My previous post looked at the growth of online advertising and the likely places for success. The article in The Economist suggests that sites like My Space and Facebook, while becoming an integral part of the online experience, may not be the place to find revenue.
One of the most interesting quotes from the article believes that "it is entirely conceivable that social networking, like web-mail, will never make oodles of money. That, however, in no way detracts from its enormous utility. Social networking has made explicit the connections between people, so that a thriving ecosystem of small programs can exploit this “social graph” to enable friends to interact via games, greetings, video clips and so on."
The article looks at email as a similar business that has yet to find a strong revenue model. My Space has the power of Murdoch behind it, but no one has been able to build strong synergies. Facebook tried to grow an ad model through Beacon but got chastised by its critics and users for invasion of privacy.
As extensions of core brands, social networks can build loyalty and enhance relationships, but it will be fascinating to watch who can prove that there is a revenue model to profit from.
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