Is There Any Money In Social Media?

Last week I engaged in a blog discussion regarding how Twitter will monetise its service offering. It got me thinking about social media in general and about whether or not such products can ultimately generate value for their investors. I probably caused some mild offence by suggesting that social media sites need to think beyond the Google ads model as a revenue driver. Shouldn’t delivering value to the user be the prime motivation for site owners?

I find it quite bizarre that so many site owners are obsessed with driving traffic to their sites in order to squeeze out a few more cents of revenue, on the basis that a tiny percentage of users will click on some ugly random ad words placed strategically around the site. Oddly, nobody seems to question this model. At this point I should probably point out that I don’t own the ads you may have seen at the top of this page sometimes. In fact if I had my way I would gladly pay to keep them off site because of the devaluing effect they have on my own brand.

So notwithstanding the irony that paying to remove ads has now become a valid revenue model in itself, I reckon there are a lot more creative ways to make a social media site pay. The most obvious option is the multi-tiered subscription based approach whereby users can receive a basic level of service for free and choose to pay for additional services. Dating sites are probably the most popular example of this approach and my friends over at Smallworlds are taking this track too. The second approach is to sell something for which there is a demonstrable need and do it in a stylish way that carves out a niche. That’s what we are doing with iWantMyName. But how can sites like Twitter earn cash when they don’t appear to have anything tangible to sell apart from access to their network?

Twitter has so much cash to burn that there is no urgency to find a revenue model – yet. Building trust and growing the user community is far more important than spamming users with site ads at present. There have been quite a few ideas floating around about how Twitter will monetise but many of them are red herrings. I believe Twitter does have a plan and the key lies in the fact that the interface is so clean and simple at present. By offering only limited functionality now it creates a fertile ground to add revenue generating value drivers downstream.

I think contextual search will play a big role in the approach that Twitter ultimately adopts and other site developers should watch and learn as this evolution occurs. Twitter is ripe to move into an enterprise setting too, but it cannot do this until there is much better search functionality. Microblogging may not replace email entirely in the future, but it certainly will put a big dent in it. How long will it be before you can add images and document attachments directly to your Tweets?

What I love most of all about micro-blogging services is that I have complete control over who I subscribe to. That is a feature people will pay for and that is the one problem that regular email software can never properly address. On that basis alone I think micro-blogging services will eventually win as opposed to stepwise adaptation by the encumbent technologies.

Merry Twitt-Mass

I’ve been resisting this for some time, but finally succumbed and opened an account at Twitter. And since Twitter now appear to have identified how they will make money, it’s clear that the increasingly popular micro-blogging service is here to stay.

Described alternately as “narcissistic and self indulgent” or (predictably) “the next killer app”, Twitter is like most things in life, there are pros and cons. If used judiciously it can be beneficial. It delivers me links to useful news and articles and it opens up another channel for me to share ideas. According to this explanatory webcast by O’Reilly Media, it’s also a “mood meter” for whatever is going in your sphere of interest. On the other hand, I don’t have any control over what I receive, once I subscribe to another user. So there are the vexing questions of truth and relevance. Do I really need all that additional information about somebody elses lifestream and how much of it is real anyway?!

But the really interesting part about Twitter is that it has the power to aggregate a huge global community. At present Twitterdom is largely confined to geeks, technophiles and early adopters. But that’s exactly what you’d expect at this point in its evolution. I think that will change. What will make the difference is when other communities realise that Twitter can work for them too. For example, there are lots of third world countries where Internet access is poor but mobile phone access is ubiquitous. So what better way to keep in touch with friends and family, when back-packing, than by micro-blogging via your mobile. Maybe even criminal dictators like Mugabe will be unseated by Twitter campaigns in the future?

But what really sold me on joining up was two things. Firstly a friend introduced me to TwitterEarth where you can spot tweets from all over the globe. OK so it’s a wee bit gimmicky, but it demonstrates how interesting new opportunities will spring up from the paradigm shift towards micro-blogging. Secondly I read a great article about how to use Twitter as a marketing tool. Suddenly I could see some value in it for me. It also occurred to me that Twitter is a great case study for the kind of mental transition our business will need to think about engendering as we push our own technology projects out into the global marketplace, such as our recently released site iWantMyName.

Looking forward to some “tasty Tweets” from you all over the Festive Season. And by the way, I promise not to squawk more than once or twice a day.

http://twitter.com/GeniusNet