Monetizing social networks: Part II (3 more types)

3) Partnership Opportunities – or, limitations of partnership

Social networks, especially those like Facebook and LinkedIn, have very targeted demographics. As a result, it makes sense for companies interested in these demographics to partner with them. For example, RIM Cell phones partnered with Facebook, while naukri with LinkedIn.

These partnerships are quite fruitful for both and make a lot of sense, but with very targeted demographics, partnerships work to the exclusion of the rest of the market. Will Microsoft’s Zune attempt to make inroads in Facebook now that Apple is a partner? Would a competitor of Simply Hired be excluded from LinkedIn? These partnerships make a lot of sense for the partnering companies, because it is the established partner that wields power. But partnerships, successfully implemented, do seem to be a solid monetization platform for social networks.

4) Micropayments-

Micropayments is an interesting concept. The general idea behind micropayments is that a social network’s userbase will pay small amounts of money for things that make their experience better. For example, someone might pay 50 paise to purchase an upgrade to their site. Considering the marginal cost of such upgrades is virtually zero, micropayments could be very lucrative at scale. People will not mind paying such miniscule an amount. However this would be difficult for start up sites.

So how to effectively implement micropayments?

Firstly, the cost should not be prohibitve for traffic. To do this, you must give the user a rich and unique experience from the beginning – no giving the user a basic me-too type site and expecting them to micropay. Give the user lots of add-ons, and as they progress as a user of the site they will start buying other add-ons. The secret for success here is too make the customer addicted to the site or in love with the product. It should be an almost indispensable part of their lives.

5) User payments/gatekeeping fees –

It only makes sense that some social networks will introduce fees for participation. There was a talk that Star network would make people pay for the content visibility. Of course, this flies in the conventional logic of network effects, but for some it is a valid strategy. Some social networks have economic incentive to participate in. this segment can be tapped.

Specialty information sites, prestige networks – there are lots of social networks we pay to access in the real world, so it only makes sense that we’ll buy into this in the virtual world. However, doing this properly is a real challenge – and it requires a significant leap of faith. If social networks can target specialty networks, users will pay to keep the service online, because the service has real value.

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