving the user a negative feeling as they browse and use the site (Strickland, 2012). Basically, more traffic is generated as more users visit the site. Since Facebook has millions of active users and this user base has enormous value. For this reason advertisers are willing to pay a greater amount of money for an advertisement on Facebook compared to another site with a smaller user base.
Facebook charges a developer fee; this generates revenue as well. Facebook does allow developers to incorporate their applications into Facebook. Although this is free for developers, Facebook charges $375.00 to evaluate their application. If the application meets Facebook’s criteria, it will be listed as a viable application (Strickland, 2012).
Other business models are emerging, for example, sites offering premium accounts for businesses. They in turn can use the social networking site as a platform to advertise. As a matter of fact Twitter has contemplated a model where companies would be required pay a fee to possess a Twitter company account.
It’s clear that social networking is here to stay and has an enormous impact on technology and the way users communicate. It’s growing at a tremendous pace, Bebo has 22 million visitors a month, Club Penguin, a children’s site has, 5 million and finally LinkedIn has about 5 million visitors a month (Urstadt, 2012).
(Dugan, 2012)
References
Dugan, L. (2012). Retrieved from http://www.mediabistro.com/alltwitter/how-do-facebook-twitter-and-pinterest-make-money-infographic_b19465
Strickland, J. (2012). Retrieved from http://computer.howstuffworks.com/internet/social-networking/information/how-social-networking-sites-make-money.htm
Urstadt, U. (2012). Retrieved from http://abcnews.go.com/Technology/AheadoftheCurve/story?id=5229625&page=1
[w1]They actually cracked a billion recently.
Vincent Lozupone, PhD 