Revenue is the key to social network success

Social networks have some tough decisions in their future, according to research from In-Stat. With competition ramping up in the social atmosphere, new research indicates monetization may be the key to which social networks survive and which networks disappear.

by Kristina Knight

The questions are how will social networks monetize their websites and how will users react to the changes brought about by monetization.

Jill Meyers, an analyst with In-Stat said, “So far, sites have focused their attention on a younger demographic, which is finite, fickle and limited in expendable income.”

By focusing on the younger generation, Meyers says social networks have been able to obtain high numbers of registered users. However, they have not been able to get high numbers of users with large amounts of expendable cash. Without the cash factor, some social networks simply don't garner the interest of advertisers. And without advertisers, social networks have no way of making money.

Applying small monthly fees to use the networks is one way of better monetizing a site, but users are reluctant to pay for premium services they once got for free. Another way to do this is to sell user information. But, again, users are reluctant to have their information shared.

"Each social networking site collects a plethora of personal and demographic data on each member," said Meyers. "While selling these data to target marketing groups may be unappealing to site members, it may be the best route to profitability for site operators.”