Over the past decade the internet has been touted as the new west, where anyone with a dream and determination can go and make it big. With web companies like Youtube, which was started in a garage and later sold to the search and advertising giant Google for 1.65 billion, and Instagram being acquired by tech behemoth Facebook, the claim seems to be holding up.
But until Google, Facebook or another tech giant are on their door whispering sweet nothings of purchasing their company, how do social media sites make money? While the strong majority of online publishers make their living just like those in traditional media – advertising revenue – but, because of a myriad reasons social media sites often have to get creative.
Sometimes the model of a social media site doesn’t lend itself to conventional advertising. Here’s how a few sites keep the lights on:
Pinterest: Venture Capital/Angel Investors – Trying to keep their original user experience intact, the photo sharing giant began working with the London based affiliate marketing firm, Skimlinks. The partnership meant that Pinterest would get a cut of the revenue whenever a user clicked a link to make a purchase from an e-commerce site.
Pinterest has since ended its relationship with Skimlinks due to questions of transparency, as Pinterest did not disclose this relationship to its users. Pinterest says they will monetize when the time is right but for now they’ll focus on growing a great experience for their Pinners.
Twitter: Multiple Sources– Twitter currently employs a number to ways rake in the dough. Mainly relying on the desire of brands and celebrities to promote themselves, the micro blogging site has helped develop a hyper-targeted style of online advertising, using mountains of data to provide advertisers the exact demographic desired. Twitter monetizes its traffic by charging a substantial fee to companies such as Starbucks, Virgin America and Red Bull for promoted tweets, accounts and topic trends which can appear in Twitter Search results. Search sites like Google and Bing pay Twitter to license the tweet downstream so that they can include those tweets in their real-time search results.
Quora: Venture Capital - A knowledge sharing site that takes a model like Yahoo Answers to the next level, Quora is the spawn of former Facebook CTO Adam D’Angelo. Continuing the Facebook mantra of, “Focus on a quality product first” Quora has built up a knowledge base that anyone can look at and gain insight from on all topics imaginable.
LinkedIn: Multiple Sources – Now, you may be wondering what LI is doing here, but, while it’s true that LinkedIn does have display and text advertisements, they make the list because the professional social networking site has leveraged its users in several ways and derives about 70% of their revenue from premium membership fees and marketing and hiring solutions sold to companies.
As the audiences from television and other traditional mediums continue fragmenting, there are fewer and fewer places for brand advertisers to reach mass audiences. We’ve seen the smorgasbord of options for social media sites to monetize their massive amounts quality traffic. As retargeting software improves and smarter ad technology in display and digital video go to market, it seems the trick is finding what works best for each individual site without hindering the user experience.
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