Ask HN: How would you monetize a social media site?
10 comments
Stuff you should do because it makes good business sense and won't piss off your userbase:
- permission marketing
- voluntary surveys
- text link based advertising (if it's done subtle)
Stuff you could do (but that may infuriate some of your users):
- regular advertising
- affiliate programs
- text link advertising (done wrong)
Stuff you should never do:
- sell email addresses
- sell other user data
- popups / unders
- permission marketing
- voluntary surveys
- text link based advertising (if it's done subtle)
Stuff you could do (but that may infuriate some of your users):
- regular advertising
- affiliate programs
- text link advertising (done wrong)
Stuff you should never do:
- sell email addresses
- sell other user data
- popups / unders
We obviously need more data, but for starters:
Figure out what your users value on and off your site. Also, research competitive and complementary sites to get a quick and dirty list of potential options. There could be existing or future features that users would be willing to pay for.
If your site doesn't display ads, carve out space so that you ease them into it. Set their expectations and you're less likely to shock/upset them (sage advice from Reid Hoffman).
Figure out what your users value on and off your site. Also, research competitive and complementary sites to get a quick and dirty list of potential options. There could be existing or future features that users would be willing to pay for.
If your site doesn't display ads, carve out space so that you ease them into it. Set their expectations and you're less likely to shock/upset them (sage advice from Reid Hoffman).
One option that I think hasn't been explored enough yet, and may be much more prevalent in the future, is micro-payment. Definitely the biggest initial barrier is the submission of payment info. But after that, I think that charging small amounts for certain special actions could be viable if those actions are deemed very valuable by the user -- "feel fair".
Examples would be offering free uploads of images up to X megs per month but charging X cents per image after. Or the ability to create more than X number of interest groups. Micro-payments advantage also is that the service can charge strategically to offset some of the higher serving costs of certain functionality, eg., storage.
The advantage of micro-payments over freemium is that with freemium the user may be very hesitatant to lock into $10 a month -- but might be willing to pay more ad hoc for enhanced functionality that over time they really want to use. The key of course is the network must be very smart about pricing and what actions are charged, and still provide an exceptional experience for free.
The system is working well in various online games (buying powers) and cell phone networks ... could it work well in a social network? I expect to see more attempts for sure.
Examples would be offering free uploads of images up to X megs per month but charging X cents per image after. Or the ability to create more than X number of interest groups. Micro-payments advantage also is that the service can charge strategically to offset some of the higher serving costs of certain functionality, eg., storage.
The advantage of micro-payments over freemium is that with freemium the user may be very hesitatant to lock into $10 a month -- but might be willing to pay more ad hoc for enhanced functionality that over time they really want to use. The key of course is the network must be very smart about pricing and what actions are charged, and still provide an exceptional experience for free.
The system is working well in various online games (buying powers) and cell phone networks ... could it work well in a social network? I expect to see more attempts for sure.
Simply charge them for it. I don't understand why not. I haven't read the latest stats on how big Facebook is, but lets put it at 200 million real users. Let's say that Facebook says that it now costs $5 a month to use. You get all of the same features you have now, unlimited everything, just like now. If only 5 million stayed and paid that amount, thats $25,000,000 a month.
I would much rather have $25,000,000 a month in real cash, than having other people give me money and have part of my company. Facebook is unlike Twitter. There are a bunch of Twitter clones out there, and Twitter is fairly easy to copy. If Twitter started charging for its services, 99% of the users would migrate somewhere else. I think Facebook has a powerful enough application that other companies couldn't touch it for years, and people would pay for it.
I would much rather have $25,000,000 a month in real cash, than having other people give me money and have part of my company. Facebook is unlike Twitter. There are a bunch of Twitter clones out there, and Twitter is fairly easy to copy. If Twitter started charging for its services, 99% of the users would migrate somewhere else. I think Facebook has a powerful enough application that other companies couldn't touch it for years, and people would pay for it.
You are missing one very important point. If facebook were to do that there would be a free alternative with traction within 24 hours and the 195 million that go away will pull the remaining 5 million with them. Facebooks sole raison d'etre is the fact that they have a userbase that has a high probability of including some people that you know.
See 'metcalfe's law' about the value of telecommunications networks.
It's very easy to destroy a community that was built on 'free' by starting to charge for it.
It is always easy to solve other peoples/businesses issues in five minutes, in practice things are seldom as simple as they appear to an outsider.
See 'metcalfe's law' about the value of telecommunications networks.
It's very easy to destroy a community that was built on 'free' by starting to charge for it.
It is always easy to solve other peoples/businesses issues in five minutes, in practice things are seldom as simple as they appear to an outsider.
I doubt that very much. There is a point of diminishing returns, I agree. If the charge were $1, less people would leave than if the charge was $100. But, the value of facebook or other social networking sites is in the social aspect.
For pay services have competed favourably with free services. Ringtones are one example where people opined that paid services would fail because free options would emerge. And yet, people still pay and download ringtones.
The catch to making people pay the $1 or $5 is to make it easy. If you require them to pull up a credit card or some such, you will lose people. If there was a simple way to pay such that the money came out of some account (PayPal or some such) then you'll get the $1 in a heartbeat.
For pay services have competed favourably with free services. Ringtones are one example where people opined that paid services would fail because free options would emerge. And yet, people still pay and download ringtones.
The catch to making people pay the $1 or $5 is to make it easy. If you require them to pull up a credit card or some such, you will lose people. If there was a simple way to pay such that the money came out of some account (PayPal or some such) then you'll get the $1 in a heartbeat.
