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Revenue streams and other business of social networks


You analysing my blog post about me analysing Ameel’s blog where he analyses his dream. I think. From cartoonstock.com

Ameel (who is studying an MBA and works in technology) had a dream that he walked into a secondhand bookstore in Melbourne and -in the dream- bought the store. I’d love to own a second hand bookstore, but I’d never get any work done. I’d be reading in the corner. That’s my dream. :

Soon after my (Ameel ) dream, I stirred and, in that half-awake, half-asleep state, I realized that I had automatically started doing a full-fledged analysis of the business. I remember wondering about:

  • Revenue streams — which new ones I was going to add
  • Profit margins — trying to figure out which revenue stream would bring the business the most profit
  • Inventory and inventory management — which types of books were the most profitable, what their turnover was, whether I should move into selected first-hand books as well, etc.
  • Plans for expansion — in the first phase I was going to add wireless Internet and a small, self-service kitchenette/cafe in the corner
  • Marketing plans — customer surveys, flyers, word of mouth, sponsored events, starting a reading club, partnerships, etc.
  • Industry analysis — figure out which industry I was in (second-hand books), whether I wanted to be in any other industry or industries (coffee shop, retail bookstore, Internet cafe, community venue, etc.), who my competitors were and what were they doing, etc.

So funny, that’s what I do with social networks. I stumble on them, create an account, and immediately take mental note of features and processes that I like/dislike. I’d just change that list a little:

  • Revenue streams — Standard Subscription, Premium Subscription, Advertising, Virtual Goods Sales, Monetizing User Generated Content, Merchandising, Sponsorship, Revenue Share etc
  • Profit margins — in social networks it’s the stream most sustainable, not necessarily most profitable
  • Inventory and inventory management — Features that are important. For example, in ‘event’ based communities such as Sports and Reality TV, immediate synchronous communication (chat channels) is important. How’s the game, what’s the score, who sang what? Twitter and MSNMessenger currently fulfill that need. Need blogs? Video gallery? Forum? podcasts facilities? tagging? voting?
  • Plans for expansion — Web 2.0 has a BETA tag for a reason.What are you rolling out next week? And the week after that? Forget the corner office, get yourself some APIs and widgets and whatnot. 🙂
  • Marketing plans — rewarding friends signing up friends, developing word of mouth, seeding into receptive online communities, encouraging machinima, mashups and user generated content.
  • Industry analysis — pretty well the same as Ameel. Expanded to Porters (?) Five Forces – who has a similar service online? who has other services online that target same demographic (but not same topic), what competes offline for attention (sports, Tv), and so on.

I think I would add in another layer, not sure what to call it, infrastructure?

  • Infrastructure —scaleability, moderation tools, reporting mechanisms for behaviour, security including tracking IP of bad guys, managing identities, actually this would be the biggest bit. All the bits not above.

You don’t need to do an MBA in Social Networks now, you just got the Readers Digest version. Don’t thank me- thank Ameel, he did a great job of putting it together in the first place. Well his subconscious did…

It’s pink cos I feel more Valentine Day-ish TODAY.

Laurel Papworth

Named by Forbes™ Magazine in the Top 50 Social Media Influencers globally, named Head of Industry, Social Media (Marketing Magazine™) and in the Power150 Media bloggers (AdAge™). CERT IV Training and Assessment certified trainer (Diplomas and Certificates etc) Adult Education. Laurel has manager Facebook Pages for Junior Masterchef, Idol, Big Brother etc. and have consulted on private online communities for banks Westpac, not for profits UNHCR & governments in SE Asia. Lecturer, social media, University of Sydney for 10 years and Laurel has 11,000 online students. Laurel Papworth personally connects to 6 million followers online and has taught around 100,000 people in the last 10 years how to be social media managers.

3 thoughts on “Revenue streams and other business of social networks

  1. Ah, I didn’t think of the infrastructure layer — even though it is crucial. Being MBA buzzword trained, though, I’d probably call it ‘resources and governance procedures’ or something like that 🙂

    The plans-for-expansion bit is particularly important for social networking sites, isn’t it? I think it would help if companies would announce a broad (so they don’t give away too much) and tentative (so they don’t force themselves into a corner) list of features that they’re going to add in the future. Sort of like Google does with its Google Labs. That way you get an idea of what they’re working on and what direction they’re probably going to take in the future.

    Do you teach this kind of stuff in the Masters of Convergent Media?

  2. *laughs* anonymous is the reason I put pictures in my blog 😛

    @ameel not sure, we are still writing bits. I hope so. I really want to go through different business models.

    Did you know Ducati opened up their labs (development, R&D) to ‘fans’? Ducati enthusiasts are prosumers and co-create products. You can’t do that behind a digital walled garden 🙂

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