Multiple Models for Social Media Businesses

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Twitter’s move to a more “centralized,” broadcast-media-style model, and Facebook’s shift away from that approach, spark some interesting thoughts about what it takes to succeed in social media. As I discuss in a post at GigaOM Pro, the strategy a company chooses will align it with a particular revenue model.

With a site-centric strategy, you’re in the eyeball business. That means you’re either selling to your audience or selling the audience itself (to advertisers, marketers, retailers). Either way, a social media site needs a big enough audience — even if it’s within a desirable, targetable subset — to attract advertisers or produce profitable volumes of sales. Both Twitter and Digg are redesigning their sites to appeal more to broad audiences: They recognize that there are far more content consumers than creators. At the same time, they both need to service the content creators or broadcasters. It appears that, in contrast to Digg, Twitter’s new content consumption features — embedded media, multiple panes, lists for filtering — have encouraged, rather than alienated, its power-user communicators. But while Twitter’s doing carriage deals with content companies and marketers, it still lacks a robust marketing and advertising platform.

If you’re primarily in services, you have three revenue strategies to choose from or to mix and match:

  • Licensing: Enterprise applications have tapped social media technologies to create traditional or software-as-a-service businesses for companies like Salesforce.comBox.net and Jive. Likewise, Amazon and others offer cloud-based hosting and storage in support of social media applications and functions, but it’s rare to see technology companies pay to license APIs and social media services.
  • Harvesting: This is social media’s big undelivered promise, and the real reason for Google to keep on trying. In theory, the information gleaned from community activities and users’ social graphs can provide powerful insights for marketers, or as a core driver for shopping or search.
  • Plundering: Will companies with social platforms turn on their ecosystem by replacing them with their own features, apps, and services? So far, Google Maps, for example, remains hugely popular mash-up material, and Facebook and Zynga are still getting along.

Read the full post here.

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