Profile for stubby43 - Can anyone explain to me how social networking sites make their money?

stubby43 aka Phil is a 25.42 year old boy, has been a member since December 22, 2006, has scored 3,809 submissions, giving an average score of 2.65, helping 191 designs get printed.

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May 24 '08 by stubby43
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Can anyone explain to me how social networking sites make their money?

Because I cant for the life of me figure it out, wired.com released stats claiming that whilst social networking sites had around about a 500% growth in the amount of users their actually advertising revenue amounts to only 12%.

But facebook estimates its value at around about $8 billion dollars based on its projections that it'll earn $1 billion by 2015.

Microsoft invested $246 million for 1.6% share of the buisness.

This is coming from a platform that doesnt do a vast amount of advertising.

When people add an application to facebook, odds on its made by a website called slide.com founded by Max Levchin who co founded pay pal. Reportedly slides revenue is around $500,000.

To me it feels like where in another web bubble, because non of these companies are actually producing anything, its an incredible amount of money but I cant really see anything to back up these astonishing claims.

Anybody got any clue?

squatterjohn on May 24 '08 at 11:38am

I still can't work out how Google makes any money.

Chipmnk on May 24 '08 at 11:41am

Advertising.

Perudoesitbetterthanu on May 24 '08 at 11:41am

i figured they made all of their money from the advertising, i guess not??

wotto on May 24 '08 at 11:43am

advertising, spamming and generally gathering and selling info.

ladrones on May 24 '08 at 11:45am

advertising and bullshit

spacesick 2 on May 24 '08 at 11:46am

adverbullshit

The Amazing Fracturedpope on May 24 '08 at 12:17pm

adverspammopedia

iPear on May 24 '08 at 12:19pm

Yeah, I figured it was from advertising as well. I mean, isn't that how most business type deals get their moneys?

stubby43 on May 24 '08 at 12:32pm

Google is pretty much universally recognised as an advertising giant but the social networking sites havent been as successful, dont get me wrong they make a decent amount of money but its incredibly difficult to say if their estimated earnings meet their actual one.

For example the last time info was released on youtube in was costing a million dollars a day to keep it running and was yet to brake even, but that stat was in 2006, they've improved their advertising but I'm still not sure their actually profitiable.

twin85 on May 24 '08 at 12:38pm

The valuations of websites like facebook are hard to determine. The current valuation of facebook being up near 15 billion is only based on what Microsoft bought 5 percent for.

Facebook made around 120 million off advertising this year, which is based a lot on pay per click ad campaigns and out right ad buys. This is awfully low compared to the 15 billion dollar valuation.

A large part of this is due to the number of page views a site like facebook puts out. If Facebook has XX number of page views a year, a company like Google can easily monetize that traffic with Google adwords. The bottom line is it is just a numbers game.

stubby43 on May 24 '08 at 12:48pm

Ok that makes sense, I'd actually be pretty interested to see if their estimations reflected actual income.

What I'd really like to do is spot the next big tech company and buy shares in this market it seems almost as if making money is deffient, as far as I'm aware the depression hasnt had a huge effect on these companies.

shakethesheets on May 24 '08 at 2:13pm

What I'd really like to do is spot the next big tech company and buy shares

You're certainly not alone there, and it's much easier said than done.

shakethesheets on May 24 '08 at 2:17pm

But I would assume that they make money through advertising and selling information about their members... You make a fair point that if their money isn't from advertising, what could it be from? With SO MANY people viewing their pages, it makes sense to me that they're just making a boatload on adverts and selling patron info.

stubby43 on May 24 '08 at 3:10pm

Well their deffiently making alot of money from advertising but I'm not 100% certain about selling to 3rd parties because of privacy laws.

As for spotting the next thing, I'd really like to invest in a company that recomends media that you'd be interested in according to your searching thats the next big thing.

DozerDozer on May 24 '08 at 3:30pm

data mining.

Steve The Great on May 24 '08 at 3:44pm

drug trafficking.

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