Social media business models are vastly different from traditional business models. They are ever changing, driven by eye-opening revenue and have very little support and documentation. When one figures out how a social network can be monetized, another model emerges and another dies.
How do social networks monetize? Display ads are one way in which an advertiser, ad network and developer share revenue through a CPM structure. Branding element within an application can push brands within an App, using CPS (Cost Per Share). This experience is less intrusive to the end-user and more lucrative to the developer. Virtual currency is very simple, yet very big. To gain virtual currency, you must invest your time or money for virtual currency. Virtual gifts also are another way social networks make money. As silly as it may sound, this is very big in Southeast Asian countries. As social networks grow, these different times of business models will expand and vanish.
In 2006, the first tweet was published by Jack Dorsey (Twitter Founder)- “just setting up my twttr”. 2007 was the tipping point for Twitter’s popularity when the South by Southwest (SXSW) festival where there were two 60-inch plasma screens in the conference hallways, streaming Twitter messages. Reaction was highly positive and grew Tweets from 20,000 to 60,000 a day. There were two rounds of capital funding by venture capitalists who backed the company. Twitter grew to 400,000 per quarter in 2007, which to 100 million Tweets per quarter in 2008 and 50 million per day in 2010. Twitter gained many more users during historic moments such as the 2010 FIFA World Cup, The 2010 NBA Finals, as well as the death of Michael Jackson in 2009.
Since the beginning of Twitter, many have asked, how will a profit be made? Many have suggested advertising, but now CEO Dick Costolo is leaning on “Commerce”. In a keynote interview at Fortune BrainstormTech in Colorado, Costolo was pressed about the company’s business model and future. He mentioned how how conference organizers, sports teams and other organizations had used Twitter to find buyers for unsold inventory. The San Diego Chargers sold about 1,000 tickets to make sure a game did not get blocked out from television. Twitter did not make any money on those transactions, but wants to in the future. “There’s a commerce opportunity there for us to take advantage of if we want,” Costolo said. “How can we remove friction from the process?” So far, this does not look like a solid plan.