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The Connected Web

Phil Wainewright

Social Networking: Follow the Money

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There was a new sense of realism at the glitzy Web 2.0 Summit in San Francisco this week. This is the annual show that gave Web 2.0 its name, and it's where the big deals are done in the social networking industry. But whereas in previous years all the focus was on grabbing the biggest possible share of the consumer market — no matter at what cost — this year there's been much more focus on how to make money from social networking, and inevitably that's meant more discussion of the business market.

The two topics go hand-in-hand, not merely because businesses are much more willing than consumers to hand over money for services rendered. If social networking wants to be taken seriously in the business world, then it has to have a credible business model. Social networking platform Facebook won valuable credibility earlier this week when Salesforce.com announced integration from its Force.com platform to Facebook. But despite the tangible benefits of using Facebook to engage with younger consumers, businesses will remain wary of committing to a provider that has not yet figured out how to earn enough revenue to cover its expenses.

Facebook's founder Mark Zuckerberg was challenged on the the company's money needs when he took the stage at Web 2.0 yesterday. Evan Williams, co-founder of another notoriously revenue-shy Web 2.0 company, the SMS microblogging platform Twitter, was similarly challenged. There were no convincing answers, but at least the questions are being asked now.

In one of the networking breaks, I spoke to a staffer from MySpace, a previous darling of the Web 2.0 crowd before Facebook overtook it as the favored social networking platform. Now owned by Rupert Murdoch's News Corp, MySpace is serious about building revenue. Last month it launched MyAds, which lets users create and run their own ads, and the service is already at a $50 million-a-year run-rate, reports TechCrunch. The MySpace Music joint venture is another recently-launched source of additional revenues.

Sources suggest MySpace may generate as much as a billion dollars in revenue this year. Monetization matters, the staffer agreed. Currently MySpace is doing a far better job than Facebook of building a sustainable business — and it's making money from the consumer space, without having to add services to court the business market.

Phil Wainewright blogs about how businesses are using the Web to get better plugged into today's fast-moving, digital economy.

Phil Wainewright

Phil Wainewright specializes in on-demand services View more

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