It seems that business pundits are of the mind that many of the successful social networks that exist today are doomed to fail because of a crippling inability to monetize themselves. I've thought about this and I'd like to take a moment to mount my digital soapbox. After much reflection, I think that this is not only a myopic point of view, but that it is exactly this line of thinking that will in fact bring down social networking as we know it.
I'll be honest with you; in college I didn't exactly excel in my Finance, Accounting and Econ courses (and that, as my mother will tell you, is putting it lightly). However, I have been around long enough to recognize good business practice when I see it. I mean think about it, we all are experts in our own right, simply by performing our role as consumers.
As consumers, we reward those that provide useful, reliable, friendly services with our continued patronage. If they provide us with the contrary, we take our business elsewhere. We may not be schooled in the science of supply and demand, but we are smart enough to know when we are getting the short end of the stick.
But I digress… Back to the topic of monetizing social networks. For the jury, I submit Exhibit A: Facebook, the Grand Poobah of the social realm. Facebook seems to be perpetually seeking ways to monetize itself and every time it does, it shoots itself in its very corporate foot.
In November 2007, Facebook launched Beacon, a system where third-party websites can include a script by Facebook on their sites, and use it to send information about the actions of Facebook users on their site to Facebook. Information such as purchases made and games played are published in the user's news feed. While still active, a class action lawsuit was filed in 2008 against Facebook, Blockbuster Inc., Overstock.com, Fandango, Hotwire.com, GameFly, Zappos.com, and any additional "John Doe" corporations that participate in the Beacon service.
More recently, there are reports of rampant "click fraud" occurring within the network's cost-per-click advertising, a service mainly used by small self serve advertisers. In some cases, advertisers have reported gross misrepresentation of click-throughs as high as 10:1 when gauged against third-party metric tracking sites. The site instructed those who have issue with the service to log the discrepancies and submit them to Facebook. After taking the time to collate these logs, advertisers have been rewarded with a reassuring, pre-scripted response letter.
As I list these controversies, I know that they have resulted in little or no change in how the Facebook runs its network and that they have had no effect whatsoever on the exponential increase in FB users (What? Are we supposed to switch to MySpace? Please, that is so 2004).
However, the alternative network twitter , which most social mavens now use almost exclusively, has Facebook worried about its future (for evidence, just look at all of the new, twitter-like features recently added to Facebook). It isn't out of the realm of possibility that if Facebook continues to lose credibility, users will up and take their profiles elsewhere.
WARNING: If you are a devout capitalist, or if your name is Rupert Murdoch, the following paragraph may make your head explode.
What I propose as a solution is simple: don't monetize them, at least not in the traditional sense. There exists in media a perfect example of how these sites can persevere and ensure longevity, but I haven't heard a single pundit offer this idea yet. I suggest that social networks adopt the same model as PBS and NPR. Revenue will come through "donations" that are made by corporations and businesses that wish to participate in this medium. If they are smart, these businesses will realize that they have a vested interest in ensuring the survival of these networks as a communication tool. This will require that that they accept that there is no way to moderate or direct the conversation; the value lays in the ability to facilitate and participate in it.
Not only will this provide a constant stream of revenue, but this model will ensure transparency throughout and allow these networks to maintain the trust and continued participation of its users.
I am not naive enough to think that the CEO's, CFO's, MBA's, etc. that run these sites will ever consider such a drastic course. I understand the need for ever-increasing revenue, especially in the digital world where the necessity for continued improvement requires substantial reinvestment. Only time will tell if Facebook and twitter and their ilk can survive or if the imminent death of MySpace is an aberration and not a paragon. I simply encourage those in charge of running our social networks be wary of how they seek to monetize them in the future, because their track record so far has me worried.