How do social networks make money?

[Andre Grimaldo]

jobs

[Dominique P]

they sell ad space

your interests are matched up with advertisers and small ads are either stickered, bannered or pop up on you

some of the most aggressive use everything you talk about to help match up ads; it's very effective, you click the ad because it matches your interest/status/etc.

[F]

One way social networking sites manage to make money is through investments from venture capitalists. These investors are essentially making a bet that the site they're investing in will become popular and will eventually find a way to monetize that success. Getting in early can mean a huge payoff down the road. There are several examples of large corporations buying out Internet startup companies for millions -- or even billions -- of dollars.

[Devin Pringle]

Andre,

As someone mentioned, social media sites like Facebook sell ad space in the form of clickable banners in the side bar. The interesting thing about internet advertising in particular is that you can target individuals based on search behavior or profile information. For example, if my interests include boating or fishing, then those companies offering those services can pay for pay-per-click ads that target me as a user based on the information listed in my profile. Because they are targeting an interest, they are likely to get a better response, which is better than mass marketing. Every time someone clicks on the advertisement, Facebook is paid for that click. And because the ads are targeted, the likelihood that someone clicks on it is greater. This is in essence the same way that Google functions. However, Google ads are based on the key phrases that are searched for, and they don't necessarily know much about me as a user, while Facebook knows quite a bit about me, such as my age. In Facebook I can also target users by location or age range. So if I am selling a new candy in Michigan, I can target the younger generation, and in just that area, which actually helps you keep costs down.

[Stone Richard]

- Venture Capital: how do social networks make moneyFirst things first, most (if not all) social networks start with funding from venture capitalists. Investors are willing to take a risk on a company if they think it can be profitable in the future, so they invest early and hope for a huge payoff down the road.

- Advertising & E-Commerce: Advertising is what most people would consider the number one way that social networks make money. After all, they have millions of users. That’s millions of eyeballs wandering around their website. Why wouldn’t advertisers want to get in on those views?

- Offering Premium Options: While some social networks are completely free, others might offer a premium option to its users in an attempt to earn some money. LinkedIn, for example, has a premium package for job seekers. All of your networking options are free with LinkedIn, but if you want special privileges you have to sign up for one of their premium options.

- Creative Products & Promotions: Because of the difficulty of monetizing a social network, websites are forced to come up with creative ways to earn revenue. The best example of this is Facebook Gifts.