The only way that I know of - also known as the freemium concept - to convert a large userbase of free users to a paying userbase is to provide a lot of new features under a premium banner that you only get access to when you pay.
Over time the weight of the new features starts to be larger than the 'simple' free version. The free version is the hook that you use to get people to use the service and to stave off encroachment by competitors.
If a free competitor should arrive on the scene that offers part of your premium features for free then you can choose to selectively offer those features to all your users (not just your paid users) but here you have to be careful not to erode your paying userbase because it is possible that people are paying for just that one feature and they'll possibly cancel their subscription.
This is not as trivial as it sounds.
For the record, I manage a website that has an active userbase of about 100K people a small percentage of those are paying users.
Over time the weight of the new features starts to be larger than the 'simple' free version. The free version is the hook that you use to get people to use the service and to stave off encroachment by competitors.
If a free competitor should arrive on the scene that offers part of your premium features for free then you can choose to selectively offer those features to all your users (not just your paid users) but here you have to be careful not to erode your paying userbase because it is possible that people are paying for just that one feature and they'll possibly cancel their subscription.
This is not as trivial as it sounds.
For the record, I manage a website that has an active userbase of about 100K people a small percentage of those are paying users.
Facebook and Twitter (and their like) have yet to turn a profit or even come up with a plan to make one. Meanwhile, Blizzard's World of Warcraft continues to rack up millions a month from loyal and paying users. If you want to make money on the internet you need to take a good long look at what Blizzard is doing.
There are more ways to skin a cat. By your account the owners of icq never made money either. Until they were bought out that is...
Not every strategy is based on making money operating a service, some people aim for the big exit and are well willing to operate under a loss as long as they hold on to the service. It's a risky strategy, if your timing is off then you usually fail big time. But if the timing is right and you can find a partner that perceives an upside to having access to your users you just might score the jackpot.
Not every strategy is based on making money operating a service, some people aim for the big exit and are well willing to operate under a loss as long as they hold on to the service. It's a risky strategy, if your timing is off then you usually fail big time. But if the timing is right and you can find a partner that perceives an upside to having access to your users you just might score the jackpot.
Facebook's value is because of it's increasing users. If it's paid and 195M leave (according to your estimates) then it's real value will be eroded and it's revenue ($25M your estimate) will continue declining and it will be history within a year or less! Take my word for it. Don't you think they would have thought about this a million times over at facebook?
You get all of the same features you have now, unlimited everything, just like now. If only 5 million stayed and paid that amount, thats $25,000,000 a month.
But the major draw of facebook, for most people, is that they can keep in touch with their family, friends and colleagues - the people who make up the 200 million people. If my peeps leave as part of that 195 million, why would I still stay?
Gotta think big picture leftnode.
But the major draw of facebook, for most people, is that they can keep in touch with their family, friends and colleagues - the people who make up the 200 million people. If my peeps leave as part of that 195 million, why would I still stay?
Gotta think big picture leftnode.
It's very hard to just shut off the lights on a free service or otherwise take away features to create a premium tier. I can't even think of a viable way to do it. Do you set a time table? 60 days and your account goes dark if you don't pay? I don't think I would be over estimating to say they could easily lose 50% or more of their users in one day Even people who would be willing to pay would have an intense feeling of bait & switch. It would be a disaster.
Facebook's core value (as with most social networks) boils down to network effect...if they impose any real barriers, they cease to provide value to new and existing users.
http://en.wikipedia.org/wiki/Network_effect
You do realize your example essentially says that if ~98% of your fb friends left, you would still choose to stay & pay fb $5/mo?
http://en.wikipedia.org/wiki/Network_effect
You do realize your example essentially says that if ~98% of your fb friends left, you would still choose to stay & pay fb $5/mo?
I would go for other than paying to be member. Maybe it's OK to have some paying members (like LinkedIn) for vanity or extra (non essential) functionality.
Letting 195 million users to go away is suicide.
Ads are OK, but it's really for Google type of business - a social site want people to stay.
Collateral revenue ideas:
- Geni could have a "Get your family tree poster" printing service
- Facebook could do the same with friends
- Twitter: I like Twitter, but I have no idea
- SecondLife: virtual stuff for real money
- dating site: organize real life parties
- A product review community could become Amazon
Ads are OK, but it's really for Google type of business - a social site want people to stay.
Collateral revenue ideas:
- Geni could have a "Get your family tree poster" printing service
- Facebook could do the same with friends
- Twitter: I like Twitter, but I have no idea
- SecondLife: virtual stuff for real money
- dating site: organize real life parties
- A product review community could become Amazon
My buddy runs a social networking site for a niche market and they run a freemium model along with ads. The one mistake they made was charging too little as the difference between charging $6/month and $15/month is not as great as they expected (they have 2 levels of paid subs). The bigger hurdle is just getting the user to pull their credit card out in the first place. So don't be afraid to charge a fair amount, if your site offers good value.
If it's a more casual site where users hang around then satisfying self-expression needs by selling virtual goods around avatars, gifts etc. can be a possibility.
It has been quite successfully used by several casual gaming sites and visually intensive social sites (Habbo, Playray, Stardoll ...)
It has been quite successfully used by several casual gaming sites and visually intensive social sites (Habbo, Playray, Stardoll ...)
The value of a social media site is its user base and one should try and preserve that. Think of it as if you have created an 'economy'. Let the users 'trade' between them and charge a 'tax' like the government!
Totally depends on the client base. If it's high-end, you could charge a one-time fee to participate. If it's low-end, you could go with the freemium model.
what are the people? tell me about them.
1. Subscriptions - based on the freemium model, where the basic features will be free for everyone while paying subscribers will get access to premium features
2. Job board
What else?