Will selling goods be the answer for social networks?
Brian Oneill says that If you take a look at social networks in Asia, they are all monetizing their sites primarily through social goods. For instance, 51.com, which recently raised a $50 million round, earns 70 percent of their revenue through virtual goods.
I’ve written in the past about monetizing social nets and the challenges that the smaller players will face. Unfortunately, I’m afraid that if your revenue models are tied into advertisers, you may be looking at a light at the end of the tunnel attached to a train. So we talked about this over a year ago, and it’s been written about a lot back then, and still. So what has changed? Nothing.
Social Nets have to sell something other than subscriptions and ad space. So what is it? Virtual Goods,
Susan Wu, a principal at Charles River Ventures says that people spend real money on virtual objects for four major reasons:
Virtual objects aren’t really objects – they’re services
Virtual objects create real value for people
The cost of buying objects can be cheaper than “earning” them and lastly, and the most important,
You can make money off of virtual objects.
I would suggest all those who are “thinking” of jumping into the social media tech start up game to read the full article by Susan, though it came out roughly a year ago to the day, it is now more relevant than ever before.