How do social networking sites make a profit?

[Clarus A]

How do websites which are free of charge to users make money? Is ad revenue exceptionally profitable? Is it all up to high traffic and ads?

Any links/citations to financial info on such websites would be greatly appreciated.

[Always Sunny]

Few social networks currently charge money for membership. In part, this may be because social networking is a relatively new service, and the value of using them has not been firmly established in customers' minds. Companies such as MySpace and Facebook sell online advertising on their site. Hence, they are seeking large memberships, and charging for membership would be counter productive. Some believe that the deeper information that the sites have on each user will allow much better targeted advertising than any other site can currently provide. Sites are also seeking other ways to make money, such as by creating an online marketplace (Facebook's Marketplace) or by selling professional information and social connections to businesses: such as LinkedIn. Both Facebook and MySpace are now selling text ads similar to Google AdWords.
Social networks operate under an autonomous business model, in which a social network's members serve dual roles as both the suppliers and the consumers of content. This is in contrast to a traditional business model, where the suppliers and consumers are distinct agents. Revenue is typically gained in the autonomous business model via advertisements.

[Scott]

Free websites generally make money on advertising. Banner ads used to be a much better source of revenue than they are today, but as people have learned to ignore them, their revenue value has dropped. Still, they provide a steady source of income. Google's AdSense program has become tremendously popular because the AdSense network displays content-relevant Google AdWords ads.

Another form of revenue are premium membership accounts. While a great majority of a site's content may be free, special access and/or privileges can be acquired by paying a recurring fee for a premium membership account. Popular examples include IMDB, IGN, LinkedIn, and Morningstar.

If you want to learn more, I would suggest reading the annual reports of the public companies. For instance, News Corp discusses the profitability of MySpace in their 2007 & 2008 annual reports. Morningstar is also public and has annual reports available for download.

Look for the "Investor Relations" portions of the websites to find their annual reports. You'll have to find who owns a website first to find the relevant annual report. For example, IGN and MySpace are both owned by the media giant News Corp.

Findarticles.com is also a good site where you can find articles on profitability models.

[Scott]

from advertisements that are posted on their sites.

What sucks about all these social networks is they make millions...and do we get any of it for using their site?
NO!
like check out myspace....if it wasnt for us visitors and members, they wouldnt be making ANYTHING b/c companies dont advertise to 'no traffic' sites.
so we're actually HELPING them make money b/c we are TRAFFIC

BUT
there is a site out there that decided to share SOME of their profits w/their users
its only fair
i'm a member and i like it
wanna join? pls click this link

http://www.newyuwie.com/r/41865/

they have faqs that you can check out if you have any questions

have fun!