The LinkedIn IPO has brought new attention to the subject of profitability among social media sites, and how to appropriately set the value a company.
My fellow social media heads, I think it is time we look at the state of our fair industry. We have made great progress over these last 8 years, some sites have come and gone, while others are now part of our public financial markets. Many players have entered the fray, most not considering how they would make money.
Business has begun to adopt social technologies for marketing, public relations and customer service. Amidst all of the hype and excitement, there are some very sobering details of this revolution that are worth noting if we are to address them and move forward as an industry.
This is what I’m seeing out there.
The BIG 5
The big five destination sites of the social web are: Twitter, Facebook, LinkedIn, YouTube and Blogs. These are the most popular, the most used and the most talked about. These sites generate revenue, though not enough when compared to the amount of capital it takes to sustain it.
- Twitter still hasn’t managed to make a profit and is living on borrowed money.
- LinkedIn just went public and it’s valuation was nearly 18 times the company’s 2010 sales.
- YouTube is managing to get it together by inking a deal with several movie studios to offer feature length films.
- Blogs all have some varying degree of revenue generating capability but it almost entirely advertising-based and the results are mixed in a fragmenting web of information and news.
- Of the big 5, only Facebook really seems to have the momentum to begin turning a profit in the near term.
These are the sites we hear about, and all of them are struggling to find a way to actually make money. Not a single one of these sites has a clear pathway towards profitability.
The rest of the social web
The rest of the social web is a hodge-podge of sites. Some serve a distinct and useful purpose, like Slideshare, Flickr and Vimeo. Some sites have struggled but contain immense value, like Delicious. And others are just around to cash in on the popularity of social media, like GetGlue and Scoville. Investor money is being thrown around out there as if all social media is created equal. I still can’t figure out why anyone uses Scoville or GetGlue.
The Huge Value in Influence and Analytics
One area of the web that is seeing success, and will continue to see success, is the business of measurement and analysis. Companies that are making a business of analytics or creating social media search engines are seeing a very high level of interest as those services tend the be the pathways to actual tangible results.
Social Media in Business
Social media budgets are again on the rise as 2011 looks to be the best year yet for social media professionals. Whether the companies that make these sites make money or not, doesn’t change the fact that people are using these sites and opportunity exists.
Conclusion
Sites may come and go, but people want to use social technologies. This just means that social media companies will figure out how to make money or die trying.