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Wednesday, May 6, 2009

Can Twitter, Facebook, and Youtube ever be profitable?

So I read an interesting article on AdAge (my favorite website) about whether these social networking sites will ever be monetized. In the article (I'll add the link), Simon Dumenco examines the strategies these companies have used to bring in money from a basically free service. Youtube has started to increase the number of videos with ads as well as selling prime spots on the websites front page to firms looking to utilize the millions of views that youtube gets in a second. The real roadblock to these websites generating money is that they were never built on a profitable business plan. When the original creators of the youtube or facebook were making the website they were thinking "how can we attract the most people to our site and make it as fun and useful as possible" and not "How can we make this website the most profitable". The consequence of this is that the websites don't make much money and actually cost a lot more to run (buying bandwidth and site maintenance). There is some talk about maybe charging a subscription fee but how many of us will actually pay for a service that we have received for free for so long. I think our generation particularly has expected everything on the internet to be free and if its not then we will search for something else that is. The paradox is that these websites popularity is due to the fact that they provide a free resource for us to communicate with friends and family in a very user friendly way and if we take the free out of the equation, this bond we have to these companies will break down. These websites may never be profitable but as long as venture capitalist keep funneling in the money, we will continue using them but how long can they keep being in the red before people that fund these website disappear? It's hard to imagine a world without Youtube, twitter, facebook, or myspace but I believe that this is the inevitable future and its going to happen sooner then you think. The world is constantly changing and people are always looking for something new. Once youtube gets too ad heavy we will find something else and when twitter tries to place context sensitive ads in the middle of our tweets, we will leave that too. What do you think about these social networking sites? Can they ever be profitable and if so, how can they achieve this?

The Coming End of YouTube, Twitter and Facebook Socialism

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