Just about every social media site is free to join and many offer all of their features to users at no charge. As these social networking platforms grow their user communities, it’s reasonable to wonder how they plan to make their money, especially if that involves leveraging user-information to make sales.
A recent study of how social media sites monetize has found that 77% of social media websites make money through advertising revenue. In other words, social media sites are making money for sure, but at this point the revenue model for businesses hasn’t changed all that much from the days of print ads. However, that may change soon.
Multiple Revenue Streams
Though most social media sites focus on selling advertising space, it is common for many of the leading social media sites to combine ads with another revenue stream. Though the overall number of social media sites that use multiple revenue streams remains low at 7% according to this survey, the graph analyzing the top social networking sites reveals that multiple revenue sources may be ideal and hopefully less invasive for users.
PR and marketing site Simply Zesty offers the following analysis,“Foursquare and Twitter generate revenue solely from ads, yet Vimeo and Soundcloud use both ads and subscription services. Ultimately, the content and purpose of a site has a massive bearing on the business model adapted, showing that there is no such thing as a ‘one-size-fits-all’ model.”
Income through Advertising
Perhaps the best known revenue model for social media sites is Facebook’s advertising program. Companies can either purchase ad space on Facebook or sign on for a premium advertising platform. This premium advertising platform allows companies to place ads in the streams of their fans both on their computers and on their Facebook mobile apps.
Twitter also utilizes advertisements through sponsored tweets or promoted trends by companies that will appear in your home stream. Sponsored tweets are marked with a “sponsored” logo, which helps users spot the ads without clicking on them by mistake.
Income through Web Apps
Besides working with advertisers, Facebook also generates revenue by taking a cut of the revenue generated from web apps used on the Facebook platform, such as credits for Farmville.
Income through Affiliates
Prior to February 2012, Pinterest used Skimlinks to turn non-affiliate links into revenue-generating affiliate links to gather revenue. Marketing Land reported on an interview with Ben Silbermann, the CEO of Pinterest, who said that Pinterest stopped using Skimlinks since it didn’t make enough money from the affiliate sales. Silbermann mentioned that he plans to explore ads as a source of revenue in the future on Pinterest.
Despite Pinterest’s termination of Skimlinks, affiliate links promise to show up again on social media sites in the near future because they provide a non-invasive revenue model that, if coded properly, doesn’t have to impact the SEO of a website.
Income through Paying Customers
Another popular income model among the top social networking sites such as Flickr, LinkedIn, and YouTube is a combination of premium service and advertising. Premium users pay for enhanced features, such as additional
image storage space on Flickr, while also deriving additional revenue from traditional ads.
Given the enormous amount of server space required to manage social networking sites, it’s reasonable for users to expect that “free” social sites will need to find a sustainable long-term revenue model beyond venture capital. Whether that means sites sell ad space based on the information you’ve entered into your profile or charge you for premium features, social media sites have a valuable commodity that marketers crave: attention. The opportunities for marketers on social media sites are too great to pass up.
Money will be made on social media sites. The only question at this point is “Which model is the best long-term revenue solution?”
Photo credit: Alan O’Rourke
- Pinterest Partner: Yes, They’re Making Money from Pins (mashable.com)
- How to Develop a Social Media Strategy for Twitter (lauraleewalker.com)
- 7 Essentials Facebook Page Apps for Improving Communication with Fans (lauraleewalker.com)