Social networking business models

A colleague who has a startup in the US for social networking for doctors was whining to me the other day that advertising business models are dead for everyone except the top 5-10 Internet properties like Yahoo and Google. He said that Google does a great job of aggregating ads from small Web site but that doesn’t mean that a small-mid size Web property can monetize traffic enough in order to be profitable. It’s a corollary of the long tail of the Internet, that the small guys a the end of the tail will never have enough traffic to monetize.

The idea of monetizing social networks and communities is totally not new – at we saw a lot of failed attempts to monetize community in the 90s – Hagel and Armstrong, “Net Gain” talks about content and community as a requirement for e-commerce.

But monetizing community doesn’t work for most Web assets and I think the reason is that a buyer has choices and her behavior is significantly more influenced by a cluster of people that she  personally knows and meets with on regular basis. The notion of a “cluster” is discussed in this article “Marketing and Social Networking: When Measuring Influence, Quality Connections Top Quantity”, Zsolt Katona, Haas School of Business, University of California, Berkeley –

Monetizing social networking would appear to require a good mix of physical and virtual networking – which is an instance of a more general class of 1:N influence networking – where a medical representative, sales person, personal trainer, coach, rabbi or priest influences the behavior of their cluster – doctors, clients, support group, athletes or parishioners.

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