Twitter, Facebook and similar Web 2.0 sites have earned unprecedented buzz for their ability to build social networks of millions. As social network sites mature, however, a question looms large in the minds of their investors, one that promises to greatly affect the future of social networking as a medium: How exactly can these enormously popular solutions start making substantial amounts of cash?
Twitter, Facebook and other social networking sites have risen from humble
startup origins to redefine how 10s of millions of people communicate on a
daily basis. Even the enterprise has started to embrace them as tools;
Salesforce.com
recently added Twitter to its Service Cloud, which already includes a
Facebook application.
Now that the form has firmly established itself, though, how can Twitter and
Facebook start to generate more substantial revenue? For years, investors have
been pouring cash into social networking sites with amorphous sales plans on
the hope that a profit-generating angle would eventually come to life (or else
that
Google
would swoop in and snatch up their little startup).
Twitter may have found something of an answer this week. The site, which
allows users to send 140-character microblogs, or "tweets," announced
on March 23 the
launch
of a Microsoft-sponsored site called ExecTweets, which collects executives'
microblogging missives for the public's reading pleasure.
Later in 2009,
Twitter
also plans on starting commercial accounts with expanded features for
businesses at an as-yet-unspecified fee.
"ExecTweets is an interesting deal; you can expect more of that, with sites
deployed across multiple lifestyles-the next will probably be deployed across
tech," Jeremiah Owyang, an analyst with Forrester, said in an interview.
Advertising, Owyang added, is one area in which Twitter is unlikely to tread
as it hunts for revenue. "We know for [a] fact that ads disrupt the user
experience, because users are there to communicate with each other, and ads
would have to go into the editorial stream," he said. One more likely
avenue for revenue generation lies in "monetizing the data, as with
Salesforce."
Facebook, meanwhile, has taken steps into online advertising-but not nearly
to the extent of MySpace, which seems determined to plaster much of its online
real estate with ads.
"Facebook is clearly focused on growth, growth, growth," Owyang
said, with regard to its features and
new
Facebook APIs for developers. Facebook's application platform could become
a basis for attracting cash in the future, but Facebook CEO
Mark Zuckerberg has been publicly reluctant to embrace full-throated
monetization policies, even after
Microsoft invested $240 million in the
service.
Still, social networking holds considerable pull for users both inside and outside
of the enterprise, and with that pull comes opportunities for investors to
perhaps see some future return on their outlay. Ultimately, companies on the
hunt for clients and customers may be willing to pay Twitter, Facebook and
other social networking sites for access to their most important asset-their
member lists.
Or, as Owyang asked rhetorically, "How much is lead generation
worth?"
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