Social Media - Business Model

How do Social media companies make money ?


One of the most popular traditional monetizing model is Freemium. LinkedIn uses this model for making money from its members. This model offers additional features for the premium members and earn revenue.
I would like to give an overview of some of the evolving new revenue models adapted by social media industry.

Display Ads :  One of the most popular and successful model which involves featured Ads on the popular pages. These Ads are based on the search keywords used on search engines (Google, Bing, Yahoo). For every click made on that Ad, revenue is generated. Display Ads can be more specific for each user. Google terms this as Narrow casting. Here, Google targets specific group of people based on their Geographic location, search trends and user behavior patterns. Advantage of narrow casting is higher click through rate and the Ads is of user's interest and cannot be ignored completely.

Virtual Money: Facebook and Zynga is a very vivid example of this model. The online gaming platform on social media enables users to give virtual gifts or virtual money which are in turn purchased using real money. Thus this huge network of online gamers are exploited to generate revenue using virtual attributes. Farmville is a well known games using this model.

Buying virtual gifts on Farmville , Mobwars, Mafia etc, involves real cash from the users. Social media has integrated this with the paypal and other popular payment methods to harvest money out of massively played online gaming sector.


Checkin and Rate (B2B) :  Data related to user checkin and rating on places are exploited on a large scale. Lot of business need this data for improving their business and hence tie up with popular social media companies such as twitter, Foursquare and Facebook to collect this data. This is a typical B2B model that benefits both the local business and twitter or any social media partner.



Finally, to sum up this blog

"Every post,tweet, like and comment is worth a dollar"

 

I will discuss more about the business models of various companies in the social media environment going forward.

                                                                                                                            to be continued....