How do Social Networking sites make a profit?
How do websites which are free of charge to users Make Money? Is ad revenue exceptionally profitable? Is it all up to High Traffic and ads?
Any links/citations to financial info on such websites would be greatly appreciated.
Few social networks currently charge money for membership. In part, this may be because social networking is a relatively new service, and the value of using them has not been firmly established in customers’ minds. Companies such as MySpace and Facebook sell online advertising on their site. Hence, they are seeking large memberships, and charging for membership would be counter productive. Some believe that the deeper information that the sites have on each user will allow much better targeted advertising than any other site can currently provide. Sites are also seeking other ways to make money, such as by creating an online marketplace (Facebook’s Marketplace) or by selling professional information and social connections to businesses: such as LinkedIn. Both Facebook and MySpace are now selling text ads similar to Google AdWords.
Social networks operate under an autonomous business model, in which a social network’s members serve dual roles as both the suppliers and the consumers of content. This is in contrast to a traditional business model, where the suppliers and consumers are distinct agents. Revenue is typically gained in the autonomous business model via advertisements.
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