How do Social Networking Sites Make Money?

Rahul BankerSocial Media9 Comments

This has always been a question of debate as many common internet users wonder how Facebook, Twitter and other sites make money or how they profit from the site they’re running. Well, each social networking site have their own way of money. Here I’ve found some interesting things about how they make money online. Let’s check out how Facebook or Twitter make money online.

Making-money-with-facebook

I think in this particular case it might be wise to distinguish between revenue and making money (Net income). None of the publicly available figures show any of the leading social networks making a profit.

Rumors abound that FB is now in profit, but until the IPO is announced only insiders will know for sure. LinkedIn did make a relatively modest profit in the prior financial year, but is forecasting a loss again for 2011.

Each Social Network makes money in its own way:

  • Facebook: Facebook uses ads created by users, who pay for the ads to be displayed. And also Microsoft pays Facebook for using their Bing service as the Web Search feature.
  • Twitter: Twitter also gets paid by Microsoft for using the Bing service, as well as being paid by many companies to show their product in the featured section of the Top Trends.

One way that Twitter makes money is through selling an exclusive live stream, often referred to as “the fire hose” to search companies such as Google and Bing for real-time Twitter search results. This is different from the UserStream API, which is restricted to the current surrounding network of the user.

Take Facebook for example. There is the idea of “like”. Someone who likes something is generally showing interest in what the specific post is about (unless they want to play a prank on someone or something).

Now imagine you have a large group of college students “like” posts about a particular movie. The production studio of the movie asks Facebook “what kind of people like this movie?” Now, assuming the privacy policy permits, Facebook could, for a cost, provide this data (most likely in some anonymous form) to the studio.

Now the production studio has the data they need to increase marketing to college students, instead of fishing around trying to figure out what their target market is.

This can be the way according to me as I’ve been using these 2 social networking site since a long time and this is what my analysis and experience says so. What do you say?

9 Comments on “How do Social Networking Sites Make Money?”

  1. Mary

    I would say, the main thing is traffic, if you are getting traffic to any website, whether it is related to social media or anything, you can sell advertisement on that.

  2. Judy Caroll

    Hi Rahul,

    We all know that social networking sites such as Facebook and Twitter have hundreds of thousands of users worldwide and are very famous today. But one thing we often mislooked is the fact that that these social network sites are businesses. They do employ people. They do have costs to manage, and they do have strategies to employ to make money for their business.

    Thanks for the knowledge,

    Judy

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