I wrote this post a couple of weeks ago, and was going to wait a week before posting it. However I’ve been pipped at the post with this nice article from @ron_miller, “Data, Not Ads, Will Make Social Networks Profitable“, so I figured I might as well release it now. Ron, great minds think alike :-)
The saying “if you’re not paying for the product, you are the product” no longer brings a smile to anyone’s face, but instead just highlights the increasingly exploitative nature of social media monetization. The expectation that everything on the Internet is free and the subsequent over-focus on advertising to address the revenue challenge is starting to break down, most specifically with the increasing adoption of mobile which is a less attractive engagement platform for advertisers. Privacy concerns around user’s data is further exacerbating the problem. So… maybe its time to change the revenue paradigm and come up with new approaches to building businesses around social networks.
LinkedIn is a great example of a company which has gone this route, and focused on identifying value services with customers willing to pay for them, and in this way have been able to build a more robust and diverse revenue stream. Market comparisons between LinkedIn vs. Facebook, as an example, definitely highlight the weaknesses associated with a pure advertising strategy. In addition, this LinkedIn model is much more transparent in terms of what the service is actually delivering and hence how the data of the “free users” is being used.
It would be nice to see these types of specialists networks evolve where they focus on delivering clear value, with more transparency around the value and the monetization of the network.