From this article on the BBC: http://news.bbc.co.uk/2/hi/technology/7359927.stm This is interesting in that it proves the economies of scale don't necessarily mean that you'll make money. Is this down to the global economic slow-down? Or is this just that the costs of running websites like this are just too high? Let me know your thoughts...
It is 100% because the affiliate / advertising market is extremely immature. The options available and how they are implemented is a far cry from where this industry should be all these years later. One day someone will step into the market and revolutionize how things are done. Also, sites like FaceBook were built to be acquired. Their focus is on bringing in new members and not monetization. It's a silly way to start a business but when someone will offer you billions just to have more page views it works out.
Well of course social networking sites find it hard to make money because they are just "social networking" sites. you come to facebook because you want to meet new friends, to play application, and (maybe) to rate sexy girls, don't you? Members there don't usually click ads and even if they do, only few of them will be interested in these ads. Different with Google (for example), advertisers in search engines can easily get more clicks and better conversion rate. That's why we can see a big difference if you advertise in these two kind of sites.
I would wager that the spammers that utilize MySpace and FaceBook make more money combined than the sites they are spamming on. MySpace and FaceBook do not utilize their marketing well, again because the market is immature. When I look at what these guys have and see how they are wasting it I get sick.
I agree that FaceBook was written with users in mind - which is a very good thing and probably the reason it's been 'successful' but I'm not sure what you mean about the market being 'extremely immature'? I know that only Google are the real players here but are you saying that the way internet advertising is done needs to be revised? Is there going to be a monetization revolution? In regard to another reply: if the spammers are making more out of facebook than the owners of facebook surely facebook aren't charging enough for their advertising space? IMHO - FaceBook has overtaken MySpace because it's not flooded with ads; as soon as facebook make an attempt to monetise their site more then they'll lose users. MySpace is just horrible to use now, in fact I've deleted my main account...
The problem is that we need more and more bandwidth with web 2.0 - especially with video - but the cost never seems to decline. Seems like the cost of a dedicated server hasnt become more affordable in the past 5 years whatsoever.
I think its a mix Businesses looking to go online have heard marketing is cheap, so they will only want to pay the lowest pric Also the ads on these social networking sites are EXTREMELY untargetted rate thus low click thru, but do they use ecpm? If these social networking sites simply started on a few affiliate programs, they would make a killing. Also high server costs and hiring professional programmers don't exactly help their cashflow....
Well, if you are going on a site to look at pics and chat with friends, you aren't looking to buy shoes or rent movies for example. However, it also is a problem of demographics. When your users are 13-18, they don't have credit cards yet. They don't have homes, cars, or even any significant amount of money that they can spend. Wait 10-15 years when they have real jobs and you'll see changes in how valuable social networks like Facebook could be. However, in 10-15 years when those people are married/have families, they won't spend all their waking hours on Facebook either.
That's an interesting point - I've deliberately not thought too much about bandwidth when it comes to my sites because I thought that wasn't very forward thinking but you're right the cost hasn't come down for either hosting or bandwidth... Ideastone - I see that Facebook has a much more mature user-base than bebo. Targeting ads for facebook users should be a lot easier - but I suppose that's why a media company that produces films for teenagers would find a benefit to paying a stack load of cash for bebo...
Why would you want to pay to advertise in an area where people have trained themselves to ignore when you can mingle with the crowd for free and peddle your goods there ? Web 3.0 could learn a thing or two from night clubs.
I am sure the spammers make more since they set out to make money in first place. Do not know how they ever set some of the sites up and did not have any idea how it would make money.
Surely people 'think' they have learnd to ignore adverts on TV but advertisers still spend millions advertising there... I think advertising works on a subconscious level much more than people realise. You may not click on the product advert immediately but somewhere that product has been registered deep in your unconscious mind. How you measure that I'm not sure - just in pure sales I suppose?