Will Social Networks Ever Make Money?

Management Today, October 1, 2009 | Go to article overview

Will Social Networks Ever Make Money?


Despite massive overnight popularity, Facebook, Twitter and the like have to contend with hard 21st-century attitudes: users resent intrusive ads, they expect a free service, and they are fickle. So what are the prospects for profitability? Andrew Saunders reports.

To some, they are the undisputed darlings of web 2.0, spearheading a virtual revolution that will replace the net as we know it with a connected world where status, street cred and even employability are determined not by the old credos of class, geography and education but by the number and quality of nodes on your personal global network. To others, social networks such as Facebook and Twitter are the last word in navel-gazing - online platforms for the swapping of trivial opinions by the terminally self-obsessed.

Whichever side of the fence you prefer to be on, if the grand vision promised by the boosters is to stand a chance of coming even halfway true, the big social networks will have to start doing something that they have so far singularly failed to do - making decent, sustainable profits. The question being asked with growing urgency out in the real world, where the wheels of commerce have yet to become frictionless and still need greasing with plenty of moolah, is: can they ever do so?

Some veterans of the dot.com bubble of the late '90s have their doubts Michael Wolff, American author of Burn Rate, the most compelling first-hand account of life in Silicon Valley in that frenzied period of boom and bust, is one. 'Social media is based on the internet model, and we are right to be alarmed by that model. It creates moments of intense enthusiasm, but they do not - cannot - last.'

Enthusiasm is the word. Facebook has signed up a mindboggling 300 million users in just three years. That's a fifth as many followers as the world's largest religion, Christianity, has accrued over two millennia, and it's still growing fast - five million new users a week.

Founder Mark Zuckerberg's ambition is also of biblical proportions. He wants to get to a billion users in a year or two, and - having turned down at least one billion-dollar offer, from Yahoo! - shows no inclination to sell out. Facebook has attracted a zealous following from the investment community - the purchase of a 5% stake by Microsoft in 2007 valued the company at dollars 15bn, although more recent share sales suggest dollars 5bn is closer.

And yet in its more established territories, Facebook is already old hat. How long can it find new markets where punters still think it is cool, to make up for those where it has passed into the ranks of the web establishment?

Blake Chandlee, commercial director EMEA for Facebook, is ex-Yahoo! and was Facebook's first international employee, way back in 2007. He is confident the firm has what it takes to stay at the top for a while yet 'How do you avoid being blindsided by the next big thing? I asked Mark (Zuckerberg) exactly the same question when I went for the job,' he says. 'He really wants to connect users, to make Facebook more of a utility than a content-driven thing, like some other social sites.

'Facebook is about nodes and edges - it enables you to keep in touch much more effectively with people at the edges of your network, people you might know only superficially, than you can in any other way. That has real global appeal, more so than content plays.'

At least Facebook has viable revenue streams - it makes money from advertising on the site, and is exploring other sources of income, such as stored credit, which users can spend on the site, and a new VOIP telephony service to compete with Google and Skype.

Last month, Zuckerberg announced that Facebook will be cashflow-positive this year, which means that it will earn more in revenues than it spends on capex - a vital turning-point for any start-up.

But it's very cagey on exact figures. Even mundane facts such as employee numbers are not 'officially' public (it's around 1,000 people, by the way) and revenues and expenditure details are closely guarded secrets. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Will Social Networks Ever Make Money?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.