Social Media Seeks Payoff
Byline: Matt Moore Associated Press
DAVOS, Switzerland -- The leaders of Facebook and other social media sites have long seen some grim writing on their wall. While spectacular popularity has turned them into household names, they haven't found a way to transform all those friends, fans and followers into profits.
On Wednesday, in a rare encounter of rivals, the chiefs of Twitter, MySpace, Facebook and LinkedIn met with industry experts at the World Economic Forum to plot strategies for the future -- and help other business ride their success as well.
The common theme: developing social networks so they get beyond socializing to drive humanitarian causes -- Haiti earthquake relief, for example -- or help businesses better communicate with their customers to increase sales.
While participants touted social media's ability to reach out, form relationships and keep people and businesses linked together, they offered scant insight into how the companies can make money, cashing in on their enormous fan base.
"What's important for them is to become indispensable to consumers," said Augie Ray, a senior analyst for social computing with Forrester Research Inc.
"For Facebook, one of the interesting things is the value
of advertising that is super relevant and also increasingly involves the preferences and actions of your friends," he said.
Facebook, which draws revenue from advertising posted down the right side of its site, has generated buzz about a possible initial public offering this year. The site created a dual-class stock structure in November, a move that is typically a precursor to going public.
"That is the same scenario that Google did prior to their IPO," said Scott Sweet, senior managing partner of IPO Boutique, an investment research firm.
If it does go public, Twitter and LinkedIn may be tempted to follow, he said.
Evan Williams, chief executive and co-founder of Twitter, the wildly popular micro-blogging tool, said more and more small businesses were listening to their customers via the site, capitalizing on the way individuals build relationships across social media platforms.
"This is the heart of what a lot of social networks are about, they're about communicating ... but they're also about relationships of all types," he said.
"Some of the stuff we're excited about with Twitter is an individual will follow a local business, a coffee shop, and get their special of the day. …