Ok, I’m addicted to Twitter – it often provides me with plenty of food for thought. A few days weeks ago now I received a Tweet from a long time connection of mine, SunnyC. Sunny had recently read that Twitter was preparing to monetise and we both wondered whether this would change the service in a fundamental way.
It made me think – so many of the larger social networks… Facebook, Myspace & Twitter all hold such high values and communicate with so many individuals – yet are failing to turn this into a profit considerable enough to reflect their value or reach! Rupert Murdoch has managed to quote the blatantly obvious here, ‘I think we need to find new ways to monetise our huge audiences.’
Let’s take a look at the situation. Facebook, arguably the largest social network around earns less that its competitors. It’s struggle to monetize has been public, with failed attempts with Beacon, Inline ads and the lowest click through rate of any social network. The bottom line is that Facebook users just ignore ads (for the most part) and marketers are shunning Facebook and preferring something results driven. The few large-corporation run campaigns on Facebook attract plenty of users but little more than a small flurry of activity. I’m struggling to see how Facebook will live up to its multi-billion dollar value, and I, for one, would not take Facebook stock as a payment for anything.
When Rupert Murdoch purchased Myspace, then-larger than Facebook, for $580 million it was considered a shrewd business move; the value of Myspace was considered to be 10x that. Yet, in the last lot of results I saw Myspace added only $7 million to Murdoch’s first quarter profits. Google was quick to jump into bed with Myspace, signing an exclusive ad deal with the network at a minimum cost of $900 million. Last I checked Google was still in this contract at a loss.
Clearly, both Myspace and Facebook are failing to bring in the dollars. Twitter is yet to try and has been taking its time coming up with a strategy (the first attempt at revenue is expected to be this April). Todd Dagres, a major investor in Twitter, consistently claims that Twitter is working towards a long term, profitable business model – and I can not wait to see what it is. It is claimed that these changes will not hinder the current user experience on Twitter, and from what I could find out, Twitter will generate money from:
- Targeting large corporations who interact with customers online, i.e. Starbucks
- Focus on listening more than interacting
- The topic of advertising has been discussed, yet Twitter is a very personal medium. Any ads in Twitter would need to be non obtrusive and personal (much like Facebook tried, and failed, at).
My guess here is to provide reports as to what people are saying about their brand, yet several Twitter scan services already exist. With buyout offers exceeding $500 million, it is going to be interesting to see if Twitter can be the first to live up to its price tag. I do feel that a company scan and activity monitor is useful to companies and could be profitable, but it would only be useful if it is able to canvass all social networking mediums. I seriously doubt that Myspace, Facebook, Twitter and the likes can all co-operate on that one!
The bottom line is that these social networks have incredible reach, high values and very interactive user experiences yet consistently fail to earn considerable profits. Especially in an economy where we need to cut down on such experiments, it is going to be interesting to see how these companies survive and if they really are worth the hype!
Google actually think they have a solution, but this blog entry is too long as it is. I’d like to finish this blog off on a relevant (and very true) quote from Time magazine on social media and its profitability.
‘‘The value of content has never been ethereal. It has always been tied directly to what owners could ‘get’ for it, either through advertisers or subscribers. For content to have value, it could never be free. Its position as royalty depended on that.’
