

Ask HN: Why is it so hard for social media/networking sites to monetize their users? - zitterbewegung

It seems like the business plan for yet another social media / networking plan is as follows.<p>1. Create a interesting web app<p>2. Get people to use your application<p>3. ?????<p>4. Profit<p>Unfortunately, it seems like there isn't a method of getting to profit. When I asked the cofounders of reddit my question at pycon they said that advertisers don't understand web 2.0 companies. If that is true then maybe what is needed is a web 2.0 advertising company?
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aristus
That's not the whole story. Plentyoffish is _highly_ profitable. Why not other
social networks? Because they have a less-effective ad model but think they
can spend like a search engine.

A lot of people (whether or not they "get" Web2.0) have unreasonable
expectations for demographic and behavioral targeting of ads. When you
advertise on Google you are targeting not only a specific word, not only a
specific person who is interested in that specific word, but _right at the
moment they are looking for it_.

For this reason I believe search advertising will always be an order of
magnitude more effective than demo-targeting, and at least a few times better
than the loftiest pipe-dreams of behavioral targeting.

So. Your ad model is 0.1X as lucrative as search advertising, yet your
infrastructure costs are comparable to a search engine. You lose. PoF wins
because Markus doesn't have 100 employees.

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yummyfajitas
PoF has another advantage.

If you are at PoF, you are searching for a date. PoF makes a lot of money
selling ads for _better dating sites_ , something it's users are almost
already looking for.

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ajcronk
If PoF is a launchpad to premium dating sites, how do people end up on PoF in
the first place? I assumed SEO, and I searched for "dating" and "online
dating" but PoF didn't rank high. Maybe they go after more niche keywords.

~~~
iigs
Google search for "free dating" put PoF at #2

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mattmaroon
The one thing I can tell you for sure, having done affiliate marketing on the
big 3 search engines and the big 2 social networks, is that users on social
nets click often but don't convert. The click through rates are lower than
you'll see on Google, but not as much lower as you might think if you do a
good job with the ad and the demographic targeting. But the conversion rates
are beyond abysmal.

That seriously depresses CPC bids, which will prevent Facebook/Myspace from
really monetizing well from that source. It's a shame too, given that the
reach is massive.

I think it's because people just go to social networks to hang out. They
specifically don't want to buy stuff, and when you try, you're like a
telemarketer calling a college kid at a frat party.

I was really on the fence about whether or not Facebook would ever be able to
somehow find a business model that didn't involve people whipping out a credit
card somewhere (i.e. not freemium, virtual goods, etc.) until I tried that
experiment.

~~~
aristus
That's exactly it. Before all of this interweb stuff the highest-margin ad
venue was the phone book. Every business and trade professional spent at least
50 bucks and every lawyer, national chain, auto dealer, etc splashed out for
more. YPPA are still pulling about $10B per year.

The phone book is kind of the upper bound for behavioral and demo targeting:
everyone who sees your ad wants to buy what you are selling right now. The
only question is which ad they see first.

A social network simply does not have that kind of audience. A site that is
not in the business of telling people things they want to know is never going
to make the same margins from ads.

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iamelgringo
There is a way to get profitable, companies like Twitter, Digg and Facebook
haven't figured it out, yet, and it gives the whole web 2.0 business a bad
rap.

MySpace is quite profitable to the tune of pushing $1 Billion in 2008:
<http://bit.ly/PJPc2>

Dogster has been doing quite well in the advertising space:
<http://bit.ly/7WZL> and <http://bit.ly/ytNf> They've been able to be
profitable by hiring their own advertising sales team. They are getting CPM's
of $20-40 for their email newsletter: <http://bit.ly/p9nB>

CuteOverload.com is profitable. icanhascheezburger.com is profitable.

Part of the problem with web 2.0 companies, is that a lot of them don't
realize that they are media companies. Mainstream media companies figured out
the monetization bit years ago. They make money by selling the content
(Movies, Music, print media), selling advertising space on the content (TV,
print media), or by branding and merchandising themselves (Star Wars, Saturday
Morning Cartoons). __* _See Footnote_

Mainstream media has also learned a long time ago, that you can charge a
premium for delivering a targeted demographic. If you were able to launch a
Social News site devoted to the people interested in buying car insurance, or
people intersted in investing in day-trading stocks, your CPMs would sky
rocket.

Dogster is making money because they figured out the setting up their own ad
network and selling ad space on it was much better than using Adsense. TV
stations, radio stations all have their own sales teams that sell ads on their
networks.

 __* Newspapers and Print media are really struggling because their overhead
is so high, and can no longer compete with online media. But, for years, these
companies have been cash cows. Just look at how Rupert Murdock made his money.

~~~
vivekamn
I second that. Having their own ad network has worked out great for
cafemom.com a ssn for mothers.

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benmathes
People don't like ads interfering with their social interactions. It's much
more intrusive to be hanging out with your best bud and see an ad for Old Navy
than it is to be shopping for stuff and see an ad for Old Navy.

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staunch
[http://andrewchenblog.com/2007/09/26/5-things-that-make-
your...](http://andrewchenblog.com/2007/09/26/5-things-that-make-your-social-
network-monetize-like-crap/)

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antiismist
Advertisers want two things: people to buy stuff via some conversion funnel
that starts with the ad, or "brand lift".

The best way to get people to buy stuff is to find intenders - those people
who are about to buy something in your category. Think google adwords. This
doesn't work too well on social media, because people are interested in
hanging out, not on thinking about some purchasing decision.

"brand lift" - advertisers in this bucket are super sensitive to their brand
image, and they won't be getting the lift they want if it's next to some
random comment stream.

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njharman
It's not. It's hard to to monetize with advertising which is all most sites
even try. Virtual goods, premium accounts, merchandising those are methods
that work.

Also thinking it in terms of monetizing _users_ instead of monetizing your
site/products is symptom of failed thinking. Users aren't cogs in your money
making machine, they resent being used/abused for your profit. Do something
your users want, offer something they will pay for.

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tokenadult
How do websites in general make money? (Or do they? Do they have revenues but
not have earnings?)

<http://news.ycombinator.com/item?id=542656>

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vaksel
because people go on a social networking site to socialize, they focus their
attention on their profile page, most people won't even let their eyes wander
to the ad portion of the page

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erlanger
Because they try to profit through traditional business channels. By
effectively leveraging social pressure, these things could be a gold-mine.

