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Derek Powazek - What If Social Networks Just Aren’t Profitable?


Stashed in: Social Media, Monetization

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"What if we all realized that social networks are a societal good (at least as good as a local alt weekly) but not necessarily good businesses? We’re all desperately hoping that Twitter or Facebook or Tumblr will figure out the secret ingredient that turns a large-scale community of free members into a cash machine. What if we’re all just waiting for the impossible? Like a business that turns water into gold? We’ve got lots of water, we just need to figure out the gold part….

What if we eventually realize that, like the alt weeklies, these are things we do because they should be done, because it’s fun, to make our little community a better place … not because they’re going to be great businesses.

Because so far, when you look at the numbers, that’s just what they are: not great businesses."

"Facebook's real problem isn't privacy, it's monetization," said Dave McClure in 2008. "It's not too early to worry about how Facebook makes money."

Four years later, people are saying the same thing.

The same thing used to be said about Amazon, until they proved their own sustainability.

Facebook may one day be a great business. Too early to call.

Here's the thing Derek said that's really resonating with me:

The one truly great business born of the web is Google, and not their self-driving cars and the other nonsense that accounts for zero percent of their income. It’s putting small, self-serve ads beside their search results.

You and I create those search results with our behavior online, but not directly on Google. And that line between where I’m using my voice (you’re soaking in it) and where it’s being monetized (*cough*) is enough of a separation that it doesn’t bother me.

The problem happens when the content creation happens in the same place as the ad deployment. So, of course, that’s exactly what Google’s trying with Google+, to less than stellar results.

Having said that, there are many other business models: Pinboard's pay up front, Flickr's annual storage subscription fee, LinkedIn's charging recruiters for dashboards, WordPress and Tumblr with a la carte add ons, Amazon and eBay/PayPal with direct payments.

But there's no business on The Web like Google's business. Derek's right about that.

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