Social networking sites are dominating in Internet now. People often find themselves updating their status on Facebook, or sending messages on Twitter or downloading new photos to their page on MySpace. There are a lot of social networking sites that allow users to create profiles without charging them. But how can these sites make enough money in order to support millions of users?
One of the ways how social networking sites make money is using investments from venture capitalists. These investors are significantly making a bet that the site they’re investing in will become popular and will bring a profit. Starting such business from the very beginning can mean a big payoff at the end. The world knows several examples when big corporations buying Internet startup companies for billions of dollars (Jonathan Strickland. 2009).
At the end of 2007 it was a boom of venture capitalism. It was common for businessmen to invest money in promising Internet projects. Such service as Twitter wouldn’t exist without these investors. But because of economic problems, venture capitalism became careful with investment; they are still investing, but became pickier about their choices now.
So, now social networking sites need to hope for one of these results: convince a bigger company to buy the site or to manage to make money.
The most popular way for Web sites to earn money is to offer companies to put advertisement on the site.
Probably it is difficult to believe but advertising in Internet is still an emerging market. Experts in Marketing are still trying to find the best way to involve advertising into the Web experience without negative reaction of users.
So, the more popular the site, the more money it can bring through advertising. Such sites like Facebook have millions of users. That is why advertisers are ready to pay more for an ad on this site than for the same ad on a smaller social networking site.
The other opportunity to earn money is to charge users for membership fee. Even if most social networking sites try not to use such strategy; some managed to use it rather effectively. A lot of dating sites hide key information from users until they choose to pay for a premium membership.
Other new business models will appear when social networking sites will grow and become more popular. Other strategies may include special premium accounts for companies. Companies will be able to use such sites as an advertising platform. It is known, that the founders of Twitter have discussed such a business model that would make companies to pay a special fee in order to create an official company Twitter profile.
We see it clearly that social networking sites have become a big part of people’s social life. They are used by millions of people and developers create profiles that depend on these sites. But they will need to earn more money if they’re going to stick around (Jonathan Strickland. 2009).