Social media Profits from home
Most social media platforms have followed a very similar business plan: concentrate on growth first and let revenue take care of itself. Despite not having a clear idea of where the money will eventually come from, some sites have still done very well – especially Facebook. It concluded its first year on the stock market recently with some spectacular results, including an expectation-beating £200m trading profit and an impressive surge in mobile advertising. This was enough to push the share price up 18% in a single day and add nearly £2.5bn to Mark Zuckerberg's personal net worth in the process.
Unsurprisingly, entrepreneurs everywhere talk of creating the 'next Facebook'. As the first site to take social media mainstream, however, Facebook's journey to riches may not be repeatable. Instead of trying to copy the successes (and weaknesses) of Facebook, Twitter, and other early social media successes, new developers should instead be seeking inspiration from other more monetised forms of digital content. The 'growth first, profits later' model is growing increasingly creaky.
The main reason for this is that increased competition for user attention is making growth much harder. It is possible that Facebook's billion plus user count will never be matched again. Successfully monetising with fewer users is a must, but so far this has proved elusive. Instagram and Tumblr both boasted over 100m users each, but only earned investors a return when they sold themselves to more established players. The appetite for buying unprofitable social media sites will run out eventually, though. Financial self-sufficiency must be the goal of any new social media platform.
Monetised copies of existing social media services have however so far fared relatively badly. Pheed, launched in October 2012, cherry picked the best features from Facebook, Twitter and YouTube but also allowed content producers to charge monthly subscription fees and stage pay-per-view events. Hundreds of A-list celebrities signed up eagerly, including Miley Cyrus, Sean Combs, and Paris Hilton. Press coverage was extensive, and by February 2013 Pheed was the number one free download on Apple's App Store.
Six months on from the white-hot media interest, though, and Pheed is eerily quiet. Miley Cyrus has not posted for over a month, and regular users are scarce. Pheed's monetisation strategy appealed to content creators and investors, but attracting users with the same product they can access for free elsewhere has not worked. Instead of trying to reinvent social media as it now stands, developers instead should be looking for inspiration from the most successfully monetised form of digital content: free mobile games with paid for add-ons and enhancements that raise revenue.
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