Web 2.0 and the Elusive Revenue Model

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While the buzz around social media platforms like Facebook and Twitter is huge to say the least, they still haven’t found a solid way to generate the kind of revenues that Google did with their Adwords network. While Facebook has been somewhat successful in capitalizing the advertisement model, there seems to be a raging debate whether it should or shouldn’t charge individual users and companies with groups/ fan pages for using Facebook. Just a couple of days back a cousin of mine cribbed that she is going to stop using Facebook cause they’re now going to charge users and I said that I hadn’t heard anything to that effect.

Co-incidentally, Ning, the white label social networking company has announced three new pricing options. According to CNNMoney starting July 1, administrators of Ning’s 300,000 social networks will have 30 days to start paying up or find another place to congregate on the web.

Not surprisingly many have started complaining and as theCNNMoney article says, “they complain, the site lured them with the promise of a free experience and then broke trust by introducing the charges”.

As an entrepreneur and a CEO, I certainly understand Jason Rosenthal’s dilemma to turn the company profitable. At the end of the day it is the bottom line that matters. However, as someone familiar with the social networks, I personally feel that for Ning, which isn’t as popular as Facebook or Twitter, switching to a paid model out of a blue is certainly going to lead to some adverse publicity if not a outright boycott from its existing users.

At the end of the day though, it seems like the free days for users of social networks are coming to an end, as investors, looking to make a profit from their investments, increasingly start asking tough questions to managements before doling out more cash and funding more freebies for users who seem to spend a lot of time but are not willing to spend too much money on these networks.

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