While pure-play media sites try to figure out how to offset ad sales declines by charging readers, it seems that social networks — surprisingly — are making faster progress at getting their users to pay up. The latest example is teen-friendly social net myYearbook, which says it’s now profitable because of a subscription and virtual goods-based business model that has increased revenues by 120 percent vs. a year ago.
Other networks like hi5 have begun to diversify their revenue streams with virtual goods and even downloadable games, while social game and app developers have also been making money by getting users to pay for credits and virtual goods. The biggest challenge these sites face with getting these revenue streams to scale is that the payment platforms aren’t streamlined: users need to enter a credit card for every different app or subscription, and for younger users, getting their parents’ buy-in can be a deterrent.
Companies like PlaySpan are trying to create one-size-fits-all payment platforms that work across multiple apps and networks (and accept prepaid game cards); myYearbook made it easier for its younger user base to pay for these options by partnering with mobile payment service Zong.
The social net says roughly a third of its overall revenue is user-derived. Members can buy virtual currency called Lunch Money, which can be used for virtual gifts; performance-based ads also offer up Lunch Money as an incentive for watching videos and completing surveys; and the social net also rolled out a premium membership called the VIP Club, with monthly fees that range from $7 – $20 per month.
Founded by teen siblings Catherine and Dave Cook in 2005, myYearbook has raised nearly $19 million in funding from Norwest Venture Partners, US Venture Partners and First Round Capital.