Twitter co-founders Evan Williams and Biz Stone said during last month’s Reuters Global Technology Summit that they’d be generating revenue from their social media site by year’s end.
That got everyone pretty excited until Williams and Stone said they planned to accomplish that goal without advertisements and gave nebulous answers as to how else they’d go about raking in the dough, leading the wireless industry to throw up its hands in exasperation and go looking for the monetization holy grail someplace else.
Social media seems like it should be a huge money maker. Just picture it – thousands of people waiting to be advertised to, millions more who might be willing pay a bit for the service. Carriers share social media sites’ eagerness to glean money from the networking service because handsets are increasingly functioning as social media portals. In the end, a business model that works for social media will probably work for carriers as well.
But both the Web sites’ and carriers’ efforts to find a viable business model have been frustrated by a host of different factors.
Essentially, the problem is one shared by the Internet as a whole: Getting consumers to pay for services they’ve historically taken for granted as free. But carriers have one added complication. They need to convince their customers to accept intrusive advertisements on their devices, which long have been seen as a sanctuary from annoying telephone solicitors and intrusive advertisements. And they’d really like to accomplish that without having customers defect to another, ad-free network.
As both carriers and social media sites try to get around these road blocks, alternative business models are in high demand. But so far, no concrete ways to make money have emerged from the protoplasm that is social media.
Analyst Jeff Orr with ABI Research expects to see a good deal of fiddling with social media business models over the next year because he doesn’t see the current advertising model being especially profitable for carriers or Web sites.
“I would love to say there’s another model that would be more successful for mobile, but the truth is that it doesn’t exist yet,” he says. “There’s this perception that content and applications are cheap, and that establishes a benchmark in the consumer’s mind. People are saying, ‘No, information on the Internet is free, and therefore this should be free.’”
Orr’s solution: Look to European carriers like Vodafone for guidance on how to successfully and unobtrusively incorporate advertisements onto devices. Figure out a way to tap into the veritable gold mine of information that carriers have on their customers’ habits, whereabouts and Internet usage.
“[There’s] fear of churn, fear of upsetting the customer and having them flee somewhere else. But I think there’s an equal fear of not engaging them and letting them make up their own mind, because I think the result will be the same,” Orr says. “I think mobile advertising is evolving in the U.S., but the dots haven’t really connected yet.”
